What methods can Ross attempt to use to gather information about the company

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Question - Ross Tanner is an investor and entrepreneur. He holds a large number of shares in Seaway Security Pty Ltd. Ross has been quite unhappy about the management of the company, particularly as it seems that directors have had pay increases each year and seem to have significant benefits in the form of cars, trips and various other expenses paid on their behalf. Ross suspects that the directors are acting generally for their own benefit, and not in the interests of all shareholders. He is particularly interested in how certain shareholders have increased their holdings, and whether the company has been assisting a particular group of shareholders at the expense of the shareholders in general.

While Ross has asked various questions at company meetings, he is not satisfied with the answers he has received. He believes there may be a case for bringing an action against the directors under some part of the Corporations Act. Ross needs to gather some information so that he can determine whether to bring an action for oppression or perhaps a statutory derivative action against directors who are misusing their position.

Explain with reference to specific sections of the Corporations Act 2001 (Cth):

a) What methods can Ross attempt to use to gather information about the company, in order to consider his options in taking action?

Answer - With Ross being a shareholder he has the right of his interests to be represented and protected. Shareholders have the interest of increasing their wealth and receiving profits which is gained from dividends. The management benefiting themselves instead of the shareholders by compensating themselves does not represent the interests of the shareholder. This is a clear breach of officer duty where the management needs to making decisions to that will benefit all. Officer breach of duty allows the members to take remedies and in this case Ross should take statutory remedy. This remedy allows him to inspects the books of the company. With Ross inspecting the books it will enable him to gather information regarding the managements actions.

b) If Rossdoes find that the company is acting unfairly or prejudicially against some members, what type of action can he instigate?

Answer - After Ross inspects the company's books and finding that the management had been acting on its best interests, this will be a breach and Ross can implement a derivative action. A derivative action is where the company's shareholders can sue the company's directors and executives for damages. With the suing of the management the directors/executive can either be changed. Derivative action is taken since the shareholders consider the activities by the management to be illegal, criminal, or fraudulent behaviour. It also brings about conflict of interest.

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