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Proposal 1 Concerns Amending the Internal Governance Rules in the Constitution

By:   •  June 29, 2018  •  Essay  •  554 Words (3 Pages)  •  797 Views

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Proposal 1 concerns amending the internal governance rules in the constitution. Shareholders hold rights to alter the constitution and introduce the new clause in relation to specification of the acquisition of shares. This is validated through the appointment section in the constitution where section 136(2) of the Corporation Act (2001) give rise to the statutory power of companies to alter their constitution. The alteration of the constitution requires a special resolution of the company, which is passed on the condition of receiving 75% of votes from its members. In this case, to pass the special resolution, Dan, Melanie, Jarrod and Eva must all support it to reach over 75%.

Proposal 1 also highlights the rights attained by minority shareholders, therefore considerations as to whether this scenario constitutes an expropriation of minority shares, must be explored. This is considered on the assumption that the amendment was passed in the members’ meeting with 75% support. Powers exercised by members are limited by the Act in an attempt to prevent unfair exploitation of minority shareholders by majority within a company. This case involves a constitutional amendment, the assessment of as to whether equitable limitation was in breach must be performed. The Gambotto principle was formed on the basis on the case law Gambotto vs WCP Ltd , where the principle arisen from the ruling assesses the legality of attempts to alter the constitution to provide other shareholders with the ability to acquire the minority shareholders’ property – in this proposal, the ordinary shares.

The minority shareholders (shareholders holding less than 5% of the company’s equity capital) of Tramp Industries must take their case to court to invalidate the ruling, on the basis of ‘substantial injustice’. In this scenario, it can be asserted the ‘compulsory’ acquisition of minority shares constitutes oppression. In the application of the judgement in Gambotto, constitutional amendments should be assessed as to whether the amendment deprives shareholders of rights to own equity. The amendment


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