Reference no: EM133245784

Newfarm Agriculture Ltd ('Newfarm') is a non-listed public company that operates a number of farming projects in central NSW. Newfarm has around 50 members who are mostly local farmers. The board has traditionally been open in its consultations with Newfarm's members about major decisions. Newfarm's constitution requires expenditure for amounts over $5 million to be approved by a majority of the company's members. In order to reduce both its energy bills and its carbon footprint, Newfarm has recently been investigating the potential to install large solar panels and wind turbine machines to power its farming facilities, and the government has recently announced a grants program for farms that convert to renewable energy. Independent modelling has estimated that the initial installation of these new forms of energy generation will cost around $8 million. Newfarm's directors are planning to finance this installation through a combination of drawing upon the company's savings and also through bank loans.

Jesse and Terrence are two wealthy farmers who are members of Newfarm and between them hold 50 per cent of the company's shares. They are highly sceptical about solar power and believe that solar panels increase the risks of bushfires and regard wind turbines as unsightly. They are opposed to the plan to construct large-scale solar panels and believe there are better uses for the company's funds. Jesse and Terrence have advised Newfarm's directors that they intend to vote against the proposed expenditure of $8 million at the meeting to approve this expenditure. Newfarm's board has just met and resolved to issue 50 new shares to Moses, who owns a solar energy company which is prepared to install the solar panels. This has the effect of reducing the percentage of shares held by Jesse and Terrence from 50 per cent to 20 per cent.

Jesse and Terrence are outraged when they hear of the board's decision. They approach you for advice on whether there might be grounds upon which they could challenge the decision by the directors to issue the 50 the new shares to Moses.