NSW Directors fail to disclose imminent asset sale to all shareholders

Discussion in 'Commercial Law Forum' started by firsttimefounder, 27 February 2018.

  1. firsttimefounder

    firsttimefounder Well-Known Member

    7 November 2017
    Likes Received:
    Some advice needed on the following scenario:

    • Company A is a private company with a small shareholding
    • Company A geared up towards the preparation for an asset sale to Company B ( unbeknownst to all shareholders)
    • The directors of Company A then raise money via a rights issue and invite the other shareholders to participate in the cap raise and issue a new class of shares. i.e. preference shares to those who invest
    • The directors of Company A then go on to sell the assets of the business to Company B but failed to disclose the trade sale to Company B
    • The shareholders of Company A who had ordinary shares are left with very little value post trade sale

    My question relates to disclosure rights to shareholders by the directors of Company A.

    Pursuant to their fiduciaries, surely the directors should have disclosed the information they possessed of this special knowledge of the future plans to sell the assets of Company A given they would ( and did) profit from the sale via their newly issued preference shares?

    They could be deemed to have deliberately mislead the minority shareholders and breached their duty of care as directors?

    What recourse can shareholders have who were mislead.

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