Amber Ltd is a public company. It is not listed on the ASX and it has...

Amber Ltd is a public company. It is not listed on the ASX and it has no constitution. Su is a large shareholder of the company who is upset with the way in which Amber Ltd is being run. She does not consider the directors have made a sensible decision in deciding to borrow funds from Loans Ltd. As a condition of lending, an officer of Loans Ltd will be appointed as director of Amber Ltd. Su wants the company to have a constitution that requires directors to offer existing shareholders the opportunity to invest in more shares, before the board can seek funds by borrowing from an outsider. Su makes her proposal to Cliff, an executive director of Amber Ltd, who has a 10 year term under the company’s constitution. Cliff and the other directors refuse to consider Su’s proposal.

Required:

Answer the following questions. Refer to relevant sections of legislation in your response.

a) Do the directors of Amber Ltd have the power to borrow money from Loans Ltd?

b) Do you think Amber is listed on the ASX? Why, or why not?

c) Why would Loans Ltd want one of its officers to be appointed a director of Amber Ltd?

d) Does the Corporations Act allow Su to remove Cliff as a director even though he has a 10 year term under the company’s constitution?

Solutions

Expert Solution

(a) Section 198A states that director is responsible for managing business of the company so the director may exercise all the powers except any power that the company’s constitution or this Act requires the company to exercise in a general meeting. So the company does have any constitution. So the directors of Amber Ltd. have the power to borrow money from Loans Ltd.

(b) Amber Ltd. is not listed on the ASX as this is given in the second line of the question.

(c) Loans Ltd. would like to safeguard its interest in Amber Ltd. as it is lending a huge amount of money to Amber Ltd. So, it will want a officer of its company to be appointed as director so that he/she can take care of the decisions taken by Amber Ltd. which may affect the interest of Loans Ltd.

(d) Since the company does not have its own constitution, so the Replaceables Rules will be applicable which states that a proprietary company may by ordinary resolution can remove a director deom office. So, SU can remove Cliff as a director even though he has a 10 years term under the company's constitution.

ekkarill92 answered 1 year ago

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