Patricia is a 48% shareholder in Opium Pharmaceuticals Ltd. She has been buying up shares in an… 1 answer below »

Patricia is a 48% shareholder in Opium Pharmaceuticals Ltd. She has been buying up shares in an attempt to gain control over the company. She tells you the following: It has come to her notice that the board of Opium Pharmaceuticals Ltd has authorized the issue of 10 000 shares to Johnny Investor, at a price of $ 50 per share (the large scale of this offering means that the disclosure requirements of Chapter 6D of the Corporations Act 2001 (Cth) did not need to be complied with). However, the effect of this issue is that her relative shareholding in the company has now dropped to 25%. The company’s accounts indicate that it has cash reserves of $ 100 million, and there are no new projects that will be undertaken. She also learned that Peter Somnium, one of the executive directors of Opium Pharmaceuticals, who was given the job of acquiring raw materials for the company, negotiated a contract for the purchase of opium poppies (used by the company to make morphine) at $ 500 per tonne from a local supplier, whereas research on the internet (which Somnium admits he did not undertake) indicates that the poppies are easily obtainable at $ 100 per tonne. The result was that the company paid $ 1 million more for the poppies than it need have. Patricia also tells you that when she wrote to the board advising it of this issue, and asking that they take action against Peter, she was told that the board had decided not to act. They have also ignored her complaints about the share issue to Johnny Investor, saying that the shares were issued in order to raise capital. Advise Patricia as to the legal issues arising out of these facts and what remedies are available to her.

 

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