Corporations Act: Empowerment Pty Ltd Essay

Question:

Discuss about the Corporations Act for Empowerment Pty Ltd.

Answer:

Introduction

The statutory oppression remedy of the Corporations Act is provided within Part 2 F. 1 entailed in section 232. Section 232 permits the courts to allow members a wide variety of remedies. It also stipulates that a member has to show the company has conducted its affairs conversely to the members’ interest as a whole, oppressive, unfairly discriminatory or unfairly prejudicial.

Can Desley apply for a remedy under section 232

A member, previous member or ASIC-approved individual can apply under for remedy under section 234. A member is allowable to make his application even where the oppression relates to the member in a capacity other than a member and or another member in his capacity as a member (Hanrahan, Ramsay and Stapledon 2013).

An individual can still apply even after being eliminated from the register of the member due to a selective capital decrease. A person who will stop being a member can as well apply where the oppression action links to the condition whereby they stop being members. An individual whom ASIC views appropriate having regard to its probe into the affairs of the company (Hanrahan, Ramsay and Stapledon 2013).

Applying the provision of section 232, Desley can apply for a remedy since he is a member. Also, he is permitted to apply since he will stop being a member since this oppression in action links to the condition whereby Desley will stop being a member. It is clearly stated that Desley intends to end her involvement with the Empowerment Pty Ltd. Moreover, it is clear that she is not only being oppressed by the company conducted itself contrary to her interest as a whole and oppressive but also further depressed due to her inability to sell her shares (Hanrahan, Ramsay and Stapledon 2013).

Did the conduct complained of happening within the course of the affairs of the company

Section 53 defines the affairs of the company to include the company’s formation, promotion, membership, profit and losses as well as trading activities. The affairs also entail company’s internal management as well as proceedings and voting rights.

Applying the above provisions to the fact, it is true that the conduct complained of happened within the course of the company’s affair. For example, the conduct touches on profit and loss and trading activities (Hanrahan, Ramsay and Stapledon 2013). The board conducted itself contrary to Desley’s interest by awarding themselves an increment of $80,000 and increasing Abel’s pay and benefit by $70,000 in total discrimination of Desley.

More badly, the board explicated in advice to the members, that all the profits will be retained for the next several years for the expansion of the business operation. This is clearly an unfairly prejudicial, unfairly discriminatory and oppressive to Desley. It is clear that all the other members accept Desley will benefit from the manner the board conducted itself. She is also oppressive since she has been denied an opportunity to sell her shares (Hanrahan, Ramsay and Stapledon 2013).

Does the conduct being complained of fit within the meaning of s232

The conduct fits within s232 since it is oppressive, unfairly discriminatory and unfairly prejudicial to Desley. This is because only Desley will not benefit from the new policies and she cannot as well be allowed to sell her shares. The decision is, therefore, oppressive in effect thereby breaching Desley’s reasonable expectations (Hanrahan, Ramsay and Stapledon 2013). It was, therefore, apparent that the board lacked wisdom, inefficient and carefulness (Hanrahan, Ramsay and Stapledon 2013). There was also obvious unfairness and lack of probity towards Desley as one of the principal shareholders. The case of John J Starr PL v Robert R Andrew can be applied in this instance where the oppressive conduct of board meeting was affirmed and Thomas v HW Thomas Ltd is also relevant as it confirmed unfairly restriction of dividends.

What orders cab the court make

The court may issue a purchase of oppressive members (Desley) shares to solve the issue as well as regulation of the affairs of the Empowerment Pty Ltd (Hanrahan, Ramsay and Stapledon 2013).

References

Hanrahan, P.F., Ramsay, I. and Stapledon, G.P., 2013. Commercial applications of company law. Commercial Applications Of Company Law, CCH Australia Ltd.

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