Scenario

Kelvin, who is a professional engineer, has been highly keen in owning and running his own business. Kelvin has attempted to own and run start-up businesses two times without a success. Once Kelvin started his own IT company and he was unable to manage the marketing side of the business, the risk management side and the IT aspect of the business. Another time, Kelvin joined his two friends from his university time, and they started a partnership business again on IT field. However, as one of the business partners died of cancer, Kelvin and the other business partner struggled to continue to run the business, which they finally decided to sell it.

Kelvin is convinced that he lacks the skills to run a business by himself, and he is considering buying shares in a company. Kelvin is exploring the opportunity of buying a share from Sahara Dimond Wholesale Company. Sahara Dimond Company was established 30 years ago, and it is a Melbourne based wholesale company that sells Dimond directly to the public. Sahara Dimond Wholesale Company is now selling its share to the public.

Kelvin would like to have a full understanding of how a company functions and the legal consequences of owning a share. You are required to advise Kelvin on the following legal matters.

Scenario -Based Questions

1. Kelvin asks you to explain to him what is meant by the terms 'member' and 'shareholder', and the different ways in which a person may become a member. He also asks you to explain who may be eligible to become a member, and how many members a company is permitted to have. Finally, Kelvin asks: how does a person cease to be a member of a company?

2. After purchasing his shares, Kelvin asks you to explain to him what the register of members is, what information is in that register, and whether all companies must keep one. Kelvin is quite fascinated by the existence of a register and asks you whether he can inspect the one his details are recorded on and, if so, where can he find it. Kelvin confides in you that if he can get access to the personal details of all his company's members, he could then sell that information to commercial call centres and socio-economic survey research companies. Also, Kelvin cannot understand why the court has sole power to correct any errors made on entries into the members register. Advise Kelvin.

3. After receiving a notice of an annual general meeting of his company, Kelvin asks you to explain to him the difference between a general meeting and a board meeting, and what role these two types of meeting have in relation to the corporate governance of his company. Kelvin is also puzzled by the term 'quorum 'and what it must be for a general meeting and a board meeting. Kelvin wishes to become a leader and wants to know about how a person can become the chair of a general meeting or board meeting, and what their role actually is in relation to those meetings. Kelvin cannot grasp the difference between voting on a show of hands and voting on a poll. Lastly, Kelvin cannot grasp the concept of a 'proxy', how that person can be appointed and their voting rights at a general meeting. Advise Kelvin.

4. After attending his company's annual general meeting, Kelvin visits you once again to find out how the business that was transacted at that meeting got recorded, what that record should show, and how Kelvin could access that record to see whether it was 'correct'. Kelvin had observed that the notice he had received advising him of his company's annual general meeting had stated that it would commence 'at 1 pm'. Yet, on the day, the annual general meeting had not commenced until 1.10 pm because the chair had been delayed in traffic while trying to reach the meeting's venue. Kelvin surmised that this delay in starting the meeting could constitute a procedural irregularity that could only be rectified by his company conducting the whole annual general meeting again. Advise Kelvin.

5. Kelvin is well convinced that owning shares is the best way for him to own a business, and he is happy with his decision of buying shares at Sahara Dimond Company. Furthermore, so far, Kelvin is happy as to how the business is being run at Sahara. However, he is worried if in case the directors of the company will act against the best interest of the business. Advise Kelvin as to how the Directors of the companies are required to act as per the law and any potential solutions the law has if directors fail to act in the best interest of the company.