Microplex Corporate Law - Essay Example

Corporate Law In case of Microplex it was a wholly owned subsidiary of Megaplex. According to the details given the parent company is investing (financing) the subsidiary. The financed amount is taken in the form of debentures and with reasonable security. In case of crisis like insolvency the secured lending can be realized but unsecured lending cannot be realized as it have no ground under the common law. As far as the purchase of land is considered Microplex invested $50 million dollars, which was $10 million dollars more than the consultant's recommendation. After that it was given that a director (peter) must be paid by Katrina family to make the deal valid. If the company directors know it, they can stop any body from purchasing the land by convincing peter not to sign for it. But here the problem is not about purchasing land but the amount owed to Burkes and Wills and the clause that it was a heritage land and cannot be used for private commercial purposes. Here there was a provision in the corporate act (2001) to get enough time by applying for compensation. Microplex can get compensation from the Katrina family for deliberately hiding the legal tangles bebind the land scape (water front) they wanted to purchase from them. If they get the compensation then they can successfully get rid of burden of Burkes and Wills. If they did not get it they can get at least time for settling the legal tangles in Babinda trust and get credit from them to pay the dues of Bukes and Wills. The company can approach court according to the following provisions. Division3-Approved compensation arrangements Subdivision A-Approval of compensation arrangements 882A How to get compensation arrangements approved with grant of licence (1) If the information in the application for a market licence in Australia contains information about the proposed compensation arrangements according to paragraph 881B(2), the minister can be compelled to treat the application as a thing for approval of the compensation arrangements and, for that action, he must consider the proposed arrangements were adequate. (2) If it does not happen as it was mentioned in (1) or the proposed arrangements for compensation are not adequate the application for the licence can be rejected. (3) When it was felt by the minister that the proposed compensation arrangements are adequate the minister can grant the licence. But while granting the licence the minister must approve the compensation arrangements. Note: The other provisions about granting licences are in Subdivision A of Division4 of Part7.2. (4) The minister must follow the following in the conditions of licence. He must deal with the least amount of cover required in relation to the compensation arrangements in such manner as the minister thinks appropriate and He can identify the source of funds available to cover the claims and he can approve arrangements on the basis of them. (section 885H) 882B How to get compensation arrangements approved after licence is granted (1) There will be operators of licenced market. It any one of them wanted to have a compensation arrangements for the market approved after the granting of the licence, the so called operator should apply for approval according to the provisions of this section. (2) The application must: funish the information regarding and relevant to the compensation arrangements proposed. Those must be the arrangements required by regulations made for purposes about this paragraph and must accompanied by a copy of the proposed compensation rules and (b) can be made to the minister through lodging the application with the help of ASIC. Note: For fees in respect of lodging applications, see Part9.10. (3) The minister has a right or rejecting the application if he consider that the proposed compensation arrangements are not adequate according to the things mentioned in the law. (4) If the above (3) is not the case and if the minister considers the proposed arrangements are adequate then he must: (a) approval of the arrangements of compensation must be given in writing. (b) he can change the conditions of licence of the operator as to: (i) be able to deal with the least amount of coverage required in relation to the arrangements of compensation in such a manner as the Minister thinks appropriate; and (ii) he can recognise the source of funds which are available for coverage of claims on the basis of which the Minister approves the arrangements (see section885H). (5) While varying conditions of licende as mentioned in paragraph(4)(b), the Minister should proceed under section796A as though the licensee had applied for the changes to be made. The extension of contract to the Burkes and wills also can make a loss for the company. They were not at all responsible for any legal attachments on the land and they are to be paid for the construction work done. That loss was made more by extending the contract for six more months. Whole contract with Burkes and Wills proved to be a waste as the environmental survey revealed that a lot of remedial work to be done. There was no information regarding the relation between the development work done by Burkes and Wills and the remedial work recommended. As far as cultural heritage land law is considered number of countries along with US are signatories of the pact which stresses on the avoiding modern constructions in the heritage lands. If the land proposed to buy by the Microplex comes under those heritage conditions, no clause in the law can give permission to the company to run a business in it or any construction is not allowed and if it was made, will be liable for destruction. Now the question is that how much investment can be realized from microplex by Megaplex. Had Megaplex initiated the process a little bit earlier to realize security before the appointment of liquidator, both secured and unsecured lending would have been possible to recover. But now as the court appointed a liquidator, the company has to satisfy with the amount it gets from liquidation of the assets and which was shared between the creditors. But the amount which was financed to buy the land mentioned in this paper was in the form of debentures and with equitable mortgage. So the amount that was financed through secured lending can be recovered by realizing the security. The returns on the debentures will depend on the amount realized by liquidation of the company by the liquidator. One way the Microplex can escape from the legal challenges is to pay for Burkes and Wills. But one financer (parent company Megaplex) decided not to finance for Microplex. So they have to search for alternatives. The other creditor is Babinda a trust. The trust members due to their internal clashes and differences forgot to register the charges on book debts with ASIC and the trust was not in a position to lend amount to Microplex. If the directors of Babinda are unanimous in financing the Microplex they can go to court under 283HB Specific Court powers to (1)When a trustee or ASIC approach the court the court is empowered to make any or all of the following orders: (a) It can issue an order that stays the action or the other proceedings of civil code before a court by or against the borrower or a guarantor body. (b) It can pass an order to restrain borrower from paying any monty to the debenture holders or any holders of any other class of debentures. (c) It can issue an order that a security for the purpose of debentures be enforced with immediate effect or at the time the Court directs (though the debentures are irredeemable or redeemable only in case of happening of a contingency); (d) It can pass an order about appointment of a receiver for any property considered as a security for the debentures; (e) It can pass an order restraining advertising by the borrower for deposits or loans; (f) It can pass an order restraining borrowing by the borrower; (g) It can issue an other order that the Court considers appropriate to protect the interests of existing or prospective debenture holders.1 The above thing is suggested because the court have the following powers in case of replacement of directors. Part2L.8-Court 283HA General Court power to give directions and determine questions If any trustee approaches the Court for a direction regarding the performance of the trustee's functions or for determining the question in relation to the interests of the debenture holders, the Court can issue a direction and can make a declaration or determination regarding the matter that was considered appropriate by the court. The Court can even make an ancillary or orders of consequence. Note: Under this section, the Court may order a meeting of debenture holders to be held, see section283EC. So the only legal way to save as much investment is to realize the security of megaplex in microplex. The share or debenture holders are not responsible for the losses and debts of the company. So the debentures of Megaplex in Microplex must be paid in full face value after liquidation. So the secured lending of the Megaplex to Microplex can be recovered without any problem. Now comes the liquidation question of Microplex. As a liquidator is appointed by the court the Megaplex as a parent company and debenture holder in microplex can plead the court under the following provision. Part2L.8-Court 283HA General Court power to give directions and determine questions If the trustee approaches the Court for an order relating to the performance of the trustee's functions or to decide any question in relation to the interests of the debenture holders, the Court may issue a direction and can make any declaration or determination in relation to the matter that it considers appropriate. The Court may also make ancillary or consequential orders. Note: Under this section, the Court may order a meeting of debenture holders to be held, see section283EC. Timely intervention of court under above provision will temporarily stop liquidators and indemnifying activities and give time for megaplex and microplex to set right the legal tangles involved in the deed. They can try to get credit from Babinda trust by incorporating the ousted director with the help of another director Julie and convincing Airlie to include Laura so that the trust will be in a position to finance Microplex. The time obtained by Microplex and Babinda by moving court using above provisions can be used to settle scores with Burke's and Wills as they were responsible for appointing the liquidator. If the dues of Buke's and wills were paid from the finance obtained from Babinda trust the major legal tangle in the deed will be vanished. The other major problem is that some local people were agitating that the site is of cultural heritage importance. Till now (as far the information provided) they did not approach the court, so that the problem and tangle with them can be settled amicably by offering some compensation to them. This is suggested as long as they did not approach the court. When Microplex gets finance from Babinda trust and if it was able to clear the dues of Bukes and Wills then its parent company Megaplex can rethink about not financing it as the company is managing well with the creditors and payments due to them. Instead of realizing securities they try to finance the subsidiary to get returns from unsecured lending also. References: 1. Wiki Media, 2006, Piercing the corporate veil, Wikipedia, , electronic, 22-09-06, http://en.wikipedia.org/wiki/Piercing_the_corporate_veil 2. Shelley Wright, 1999, LAND AND FREEDOM: PROTECTION OF ABORIGINAL CULTURAL HERITAGE, KNOWLEDGE AND CREATIVITY, Newcastle.edu, ,electronic, 22-09-06, http://www.newcastle.edu.au/centre/cispr/conferences/land/swrightpaper.pdf#search=%22corporate%20law%2C%20cultural%20heritage%20land%22 3. Media Wiki, 2006, Corporations Law 2001, Wikipedia, ,electronic, 22-09-06, http://en.wikipedia.org/wiki/Corporations_Act_2001 4. 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