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?
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
Download Full Solution