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Company Law Assignmenton Gambotto v WCP Ltd (1995)

Question

Task: The case selected for the present company law assignment is Gambotto v WCP Ltd (1995). The students are then required to identify the issue/s involved in the case, recognize and express the list of relevant laws or precedents, demonstrate their understanding and illustrate how they apply the law to the given situation of the case and then finally conclude to make a judgment

Answer

1. Case Examined in the Company Law Assignment
“GAMBOTTO and Another v W.C.P. Limited and another F.C. 95/007”
Legislation.gov.au. 2021. Administrative Decisions (Judicial Review) Act 1977. [online] Available at: [Accessed 15 February 2021].

2. Introduction to the Case
The majority of the Shareholders of WCP Ltd (WCP) fully owned the subsidiaries of the Industrial Equity Ltd. (IEL), which held 99.7 percent of the capital. Two minority shareholders applied for the declaration of the articles. The major shareholder WCP could not acquire the plaintiff shareholder's share because of the 701 of the corporation law. In this case, it has been stated that major shareholders would get advantages in taxation and also gets administrative benefits. However, IEL could not get that.

From the case, it has been found that IEL wanted all the shares of WCP’s shares to get out from the taxation and administrative benefits.They want to acquire the share of Gambotto and Sandri too. However, Gambotto and Sandri did not commence the proceedings. Substantive fairness in the case has largely based on the price offered for the shares. Expropriation of the market value was unfair. Current market value was based on various factors like assets, dividends, and the nature of the co-operation.

3. Substance of Facts

  • The mainstream stockholders of WCP Limited, who possessed affiliates of Industrial Equity Limited, detained around 99.7 percent of the shares of WCP Limited.
  • Gambotto and Sandri detained around 0.094 percent of the shares of WCP Limited.
  • Industrial Equity Limited desired WCPLimited's all bonds for getting an assessment and organizational benefits as well as income tax reserves of more than $4 million and secretarial fee reserves of around $3thousandin a year.
  • Industrial Equity Limitedcould not obtain Giancarlo Gambotto and EliandriSandri's stocks with alternate attainment systems.
  • Industrial Equity Limiteddesired to alter the organization structure to let a stockholder above 90 percent shares under duress obtain a slight stockholder's stocks. Industrial Equity Limited planned to purchase the stocks for $1.85 a share, which Giancarlo Gambotto and EliandriSandriwatched as practical, they still did not wish to exchange their stocks.
  • Giancarlo GambottoandEliandriSandri began proceedings.

4. Issue (Factual Context)
The appeal was made from the Supreme Court of New South Wales on 6th May 1992 by Gambotto and Sandri to confine the company from resolving to change the articles to add art. 20A. a meeting took place on 11th May not to transfer the minority shares but Gambotto and Sandri had not attended it. The proceeding came before McLelland J who declared that the amendment was invalid as well as the insertion of art. 20A in the articles was ineffective and invalid and consequential orders have been made that include an injunction. Then, Acmex Investments and W.C.P had appealed to the Appeal Court that allowed the appeal(Langford, 2020). The High Court had granted a special leave to Gambotto and Sandri to appeal from the judgment of the Appeal Court. The amendment was oppressive and imposed restrictions on the right of transferring shares inside the meaning of s.180 (3) of the Corporation Law.

The issue was presented to the court that the action of IEL should amend the articles to acquire the shares of Gambotto and Sandri be held invalid on an oppressive basis. The parties are fighting for the issue regarding shares and the high court decided that the proposed amendment was invalid because was not made for a particular purpose. The majority of the shareholders that are related to the company could not have obtained the shares of the accuser shareholders was under 414 or 701 of the Corporation Law. The majority shareholders of WCP Ltd owned entirely 99.7 percent of the subsidiaries of IEL or Industrial Equity Limited. So, IEL wanted to have all the shares of WCP to get administrative and taxation benefits. However, IEL could not acquire the shares of Gambotto and Sandri’s along with alternative acquisition mechanisms.

5. Rule (Substance of Law)
The rules for the substance of law are the followings –
The base of the forming new rule is the valuation of the share to create a firm accountant for the business.

Various methods have been used for share valuation .Net assets value is the main key for passing a law for the share valuation according to the demand of each shareholder of the company.

According to the corporation law, in section 176 it has been declared that major shareholders have no fiduciary duty at the time of practicing power.
Laws that had been proposed were demeaned in the section 176, Corporation Law. The amendment also restricted section of 180(1) of Corporate Law.
Issues regarding shareholders are very common. The equitable principle has been implemented by the court to develop public protection interests.

Shareholder acquisition rule has been modified to developing a public protecting environment for the interest of the company. Without legal authorization contractual power of the company would not be able for amendment empowering the acquisition process.

6. Application
The case stated that major shareholders of WCP ltd, owned subsidiaries of IEL which was 99.7% of WCP’s shares. IEL was incapable of getting the share of Gambotto and Sandri’s shares. However, both the shareholders had not agreed with it. The whole case has been stated by High Court of Australia. The court's main role is excessively favoring the mainstream and mostlyall evictingthe bite of practical complications, like poor access toevidence,that would then challenge marginal stockholder.Not extending to a modification whose determination is to take the stocks of a present stockholder unless the expropriation is essential for the defense orpreferment of the organization’s benefits.

Rejecting to take the existing market cost because of receiving the fair cost of stocks to favor a principal drop system under which the marginal stockholders would obtain a cost of $2.78 for each share which was matched with the present market cost. Making a decision when there are admitted contraventions and developing consequences are readily given to the guilty.

Overall values of law and equity to all authorities had discussed on mainstream and permitting them to fixmarginal. The court will always put the focus on after decision surroundings and avoid unnecessary contradiction for the decision.

7. Conclusion
In this case, IEL Ltd wanted to own all the subsidiaries of WCP ltd at the 99.7% share. The contraventions had been related to the acquisition of shares. The proposed amendment was declared invalid. IEL wants to acquire the shares of Giancarlo Gambotto and Eliandri Sandri's share for $1.85; however, both the shareholders did not want to sell their shares. The case was held in the High Court and the proposed amendment was not a proper purpose.

The IEL in this case, was unable to acquire shares of Gambotto and Sindari, in the alternative mechanism. IEL also proposed to buy the share for $1.85 but Gambotto and Sindari did not accept to sell their shares. For this reason, Gambotto and Sindari had commenced the processing to the court.

The High Court had adjourned the case because the purpose of the Amendment was invalid. The majority of shareholders had two-limbed permits expropriations, and also operates oppressively concerning the minority of shareholders.

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