Shambolic Ltd is a listed company, that specialises in propertyinvestment. It was founded by two sisters, Venus and Serena. Atdifferent times Venus and Serena have issued shares to bring fundsinto the company, and together they now own 35 per cent of theissued shares. The other major shareholder is Olympia, who owns 40per cent, and who is also a director. The rest of the shareholdingis held by a range of other shareholders.
There has been a lot of disagreement between Olympia and Venusconcerning the direction of the company. Serena always supports hersister. At a board meeting, a decision is made to allot asubstantial number of shares to another property investmentcompany, Tutu Pty Ltd. The reason given at the meeting is that Tutuwill be able to bring in more funding for Shambolic's investmentdeals. As a result, Olympia's voting power is reduced to 10 percent.
Olympia overhears a conversation between Venus and Serena. Shefinds out that Tutu Pty Ltd is controlled by Venus and Serena'smother, and the real reason the shares were issued was to diluteOlympia's shareholding and voting power, as the sisters wereconcerned about a takeover attempt.
Advise the directors about the possibility of a legalchallenge to their actions.
