VIC Company Directors and Debt Queries

[kawanshiu]

Hi,

Background: B Pty Ltd (55% ordinary shares, Mother fully owns B Pty Ltd), 1 managing director (9%, Son), 4 non-executive directors (9%*4, 2 daughters, daughters' husbands) = A Pty Ltd (100%)

1.Managing director fails to advice 2 non-executive directors that the board meeting is being held and the board resolution is passed by managing director and the other 2 non-executive directors.

Question: 2 non-executive company directors (not attend board meeting) cannot have the resolution set aside because of substantial injustice from procedural irregularity (deficiency of notice) right? Even though they had attended the meeting, the resolution would have been passed (18%/45%=40%). Am I right? Or is there any other reasons which can make them cannot have the resolution set aside?

2. The company does not have enough money to cover the debt (buying equipment) and wants to issue preference shares to various family members.

Question: the company must obtain the approval of existing shareholders before issuing shares by passing a special resolution of the company right? (s246C(5)) Or is there any other things the company must do before issuing shares?

3. 1 daughter and her husband are not happy with company's management (by managing director) and another daughter and husband also agree.

Question: what can they do? Removal of director in directors' meeting or shareholders' meeting (because directors are shareholders in this company)? Change company's constitution to restrict managing director's power to act without first obtaining other directors' consent?

But the last one may not be possible because it requires special resolution and there is only 67% vote in favour right?

Am I on the right track? Thanks so much in advance!

 

[Victoria S]

Your question depends upon the company's own constitution and many other factors. If only the replaceable rules apply to your company, then sections 248A & C may be relevant - circulating resolutions of companies with more than 1 director and calling director's meetings.

Generally, directors can pass a resolution to legally transact business as long quorum is present - which is 2 directors. Unless it has been agreed otherwise by the directors or specifies this in the constitution. It also depends what sort of resolution is passed.

I believe it may be best to obtain personalised advice from a lawyer in this situation if you are uncertain of how to proceed. Corporate governance is an important issue that businesses must be on top of.