Case study for company law

The Assignment is worth 30% of the assessment for this unit. Please read the instructions regarding the Assignment in the Unit

Information and Learning Guide (pages 10 to 13). The due date for submission is SUNDAY 28 FEBRUARY 2016 AT 5PM WST (week 8). The

Assignment consists of two (2) problem-type questions – question 1 is worth ten (10) marks and question 2 is worth twenty (20) marks.

Both questions are compulsory.

Gigi is an employee of Shiba Pty Ltd. Shiba Pty Ltd operates a factory that manufactures S20L16U8G23. S20L16U8G23 is a nitrogen-based

chemical widely used in plastics manufacturing. All of the shares in Shiba Pty Ltd are owned by Chow Ltd. Shiba Pty Ltd only has assets

of $10,000. Most of the assets used in the manufacture of S20L16U8G23 (such as the factory, laboratory equipment and central machinery)

are leased from Chow Ltd.

Gigi is a research assistant who has worked in Shiba Ltd’s factory for the last 10 years. She was recently diagnosed with a rare form

of kidney disease. Gigi and her doctors believe that her constant exposure to the chemicals involved in the manufacture of S20L16U8G23

caused her kidney disease. Gigi is angry that she was never warned about the risks associated with her job and wants compensation of at

least $3.5 million given her reduced life expectancy.

(a) Can Gigi sue Chow Ltd for compensation for her illness?

(5 marks)

(b) Would your answer be different if you knew that the directors of Chow Ltd are the same as the directors of Shiba Pty Ltd and

that they incorporated Shiba Pty Ltd to isolate Chow Ltd from the risks associated with the manufacture of S20L16U8G23?

(5 marks) (Total for Question 1: 10 marks)

Question 2

Down Under Pty Ltd owns a chain of book stores. Its directors and members are Spikey, Buffy, Angel and Cordelia. They each own 100

shares in the company. Down Under Pty Ltd relies on the replaceable rules in the Corporations Act. In addition, it has a constitution

that contains the following clauses:

ï‚· The directors of the company shall be Spikey, Buffy, Angel and Cordelia for a period of 10 years from 1 July 2012.
ï‚· Xander shall be employed as the company’s accountant until 31 December 2022.
ï‚· The board of directors must authorise all contracts entered by the company in excess of $50,000.

The directors of Down Under Pty Ltd receive an invitation from Collie Pty Ltd to attend a launch of a new book. The directors are not

able to attend the book launch so they ask Xander to attend the book launch on their behalf. Without the knowledge of the directors,

Xander attends the book launch with his girlfriend, Faith, the company’s purchasing officer.

At the book launch, Xander introduces himself and Faith as directors of Down Under Pty Ltd. During the evening, Faith enters into a

conversation with Willow, a director of Collie Pty Ltd. Willow informs Faith that Collie Pty Ltd wishes to sell its book binding

business for $100,000. Faith believes that Down Under Pty Ltd should diversify its activities so she contacts Willow in the week after

the function and after negotiations have taken place she enters into a contract on behalf of Down Under Pty Ltd to purchase the book

binding business. Faith uses Down Under Pty Ltd funds that are available to her as the purchasing officer to pay a deposit of $10,000.

When the directors learn what Faith has done, they are furious. They contact Collie Pty Ltd and advise them that they do not believe

that they are bound by the contract because Faith does not have the authority to bind the company and the constitution was not complied

with.

(a) Discuss whether or not Down Under Pty Ltd is bound by the contract to buy the book binding business. Would your answer be

different if Xander and not Faith had entered the contract with Collie Pty Ltd on behalf of Down Under Pty Ltd?

(10 marks)

(b) Spikey, Buffy and Angel have been unhappy with Cordelia and Xander for some time. At a meeting of the directors, they

terminate Xander’s employment contract. The following week, the directors call a members’ meeting at which they pass a resolution

removing Cordelia from her position as a director of the company.
ï‚· What are Cordelia’s rights in relation to her removal from her position as a director of Down Under Pty Ltd?
ï‚· What are Xander’s rights in relation to his removal from his position as accountant of Down Under Pty Ltd?

(10 marks) (Total for Question 2: 20 marks)

INSTRUCTIONS ON THE ASSIGNEMENT

The Assignment questions are based on the material in the textbook, Understanding Company Law (UCL), from chapters 1 to 7 inclusive (up

to week 6).

The word limit for the assignment is 2,000 words (including footnotes). The word count MUST be indicated on the front page of your

assignment. Students who do NOT specify the word count or who exceed the word limit for the assignment accept the risk of being

penalised.

Students should use ARIAL 12 size font, double spacing and default Microsoft Word margins. The assignment is marked out of 30 and is

worth 30% of the assessment for this unit.

REFERENCING

All references are to be cited in accordance with the CHICAGO style of referencing: http://libguides.murdoch.edu.au/Chicago

There are two parts to the CHICAGO style of referencing:

the citations within the text of your assignment; and
the reference list at the end of your assignment.

CHICAGO style is an “author-date” system, so the citation in the text consists of the author’s name, year of publication and page

numbers e.g. “(Viner 2010, 151-152)”.

The full details of the source are then given in a reference list at the end of the document e.g. “Viner, Bradley. 2010. Success in

Veterinary Practice: Maximising Clinical Outcomes and Personal Well-being. Chichester, UK: Wiley-Blackwell.”

The above-mentioned library guide contains a complete list of examples. Students accept the risk of being penalised if they do not

reference in accordance with the CHICAGO style.

Your Unit Coordinator may use software called Urkund when viewing work that you submit. Urkund is a pattern-matching system designed to

compare work submitted by students with other sources from the internet, journals/periodicals, and previous submissions. Its primary

purpose is to detect any submitted work that is not original and provide a thorough comparison between the submitted document and the

original sources. Urkund will be replacing Turnitin (the previous pattern-matching software used by Murdoch) from 2016.
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