Reference no: EM133935747

Question

KatKat Pty Ltd creates and markets geography DVDs and online videos to Australian high schools, and has the following directors and shareholders: Kris (who holds 250 shares); Kaye (who holds 250 shares and is married to Kris); and Toffer (who holds 501 shares). Most of the substantive work that is involved in creating KatKat's products is done by Toffer, a retired professor who at one time held the Chair of Climate Denial at The University of Kew. Kris and Kaye help in the advertising and sale of KatKat's products. KatKat is profitable at the beginning and initially pays generous dividends to Kris, Kaye and Toffer. In 2019, Kaye and Kris used their votes at a board meeting to appoint their son Ned as Senior Marketing Manager at KatKat. Toffer voted against Ned's appointment as Ned had recently failed in his studies towards a Bachelor of Arts degree majoring in geography. Shortly after, KatKat began to experience some financial difficulties. Toffer blamed the downturn in KatKat's business on Ned's poor performance as KatKat's Senior Marketing Manager, and this view was the source of some tension between Toffer and the other directors. At a board meeting in 2020, Toffer tabled a letter from All's Swell Pty Ltd that proposed a merger between All's Swell and KatKat and which detailed the cost synergies (which included the removal of duplicate management staff) that would flow as a result of the merger of both companies. Toffer was keen to explore the merger proposal in light of KatKat's continuing poor financial performance and resulting need for more working capital. However, Kris and Kaye did not seek any further information about the proposal and decided to ignore it. They instead used their votes at the board meeting in question to issue 1,000 shares with full voting rights to Ned, on the basis that this share issue would be enough to meet KatKat's needs in relation to more working capital. Toffer voted against this share issue. At a later meeting of KatKat's shareholders, Kris, Kaye and Ned used their votes to remove Toffer as a director of the company. Shortly after (and despite the company's continued poor financial performance), the board of KatKat voted to suspend the payment of dividends and to use available profits to increase the remuneration of directors instead. Page 4 of 6 Advise Toffer in relation to his prospects of successfully challenging the actions of the other officers of KatKat, leaving aside any discussion of the prohibition in relation to conflicts of interest. Specifically, what grounds could he raise against: 1. Kris? 2. Kaye? 3. Anyone other than Kris and Kaye?