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property development company




Assignment Details;PROBLEM QUESTION;BlackJack Properties Pty Limited (BJ) is a property development company whose main focus;is the acquisition of real estate for housing development in the Hunter Valley region. Melanie;Daniel and Sarah are the three directors of BJ and each hold 25% of the total shares.;The directors shares are all A class shares and have voting rights. All three directors are;involved in the management of the company. Melanie is the CEO, Daniel the CFO and Sarah is;Sales and Marketing Manager. The remaining 25% of shares are held by Daniels brother Max;who is not involved in the management of the company. Maxs shares are B class shares. The;B class shares have only one vote for each 5 shares held except that the shares have normal;voting rights (1 vote per share) on a resolution to amend the constitution or to wind up the;company.;Last year BJ approached large property developer ConneX Ltd (ConneX) to propose a joint;venture between ConneX and BJ to develop a housing estate in the Cessnock area. After some;preliminary negotiations ConneX said it was no longer willing to deal with BJ (this was because;ConneXs controlling shareholder had recently ended a long term relationship with Melanie).;Melanie was not aware that ConneX continued to negotiate with Daniel.;Daniel invited Sarah to form a new company, Crystal Clear Pty Limited (Crystal). They used;the company to acquire some land near Cessnock. BJ had previously negotiated with the;landowner to purchase the same land but had withdrawn because Daniel had advised the Board;that the land was too expensive. The Cessnock land was developed in a joint venture between;Crystal and ConneX but before the development was completed ConneX withdrew from the;deal. Daniel and Sarah did not tell Melanie about the formation of Crystal, or the land deal. At;the next meeting of BJs Board, Daniel recommended that BJ purchase the partially developed;land from Crystal at a bargain price. Sarah and Melanie agreed. Crystal made a small profit from;the deal because ConneX wore the loss. At no time did Daniel and Sarah disclose their interest in;Crystal or the profit received from the land deal to Melanie. BJ later sold the completed;development for a substantial profit.;At a recent board meeting Daniel proposed that BJ should lend $400,000 of the companys cash;reserves to Max to fund his new winemaking venture at an interest rate of 2.2%. Melanie;expressed concern about the loan on the grounds that BJ should be maintaining its cash reserves;given the impact of the decline in the mining boom on external funding. She was also concerned;about the low interest rate and that no security was being given for the loan. Daniel and Sarah;outvoted Melanie and the loan was given to Max. Six months later Max advised the directors of;BJ that his project had failed and he would be unable to repay the loan.;Melanie is furious with Daniel for placing BJ in such a tough financial position. She has also;reconciled with her former partner and has discovered Daniel and Sarahs involvement with;ConneX and Crystal and the profit made on the sale of the land at Cessnock.;To make matters worse, Daniel and Sarah have advised Melanie that they intend to call a;general meeting to remove her from the board of directors and to appoint Max as a director in;her place. They are also proposing an amendment to the Constitution to change the class of;Maxs shares from B class to A class. BJ has adopted the replaceable rules. The meeting;proceeded and the resolutions to amend the constitution and remove Melanie from the board;were passed by Max, Daniel and Sarah.;PART B (10 marks);1000 words maximum (words over the word limit plus 10% may be disregarded by the marker);Use the IRAC method to answer these questions. Issue, Rules, Apply and Conclusion.;Advise Melanie as to what action she may take as a minority member of BJ and her prospects of;succeeding in such an action in relation to;a. The amendment to the constitution to change Maxs shares from B class to A;class;b. Melanies removal from the BoardAdditional Requirements;Level of Detail: Show all work Additional Requirements;Level of Detail: Show all work


Paper#17654 | Written in 18-Jul-2015

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