Reference no: EM133479287

Problem

Jack, Jamil and John (JJJ) were friends since high school and are now studying at UOW together. They are the members of a pop band named 'Star Music', an unincorporated association in New South Wales. JJJ have a great passion for music, and Star Music has become very popular in a short period of time. They are now concerned about the intellectual property rights of their music and decide to form a company that will own all of their artistic and creative contributions to the music world.

They become the sole shareholders and directors of the newly formed company called Star Music Ltd (SML). At the initial stage, the trio (JJJ) decide to remunerate themselves mainly through dividends, instead of receiving any wages on a regular basis. Lovely, one of their university friends and a good singer too, is willing to join SML as a potential contributor to the pursuits of the company, and JJJ welcome her as a sole female singer to their band. Soon after joining SML, Lovely wants shares in the business and accordingly JJJ transfer some of their shares to her.

Lovely gains 10% of the total shares. JJJ retain 90%. Lovely quickly becomes overly ambitious and jealous of the trio's greater ownership in the company. Lovely demands equal say in the company's management. JJJ, in good faith, include her as a director. Soon after becoming a director, Lovely starts claiming more shares in SML and obstructing every decision JJJ want to make at board meetings.

This makes JJJ realise that it was a serious mistake for them to embrace her as member of their band in the first place. The trio ask Lovely to step down from the position of director, but she refuses to do so. Finding no other alternative, JJJ remove Lovely as a director at a general meeting of SML's members. Lovely nevertheless remains adamant and unwilling to leave the band. As a further strategy to get rid of her, JJJ incorporates a new company called Popular Music Ltd (PML). PML is owned entirely by JJJ, who transfer almost all of the assets and intellectual property rights of SML to PML for a nominal price of $100. In doing so, JJJ outvote Lovely, and decide to remunerate themselves through a monthly salary and not to pay any dividends to the shareholders of SML anymore.

Lovely becomes furious as she does not have any income and the company (SML) has lost all of its assets for just $100. Lovely declares that she will leave SML but feels that the conduct of the majority members of SML is oppressive, unfairly prejudicial to, or unfairly discriminatory against her as a member, and that she deserves compensation for unlawful treatment against her, resulting in her being effectively fired from the company.

Task

Advise Lovely if she can establish any oppressive conduct of the majority shareholders of SML as defined in the Corporations Act 2001 (Cth), what remedies are available to her as a minority member, and the likelihood of her success in any legal action.