Question
Problem: Sticky Web Pty Ltd owns and rents out the apartments in an apartment block. The company had been started by Mr Spider and Ms Fly when they got married. Mr Spider and Ms Fly each owned one share and each was a director. On the birth of their first child, Buzz, Ms Fly and Mr Spider changed the constitution of the company so that each share had the right to occupy an apartment. Mr Spider transferred his share to Buzz. A new share was issued to another child, Tarantella, on her birth.
Many years have passed and Buzz and Tarantella have grown up and moved into their apartments. Mr Spider has died. The apartment block has become decrepit. Buzz and Tarantella want to redevelop the building.
At a general meeting Buzz and Tarantella vote themselves in as directors, denying Ms Fly, their mother, a place on the board. Acting as the board of directors, they then organize the renovation and redevelopment of all the apartments in the block. Ms Fly’s furniture is taken out of her apartment and put into storage. The locks are changed. No more dividends are paid as, according to Buzz and Tarantella, the company has no income during the redevelopment, although it still has large amounts of retained profits. Ms Fly is forced to find alternative accommodation but she does not like it and thinks it is beyond her capacity to afford.
Consider each of the following set of events:
(a) Ms Fly offers to sell her share to Buzz and Tarantella so she can herself buy something much better, but they refuse to buy it saying they have no money. They also refuse to allow her to transfer the share to anyone else, saying they need to retain the company as family-owned. Now Ms Fly has come to you for advice. Is there anything she can do to regain occupation of her apartment and to force the company to pay her dividends?
(b) Buzz and Tarantella offer to buy Ms Fly’s shares and a fair valuation. The fair valuation is more than enough to buy a much better apartment than her old one. She is not interested. Buzz and Tarantella then alter the constitution of the company to permit the compulsory purchase by majority shareholders acting jointly of minority shares at a price assessed by a qualified valuer plus 20%. They then send a cheque in the appropriate amount and alter the share register accordingly. Ms Fly wants to keep her shares. What should she do?
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