Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Stay Dry Ltd (SDL) is a company that manufactures umbrellas. The directors of SDL are Charlize, Gidget, Foxy and Yoda. Yoda is the managing director.
Stay Dry Ltd (SDL) is a company that manufactures umbrellas. The directors of SDL are Charlize, Gidget, Foxy and Yoda. Yoda is the managing director. Gidget is a nominee director who was appointed to the board by Malcolm who is SDL's largest shareholder (Malcom owns 14% of the company's shares). Charlize, who is the Chairperson, has extensive experience in the manufacture, marketing and distribution of wet-weather apparel and accessories. When Foxy was first appointed to the board, she told Charlize that she had no real interest in sitting on the board and was only doing it to get some extra money. Foxy said that she would do whatever Charlize recommended because she was the expert - Foxy had no experience in the sale or manufacture of umbrellas. At a board meeting in November 2021, Yoda said SDL was not meeting its budgeted numbers and he was concerned that if the company didn't turn things around quickly it would not be able to pay an end-of-year dividend. Charlize said she had recently been talking to a supplier who said he could deliver very inexpensive fabric for the manufacturing process. Charlize suggested that if SDL purchased this fabric, it would increase the company's profit margin and would allow the company to turn around its declining financial position. Charlize failed to mention that she had never spoken to this supplier previously and never seen any of the supplier's products. After Charlize raised this issue, she adjourned the board meeting for a lunchbreak. During the lunchbreak, Gidget called Malcolm and told him about Charlize's idea, Malcolm was furious as he was SDL's largest supplier of fabric. He told Gidget to vote against any proposal to change suppliers. After a very long and alcohol fuelled lunchbreak, the meeting reconvened. Without any further investigation or discussion, Charlize proposed a resolution to change the fabric supplier to the cheaper alternative. Gidget objected to the resolution and voted against it. Yoda, Foxy and Charlize voted in favour of the resolution. SDL changed supplier shortly after the meeting. The new material supplied was awful. It faded in the sun and was not waterproof in the wet. Customers were returning umbrellas constantly. The ACCC commenced an investigation into the company because of the defective umbrellas and soon a class action lawsuit was launched against the company.As a result of the lawsuits and investigations, SDL suffered enormous losses and was not able to pay the end-of-year dividend. Part A: Would SDL be successful in a claim against the directors for breach of their duty of care, skill and diligence under s180(1) and the common law (remember to talk about possible defences) Part B: Could Malcolm bring a derivative action for the claims you have discussed in Part A? Part C: Did Gidget breach any of his duties in blindly following Malcolm's instructions to vote against the new fabric supplier? Part D: Malcom wants to remove Foxy, Yoda and Charlize as directors. How could he go about doing that? Part E: Malcolm was obviously upset when he discovered SDL was not going to pay the end-of-year dividend. Can Malcom somehow force the directors to pay the dividend? (3 m
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started