Jem, Lenny and Bill inherited shares in a proprietary company, Macklesfield Pty Ltd upon the death of their father in 2017. The company owns a sheep farm and bookshop located in central Victoria. Each brother has 25% of the shares and the remaining 25% is held by their mother, Margaret. Lenny and Bill are the directors of the company as neither Jim nor Margaret are interested in management. Lenny and Bill share the role of managing director. The company uses the replaceable rules.
The company needs to replace an old shearing shed. The cost of the replacement building is estimated at $750,000. To fund the building, Lenny and Bill propose that the bookshop be sold for $500,000 and the remaining $250,000 be borrowed from CountryBank with security being taken over the sheep farm.
Required: Explain how the company can enter into these transactions in compliance with the Corporations Act and the replaceable rules.
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