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Directors Breach of Duties Under Corporations Act 2001 and General Law

Question

David,  Evan  and  Frank  are  directors  of  WaterSuperFun  Pty  Ltd  (WSF).  WSF  specialises in opening and operating water theme parks around Australia. David  and Evan each own 40% of the company and Frank owns 20%. One of Evan’s  favourite  things  to  do  outside  of  his  job  is  to  watch  stars  at  night  through  his  telescope. In recent months Evan has been taking this ‘star -gazing’ seriously and has increasingly been discussing it with his fellow directors. At a board meeting Evan  proposed that  25%  of their  network of  17  theme parks be  closed. Profits  have been strong from all theme parks and this proposal seems odd to Frank.  Frank asks David what he thinks and David says he completely supports Evan.  Frank asks to see the company accounts but is refused. He then wants to  sell his  shares to David or Evan and is again refused. At the next two board meetings  and at the shareholder meetings Frank is not allowed to speak. Evan and David  then pass a special resolution removing Frank from the register of Shareholders  and compulsorily acquiring his shares at a fraction of what they are worth. Frank  later discovers that Evan was basing his business decisions on his star gazing  and  on  what  he  thought  the  stars  were  telling  him.  Frank  also  discovered  that  David  was  being  paid  a  secret  allowance  from  Evan  to  support  all  of  the  proposals put forward by Evan.

Advise the directors of WaterSuperFun Pty. Ltd. whether  they  have  breached their directors duties under both the  Corporations Act 2001  and  general law?

 

Summary

This question is a case study of WaterSuperFun  Pty  Ltd  (WSF) company and discusses about director breach of duties under corporations act 2001 and general law.

Word count: 1500

 

 

 

 

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