Question 2 Yolanda runs a wholefoods café in Brisbane’s South Side through Just

Question

Question 2
Yolanda runs a wholefoods café in Brisbane’s South Side through Just Nuts Pty Ltd (JNPL). JNPL’s share
capital consists of 100 ordinary shares owned 75% by Yolanda and 25% by her older brother, Rex.  
A retired investment banker, Rex made an important contribution in JNPL’s startup phase but is now,
more or less, a passive investor. He is a director, but does not closely monitor notices from JNPL and
only sometimes provides strategic advice to Yolanda about the running of the business.  
Yolanda is highly grateful to Rex for his support in the past but would like to see JNPL expand through
more external investment. She sees an opportunity in her new and charismatic friend and business
coach, Laurie. Laurie convinces Yolanda to convene an extraordinary general meeting (EGM) at which
she will use her voting power to have JNPL issue 25 new preference shares to Laurie. Laurie also
persuades Yolanda to change the constitution at that meeting to allow Laurie to acquire Rex’s shares
at reasonable market rates ‘if necessary and for genuine business reasons’ in the future. The
amendment, Laurie argues, is necessary to secure the ‘long term growth trajectory of JNPL’.  
Yolanda goes ahead with the plan without telling Rex. She is afraid of hurting his feelings. She also
figures that the new preference shares do not give Laurie a right to vote, only to some priority of
payment in dividends. Rex first hears about the plan at a family barbeque about a month after the
resolutions are passed at the EGM.  
Advise Rex on any remedies he might have under Part 2F.2 Corporations Act 2001 (Cth) and via the
equitable limit on majority voting power, as well as any other relevant matters.                     

answer in ILAC format

Explanation / Answer

The Corporations Act 2001 (Cth) (the Corporations Act, or informally as the 'Corps' Act) is an act of the Commonwealth of Australiathat sets out the laws dealing with business entities in Australia at federal and interstate level. It focuses primarily on companies, although it also covers some laws relating to other entities such as partnerships and managed investment schemes.

The Corporate Law Economic Reform Program Act 2004 reforms simplified the statute. At several thousand pages long, the statute dwarfs those of other nations such as Sweden, whose corporations statute, comparatively, is less than 200 pages long.

The Corporations Act is the principal legislation regulating companies in Australia. It regulates matters such as the formation and operation of companies (in conjunction with a constitution that may be adopted by a company), duties of officers, takeovers and fundraising.

So these are the few of the action Rex could take based on the Corporations Act.

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