Florid Flicks Pty Ltd is a company that produces various artworks in print and other media. The company has three shareholders Mick, Muldoon and Kim who each have an equal number of voting shares. The company has two directors Mick and Muldoon.
The company owns some beautiful drawings (‘the drawings”) prepared by Sarah a well know artist which have a commercial value of $250,000.
Florid Flicks Pty Ltd is having a cash flow problem and the company’s record keeping has been poor.
One of the directors Mick thinks everything will be all right eventually and keeps commissioning new products for sale but is paying ongoing expenses of the company out of money previously put aside to meet income tax and GST payments.
The other director Muldoon takes no steps to monitor the company’s position and is unaware of Mick paying expenses out of money set aside for tax payments.
Mick ponders that if Florid Flicks Pty Ltd fails then the liquidator would end up with Sarah’s drawings. Mick and Muldoon pass a directors’ resolution donating the drawings to the National Museum.
Mick and Muldoon decide to convene a members’ meeting whereby they pass a resolution ratifying the donation to the National Museum. Kim votes against the resolution.
Kim is also employed full time by Florid Flicks Pty Ltd as the Gallery Manager. In her position as Gallery Manager Kim constantly talks to various artists about new artworks and exhibitions. Recently she has been talking to Sarah about her fears for the future of Florid Flicks Pty Ltd and Sarah has agreed to provide all her future artwork exclusively to a new company Kim has just formed called Thursday Night Lights Pty Ltd
Have Mick or Muldoon or Kim contravened any of the statutory duties imposed upon them by the Corporations Act or any corresponding general law duty?
(16 marks)
Would the members resolution ratifying the directors actions cure any breach of any applicable statutory or general law duties?
(8 marks)
Kim wants to stop the donation of the drawings to the National Gallery or failing that to recover the value of the drawings from the directors. What options are available to her under the Corporations Act?
(16 marks)
INSTRUCTIONS FOR ASSIGNMENT
Start your answer to each question on a fresh page.
When answering each question, ensure that you:
identify the issue(s) raised by the facts
identify the relevant legal principles
apply the relevant legal principles to the facts
reach a conclusion
This is known as the IRAC method
I = Issue
R = Rule of law
A = Application to the facts
C = Conclusion
Issue – Decide from the facts what the major issues are. It will help to break the facts down by identifying who are the main parties, what are their relationships and what transactions have been entered into or events occurred?
Rule – With your knowledge of the Corporations Act, case law containing company rules, and other sources of company law, you need to make a decision about which legal rule or rules are relevant to the facts before you. Having identified the right rule or legal principle, you need to state it clearly and state where it comes from.
Application – You will then need to “apply the law to the facts”.
Conclusion – You should come to a conclusion based on your argument.
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