Posted: February 20th, 2017

Advise George as to what procedural steps must be followed to validly alter the constitution

Harry was appointed under a service contract as managing director for five years.  The contract was stated to be subject to the Constitution.   The Constitution stated that directors could be removed by special resolution, however, subject to the provisions of any service agreement.  A special resolution was passed and Harry was dismissed with three years left to run.   Harry now seeks your advice as to whether he can enforce the service agreement.   Question 3 George, Tony and John are the only shareholders in a manufacturing business called “Canit Pty Ltd”.  George owns 80% of the shares and both Tony and John hold 10% each.  George also holds the position of Managing Director of Canit Pty Ltd.    George is ambitious and decides to put his long-held vision of holding 100% of the shares in the company into action.  He wants to change the constitution to allow a shareholder holding 35% or more of the issued share capital of Canit Pty Ltd to acquire the shares of a shareholder holding less than 15% of the issued share capital, at “fair market price”.   (a)          Advise George as to what procedural steps must be followed to validly alter the constitution.   (b)          Tony and John are concerned that George will apply the necessary procedures required to alter the constitution.  Advise Tony and John whether there are any other grounds upon which they may challenge the compulsory acquisition of their shares.   (c)          If George held 90% of the issued share capital would he need to change the constitution to acquire the rest of the shares?  Discuss.