Question
Xenia and Nicky are the only directors and shareholders of Katz Empire Pty Ltd ('Katz') which sells clothing for pampered cats. Katz is barely solvent
Xenia and Nicky are the only directors and shareholders of Katz Empire Pty Ltd ('Katz') which sells clothing for pampered cats. Katz is barely solvent and needs an urgent injection of funds for it to keep operating. Xenia and Nicky decide to ask Nicky's uncle, Glebe, for money to help the company. Glebeagrees to give the company $20,000 in exchange for becoming a director and a 25% shareholder of Katz. Xenia andNicky agree and as a result, Katz shares are issued to Glebe and the company's constitution is amended to makeGlebe a shareholder and director for life. Glebe also signs a separate contract to appoint him as a director, which is then lodged with the Australian Securities & Investment Commission (ASIC). As a result, the company's fortunes improve.
Glebeconvinces the other two directors to let his cousin Olek provide the company with cat clothing made from silk-like fabric which Olek makes and sells at country markets. The decision turns out to be a disaster for Katz because many pet cats develop severe allergies to the fabric. As a result, many customers stop buying Katz's products and the company receives bad press coverage in online newspapers, on Twitter and on social media.
Xenia andNicky are furious atGlebe and they hope that the incident does not destroy their company. In fact, they are so furious that they decide to not allowGlebe to attend the company's next directors' meeting nor receive dividends in the future. To make sure that he does not attend, they decide to hold a special resolution at the next members' meeting to deprive him of his shares without giving him any compensation.
A potentially lucrative contract to supply cat food to prestigious cat boutiques in Toorak and Brighton that Katz had been seeking, is diverted away from Katz and to Xenia's andNicky's other company. Xenia andNicky believe that it is Glebe's actions that have damaged Katz's reputation and business and so he should have to suffer for that.
On the day of the meetings, Xenia andNicky are holding a members' meeting and a directors' meeting that he knew nothing about.
What canGlebe do in relation to Xenia's and Nicky's actions? Can he seek a legal remedy? Explain.
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