LAW205 Commercial and Corporate Law for Accountants Semester 1, 2017 Assignment 2 – Case Study (Value: 30%) The due date for submission of this assignment is the end of the day (11.59pm) on Sunday, 14 May 2017. Assignments must be submitted online via Learnline. No other form of submission, including email, will be accepted. The word length is 1,500. Please note that you must include all your references. References are not included in the word count. Please show your total word count at the bottom of the final page of your assignment. Darwin Property Developments Pty Ltd Feng, Qiyuan and Linda are directors of Darwin Property Developments Pty Ltd ('DPD'), a private property development company which also owns and operates a successful Darwin waterfront seafood restaurant. The three directors are equal shareholders. Feng and Qiyuan are brothers who originally set up the company. Qiyuan and Linda are close friends and also partners in a separate accounting firm. Linda has a powerful reputation in the accounting profession and this was a main reason why Qiyuan brought her into the company in the first place; she was renowned for tough decision making. Feng's wife recently died following a severe illness and he is currently unemployed whilst looking after his two young children as a sole parent. The number of issued shares in DPD is 6,000 ordinary shares. Each shareholder has 2,000 shares. All shares are fully paid. DPD has been very successful over the past two years but it has not paid any dividends to its members in that time. Instead, profits have been invested back into the business for future developments. Feng is short of money since his wife died and asks Linda and Qiyuan to consider whether DPD could begin paying members dividends again. They refuse and tell him that paying dividends now would upset the company's long term investment strategy and would thus be counter-productive. Feng is upset by this and asks that instead they buy out his shares. But Qiyuan and Linda refuse to buy him out. Linda then suggests he should resign as a director and take a break from the business. Qiyuan and Linda both think that Feng is no longer thinking about the best interests of the company and that his personal troubles are badly influencing his business judgement. Reluctantly, Feng agrees to resign, but before he does this he asks to see the DPD's most recent financial statements. Linda refuses his request saying that as he is about to resign this is not necessary. Feng then discovers through a third-party that DPD has been paying very large accountancy service fees to Qiyuan and Linda's accounting firm. Feng feels cheated and deliberately excluded from the management of DPD, although he does accept that while his wife was sick he missed several important Board meetings. Feng is now unsure about what he should do and consults you for legal advice wanting to know: (a) Whether he has any member rights that would allow him to bring an action against Qiyuan and Linda and, if so, should he bring a derivative (i.e. proceedings brought on behalf of the company) or personal action (for example for oppressive conduct)? What factors will influence your advice? (20 marks) (b) Assuming Feng does take action, what orders should he seek? What are his chances of success? (10 marks) Answers must refer to the specific legislation and case law to support your arguments. NB. There may not necessarily be one 'right answer'. References to legislation and cases that support your reasoning will make your answer more persuasive and demonstrate your knowledge, understanding and ability to apply legal principles and concepts to the facts.