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QUESTION

Abe, Baker, and Charlie are members of Super Cup Ltd ("Super Cup"), a successful mid-sized Australian coffee retailer.

Abe, Baker, and Charlie are members of Super Cup Ltd ("Super Cup"), a successful mid-sized Australian coffee retailer. Abe is a Super Cup director who also sits on the Gloria Jean's Coffee board of directors. Super Cup has been so successful in the past seven years that it has come to the attention of global coffee giant Starbucks. Starbucks was so impressed with Super Cup's performance that it recently acquired 85% of Super Cup's shares in a takeover action.

Starbucks would now like to acquire the remaining 15% of Super Cup shares. Unfortunately for Starbucks, those shares are held by Abe, Baker, and Charlie (5% each) and they do not want to sell.

The Super Cup constitution does not allow for expropriation of member shares.

Starbucks decides to acquire these shares by using its voting power to pass a special resolution altering the constitution to allow any member with 85% or more of issued shares to compulsorily acquire all other issued shares. Starbucks attempts to justify this alteration by claiming it will result in administrative savings and tax advantages for the company.

Starbucks provides notice of its intent to expropriate the shares in accordance with the company constitution and standard industry practice. It offers to pay Abe, Baker and Charlie the price that they initially paid for the Super Cup shares when they invested seven years ago. Abe, Baker and Charlie are angry and refuse to sell their shares.

a) Will Starbucks be able to successfully change the constitution?

b) Will it be able to expropriate any or all of the shares held by Abe, Baker and Charlie? Why or why not?

Explain your answer citing Australian case law and the Corporations Act.

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