AGC Software Pty Ltd (AGC) is a small proprietary company limited by shares that develops, tests and markets its own “anti-malware” software products. Ben has been the sole director at AGC for two years, and prior to that appointment he had served in many other executive roles for a variety of software companies. Ben also holds 40% of the shares in AGC. The remaining shares (60%) are held by 5 other shareholders who are not directors in AGC.
Ben and the employees of AGC consider themselves to be highly skilled and knowledgeable in their field. AGC has been increasing its share in the anti-virus software market over the last year which has attracted the attention of the market-leading company, Big Nanny Ltd (Nanny). Nanny makes an offer to Ben that the company will purchase as many shares in AGC as Ben can sell to them, paying him $18.95 per share. This offer is very generous as a recent independent valuation valued AGC shares at only $12.95 each.
Ben swiftly makes an offer to buy the shares of the other 5 shareholders in AGC. These shareholders accept Ben’s offer of $13.50 per share to sell most of their shares. However, after the sale is completed, the shareholders are shocked to find out that Ben subsequently sold his newly acquired shares to Nanny for $18.95 each. The shareholders are further shocked when they learn by chance that Ben’s wife is the Managing Director of Nanny.
A). Discuss Ben’s liability as a director in terms of the Corporations Act 2001 (Cth) and the relevant case law
B). Discuss the possible remedies that AGC and the shareholders of AGC could seek against Ben
Very Big Mines Ltd (VB Mines) was a no-liability company that operated in the Pilbara region of Western Australia. It was registered in January 2013 and began operating in the same year. At first, the company was very successful and secured lucrative contracts for mining iron ore. However, following the end of the “mining boom” in 2015, the company became insolvent in February 2016.
At the time of becoming insolvent, VB Mines owed money to several creditors, with the debts running into tens of millions of dollars. However, VB Mines owned several very large rural properties over which it held valid mining licences. VB Mines held valid leases (expiring in 2018) over most of their mining plant and equipment, including a lease for a high-tech device that can detect commercially viable resource deposits.
At the time company became insolvent, it was widely observed by experts that the downturn in global iron ore demand was likely to be long-term. The board of VB Mines decided in February 2016 to place the company into voluntary administration.
A). Define ‘insolvency’ under the Corporations Act 2001 (Cth)
B). Explain why directors may want to place their company into voluntary administration .
C). Outline the procedure once a company enters voluntary administration
D). Given the circumstances of VB Mines, consider each course of action that the administrator could have taken, paying attention to interactions between the company’s directors and members and creditors and the administrator. Which course of action do you think would be most suitable given VB Mine’s situation?
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