XLNT Pty Ltd (XLNT) is a large proprietary company, with a share capital of 200,000 fully paid ordinary shares issued at a price of $1.00 per share and 150,000 fully paid (non-redeemable) preference shares issued at a price of $2.00 per share. The preference shares carry the following rights, as set out at clause 7 of XLNT's constitution: (a) A right to a fixed cumulative dividend of 10 per cent; (b) A right to share equally with ordinary shareholders in any distribution of surplus assets (after return of capital) on a winding up; and (c) A right to exercise one vote per share, but only in relation to a proposal for a reduction of capital or a proposal affecting rights or ownership attached to the preference shares. Clause 9 of the constitution also provides that any changes to the constitution must be approved by an ordinary resolution of the Board. However, there is no procedure for varying or cancelling share class rights in the constitution. Karen and Peter jointly own 160,000 ordinary shares and 115,000 preference shares and control the composition of XLNT's board. Veronica holds 22,500 preference shares. Karen and Peter find material about company law through Google. They read that ordinary shareholders, and not the preference shareholders, generally have the right to the surplus assets on winding up. Karen and Peter find it most unfair that preference shareholders have this right under XLNT's constitution. Their annoyance is amplified by the fact that preference shareholders have received "really high" dividend payments over the years, and the ordinary shareholders have received none. Karen and Peter have a plan to take control of XLNT so they become 100% shareholders of XLNT, or alternatively wind up XLNT and then with the share of the surplus assets that they receive on winding up, start up the same business as XLNT but under a different name. XLNT will gain administrative cost savings in only having to deal with Karen and Peter as shareholders if XLNT is 100% owned by them. Veronica wishes to keep her preference shares because of the good dividend stream and strongly objects to any proposal which impacts her rights.

Karen and Peter propose the following resolutions to be put to the next general meeting on 11 December:

1. Clause 7(b) of the XLNT constitution be replaced with "No right to share in any distribution of surplus assets (after return of capital) on a winding up"; and

2. The XLNT constitution be amended so that shareholders with at least 80% of the total shares in XLNT can compulsorily acquire the remaining preference and ordinary shareholders' shares at a price which is 20% above the market price as determined by an independent expert.

The Board of XLNT seeks your advice on 19 November.

Advise the Board as to whether:

1. The proposed resolutions would comply with the law. This requires you to apply the steps XLNT would need to take to comply; and

2. Veronica can take any action to prevent one or both the resolutions from going ahead (even if XLNT complies with the law) and what arguments she could make to support such action.

Using the ILAC method, explain your answer