australian corporate law
QUESTION 2 Mereck Australia Pharmaceuticals Ltd (‘Mereck’) is an unlisted public company, which manufactures pharmaceutical and chemical products. Mereck was incorporated in 2001 and has not adopted a constitution. Mereck is a wholly owned subsidiary of Mereck Global Pharmaceuticals Ltd (‘MGPL’). The Mereck board of directors comprises Michael, William, Timothy, Elizabeth and Greg. Michael is the managing director and William is the chief financial officer (‘CFO’), of Mereck. Timothy, Elizabeth and Greg are all non-executive directors. Timothy and Elizabeth are employees of MGPL, who have been placed on the board of Mereck by MGPL as nominee directors. Timothy also serves as the chair of Mereck. Greg is a biochemist, who travels extensively. Early this year, after reports of increased militant activity throughout the Ukraine and the threat of nuclear activity, the Mereck board decides to dramatically expand its operations to manufacture a new drug, Neupogen, which can counter the effects of radiation exposure. The board wants to become the largest producer of Neupogen in the southern hemisphere, because the governments of Poland, Estonia and Latvia have all announced that they will be purchasing huge quantities of the drug to counter possible nuclear attacks by Russia. To achieve the planned expansion, Mereck needs to raise at least $20 million in finance. On 1 February, Michael convenes a board meeting of Mereck. He opens the meeting by stating: “If we are going to capitalise on the panic in the Baltic States by becoming the largest producer of Neupogen in the southern hemisphere, we need to raise at least $20 million as quickly as possible. One way to do this is to sell off the large tract of undeveloped real estate in Balmain that Mereck owns (‘Balmain Property’). This is an extensive prime waterfront property and it must be worth at least $20 million, and hopefully more. We are not currently using it for anything, so we may as well transform it into cash for this project. You will all have heard of Mr Frank Leary, the shopping centre tycoon. I know him socially and I would like to meet with him and enter into negotiations about the possibility of him purchasing the Balmain property from Mereck.” The following day, Michael meets with Mr Leary, and proposes that he buy the Balmain Property from Mereck for a sum of $20 million. Mr Leary says that he will think about the proposal. On 4 February, Michael convenes an unscheduled one hour special breakfast meeting of the board. Michael opens the meeting by stating: “I have very good news. After some hard bargaining, Mr Leary is prepared to purchase the Balmain Property for $20 million. However, time is of the 5 essence in this matter. Mr Leary wants a decision from the board today or he will withdraw his offer. But, since we want things to move quickly, too, it’s a deal made in heaven”. Greg has only attended one board meeting of Mereck since he became a director five years ago, due to his extensive travel. He has always left the routine business of the company to the other directors. Greg says: “It certainly seems a good solution to our current financial needs. Do we have any valuation of the Balmain Property to check that that this is the best price we can obtain?” Michael says: “I know in an ideal world, Greg, a valuation would be nice. Unfortunately, since time is of the essence in this deal, we just don’t have that luxury. But William, our trusty and knowledgeable CFO, has been following property trends in the area, and I know that William thinks this is a great deal for us”. William, the CFO, simply says “Under the Corporations Act, I am prohibited from being involved in this decision, since am involved in a consortium with Mr Leary, and I have a material personal interest in the matter”. William says nothing whatsoever concerning the value of the Balmain Property. In fact he thinks that $20 million is probably a fair price for the land at the moment, but he is aware of government plans to build a new bridge in Balmain that are near to approval, which would result in a dramatic increase in the value of the land. Greg says: “Well, being a financially illiterate biochemist, I would feel more comfortable with a written valuation. But you guys are the experts, so I’m happy to rely on you”. Elizabeth says: “If we really are serious about expanding operations, we not only need cash, we need additional machinery. I know a fantastic company called Pharmaceutical Machinery Supplies Pty Ltd which provides high quality equipment at a low cost. I strongly recommend that we source all of our equipment from them.” Unknown to the board of Mereck, Elizabeth is a director and an 80% shareholder of Pharmaceutical Machinery Supplies Pty Ltd (‘PMS’). 6 The board of directors vote formally to: (i) approve the sale of the Balmain land by Mereck to Mr Leary for $20 million; and (ii) to lease machinery from PMS and enter into a five year contract with PMS to that effect. Although Timothy and Elizabeth have doubts that $20 million is a reasonable price for the land, they vote in favour of the sale because they know that MGPL urgently needs greater supplies of Neupogen to on-sell in the US market, and they think it is essential that Mereck starts to expand its production of the drug as soon as possible so it can commence supply to MGPL. Michael raises one final issue before the meeting closes. He informs the directors of more good news. The Mereck biomedical department has performed wildly above expectations for the previous year since they hired Professor H. Jekyll as team manager. Michael says: “The profits from this section of the firm are phenomenal – they are up by 75% since we hired Professor Jekyll”. Greg says: “You know the financial scandal they had at the Notional Bank last year. We wouldn’t want one of those to occur at Mereck. I am assuming we have adequate compliance systems in place in relation to the biomedical department.” Michael says: “Oh good enough, good enough. Or at least, as good as the compliance systems of our main competitors. Anyway, Dr Jekyll is a genius. If we get too bureaucratic with him, he’ll be poached by one of those competitors”. One week after this board meeting, the contract for the sale of the Balmain land to Mr Leary is completed and the contract for the lease of machinery from PMS is completed. . Since 4 February, due to intense competition in the pharmaceutical industry and its own ambitious manufacturing expansion, Mereck has experienced severe financial instability and has had extreme difficulty in paying its debts. On several occasions, it has failed to pay creditors within the contractual time for payment. Regular board meetings are held during this period. William thinks they should stop trading and says so in no uncertain terms. The other directors, however, hope that things will improve once production of Neupogen commences, and overrule him. Mereck continues to incur significant debts by, for example, building a new laboratory and testing facility for Neupogen. Greg, who appeared to be under the influence of narcotics at the 4 February board meeting, does not attend any of these meetings as he was placed on ‘recreational leave’ immediately following that meeting. An expedited internal investigation revealed that 7 Greg, a hopeless drug addict, had been occasionally selling Mereck’s oxycodone supplies to his friends and pocketing the money. This investigation concluded that there was a serious breach of Mereck’s risk management policies. Notwithstanding his termination on 5 March, Greg – who still had keys and access cards to Mereck’s building – managed to access Mereck’s premises and source a further 200 oxycodone pills to sell to his friends. Last month, after United Nations intervention, the Russians retreated from the Ukraine and threats to bordering countries were eradicated. The United Nations announced that since it had forced Russia to retreat, all citizens in the surrounding region were now safe from potential nuclear attacks. The Baltic States made a joint statement stating “the Ukrainian crisis is now over, and as a token of good faith, Russia has agreed to sign a peace treaty with all Baltic States – called the Friendship Treaty.” The Baltic States also made it clear that they will no longer need to purchase drugs like Neupogen. Demand from US citizens consequently rapidly diminished as they turned their attention away from nuclear preparedness to another more pressing crisis – petitioning the FDA, after discovery of azodicarbonamide (a chemical used in yoga mats) in Subway sandwich rolls. One month ago, Mereck went into liquidation. Around this time, it was also discovered that Dr Jekyll and his biomedical team had been making earlier large profits for Mereck by illegally selling body parts on the black market. Also, following the approval of plans for a new bridge in Balmain, the Balmain property, on which Mr Leary plans to build a huge mall, is now worth $100 million. Advise as to what actions ASIC may bring against the directors or other officers of Mereck for breach of duties under the Corporations Act 2001 (Cth) and the remedies ASIC may seek. [In answering this question you are not required to consider any issues relating to the insolvent trading provisions of the Corporations Act 2001 (Cth)] [End of Question 2]
Our Service Charter
-
Excellent Quality / 100% Plagiarism-Free
We employ a number of measures to ensure top quality essays. The papers go through a system of quality control prior to delivery. We run plagiarism checks on each paper to ensure that they will be 100% plagiarism-free. So, only clean copies hit customers’ emails. We also never resell the papers completed by our writers. So, once it is checked using a plagiarism checker, the paper will be unique. Speaking of the academic writing standards, we will stick to the assignment brief given by the customer and assign the perfect writer. By saying “the perfect writer” we mean the one having an academic degree in the customer’s study field and positive feedback from other customers. -
Free Revisions
We keep the quality bar of all papers high. But in case you need some extra brilliance to the paper, here’s what to do. First of all, you can choose a top writer. It means that we will assign an expert with a degree in your subject. And secondly, you can rely on our editing services. Our editors will revise your papers, checking whether or not they comply with high standards of academic writing. In addition, editing entails adjusting content if it’s off the topic, adding more sources, refining the language style, and making sure the referencing style is followed. -
Confidentiality / 100% No Disclosure
We make sure that clients’ personal data remains confidential and is not exploited for any purposes beyond those related to our services. We only ask you to provide us with the information that is required to produce the paper according to your writing needs. Please note that the payment info is protected as well. Feel free to refer to the support team for more information about our payment methods. The fact that you used our service is kept secret due to the advanced security standards. So, you can be sure that no one will find out that you got a paper from our writing service. -
Money Back Guarantee
If the writer doesn’t address all the questions on your assignment brief or the delivered paper appears to be off the topic, you can ask for a refund. Or, if it is applicable, you can opt in for free revision within 14-30 days, depending on your paper’s length. The revision or refund request should be sent within 14 days after delivery. The customer gets 100% money-back in case they haven't downloaded the paper. All approved refunds will be returned to the customer’s credit card or Bonus Balance in a form of store credit. Take a note that we will send an extra compensation if the customers goes with a store credit. -
24/7 Customer Support
We have a support team working 24/7 ready to give your issue concerning the order their immediate attention. If you have any questions about the ordering process, communication with the writer, payment options, feel free to join live chat. Be sure to get a fast response. They can also give you the exact price quote, taking into account the timing, desired academic level of the paper, and the number of pages.