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Decorate Ltd (Decorate) is a large office interior design company

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Decorate Ltd (Decorate) is a large office interior design company which has ordinary shares only;listed on the Australian Stock Exchange. The majority of shares in Decorate are owned by Colour Ltd;(Colour), who holds 85%. The remaining shares are held by Light Pty Ltd (Light)who holds 11%, Bright;Ltd (Bright) who holds 3% and Julie McMahon, who holds 1%.;Decorate has a brief constitution which states that the company will employ Julie McMahon as;company solicitor. The constitution states that all other matters are to be dealt with under the;replaceable rules in the Corporations Act.;At a recent shareholder meeting, Colour indicated it would like to increase it?s shareholding in;Decorate to 100%. The directors of Decorate agree and believe it will result in large tax and;administrative savings for Decorate. The directors of Decorate have also become aware that Light;originally an interior design company specialising in residential design, has recently established a;new company, Office Design Pty Ltd (Office). Light owns 100% of the shares in Office and the new;company specialises in interior design for offices. The directors of Decorate believe that Office is in;direct competition to Decorate and are concerned.;To assist Colour in gaining 100% ownership, the directors of Decorate propose a change to;Decorates constitution as soon as possible, allowing the majority shareholder (Colour) to;compulsorily acquire the shares of the minority shareholders (Light, Bright and Julie). It is proposed;that Decorate will provide detailed information relating to the constitutional amendment to all;shareholders. In addition, an independent valuer will assess a range of matters, including market;value, to ensure a fair share price for the minority shareholders.;Bill, the managing and sole director of Light indicates that he will not support the amendment and;Light will take legal action against Decorate to stop the amendment if necessary. He asks the other;minority shareholders (Bright & Julie) to join him in the legal action.;Tony, the managing director of Bright tells Bill he and his board will not support the amendment to;the constitution and will join in the legal action. However, the shareholders of Bright disagree and;have repeatedly expressed their desire to sell the shares in Decorate and believe the amendment to;the constitution is a good opportunity to do so.;Julie McMahon informs Bill she is not sure if she supports the amendment or not. She is having;financial difficulties and would like to sell her shares in Decorate but is concerned if she does, she;can no longer rely on the clause in the constitution stating she is the company solicitor.;With reference to legal authority discuss the legal implications for Decorate Ltd, Colour Ltd, Light;Pty Ltd, Bright Ltd and Julie McMahon.;The parties involved DO NOT require any information on statutory member remedies or takeovers.;Additional Requirements;Min Pages: 1;Level of Detail: Show all work

 

Paper#20581 | Written in 18-Jul-2015

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