Repurchase Reasons and Market Reaction †MyAssignmenthelp.com

Question: Discuss about the Repurchase Reasons and Market Reaction. Answer: Introduction: In the present case, the subject matter is evolved with two topics. The first thing is the oppressive remedy and the second one is that the dividends (Akyol Foo, 2013). The commonwealth countries are enjoying certain statutory powers that help them to get certain benefits. One of such benefit is oppression remedy. This remedy is given to the oppression shareholders so that they can take action against the corporation if the corporation acts oppressively or unfairly (Dhaliwal, et al., 2014). This doctrine was for the first time introduced in the case of Foss v Harbottle (1843) 67 ER 189. It was held in that case that if the action of the company is prejudiced the shareholders at large, they can take action against the company or the corporation (Galloway, 2016). This rule is applicable to all the commonwealth countries. The word unfair prejudiced means if the company is engaging themselves in the process of illegal avoidance regarding any specific shareholders. It has been observed i n the case of Re HR Harmer Ltd. that any person who has actively taken part to the internal affairs of the company can file the oppression. It had observed by Judge Lord Jenkins that any person that has certain interest with the company could bring an action against the company regarding the oppression cases against the company that hurt the corporate personality of that person on certain illegal basis (Garling et al., 2013). It has been stated under section 234 of the Corporation Act 2001 that there are certain category of persons who can get the option to file a case regarding the same. the persons are as follows: Oppression can be filed by any person who is a member of the company; It can be filed by a person who was removed from his post under certain circumstances; A person can also file a case with the consent of the Australian Security and Investments Commission. There is a provision under the Corporation Act regarding the person whose shares are transmitted by will or the shares are allotted to him by operation of law. The affairs of the company should be so that goes against the interest of the shareholders. The acts of the company should be clear enough to prejudice the interest of the shareholders (Hooi, S.E., Albaitty Ibrahimy, 2015). It has been observed in this case that the constitution of the company provides certain dividend benefits to the holders specially those who are enjoying the benefits of the A class shares. It has been stated under the rules of the Corporation Act 2001 that the rules mentioned under the constitution of an company are mandatory in nature and it will be applicable on everyone (Iftikhar, Raja Sehran, 2017). The provisions of the constitution can only be changed in the form of by way of special resolution. However, it has seen that the company had decided not to pay dividends to the Galli Grandchildren. This act of the company has seriously caused breach to the provisions under the constitution of that company. It was the right of the Galli Grandchildren to get the dividend as they are holders of A class share. Therefore, it can be stated that the Gallis have option to bring action against the company to get the oppression remedies. In case of the oppression, the court may give remedies regarding the claim as follows: The company can be wound up; The provisions of the constitution can be modifies, if required; The share capital of the company relating to the person can be transmitted by will. The court can appoint receiver in certain circumstances; The court may even ordered to perform any duties as the court may deem fit. The doctrine of share buy-back is the main theme of this question. Two terms are involved in the doctrine. One is share buy and another is sharing buy-back. The main function of the shareholders in a company is to buy the share of the company and strengthen the economic condition of the company. The shareholders are, therefore playing an important role regarding the monetary affairs of the company. The event of share buy-back has taken place when the shares of the shareholders are purchasing by the company again. Therefore, it can be stated that the term share buy-back happened when the company has decided to buy back all the shares bought by the shareholders of the company for certain reasons (Jacob Jacob, 2013). The reasons for the same can be regarded as the shareholders are part of the company and if it has been decided by the company to reduce the capital cost of the company by reducing the sharing ownership of the shareholders. The Corporation Act 2001 makes certain provisions regarding the buy-back policies to regulate the matter relating to the same systematically. The provision regarding the same has been engraved under section 257B of the Act (Mitchell, Izan Lim, 2015). It is to be kept in mind that the reasons for the buy-back policy do not only stand on the negative base to the shareholders. It has certain benefits that help to secure the interest of the shareholders as a whole. The parameters regarding the share earnings will be increased by way of share buy-back policy. The company at the present market price is purchasing all the shares. Therefore, the shareholders are making profits in this system. The remaining shareholders are also become potential through this process. The process of share buy-back can be taken place by way of two ways. One is the open market and another is the off market. It is up to the company in which way they will be conducted the process. The present problem is based on the capital reduction process. The term capital reduction is related to the term equity. It is the right of the every shareholder to keep certain equity. The quantity of equity can be reduced by way of cancellation of shares or it can be reduced by way of repurchasing the shares by the companies again. Company has stated it under section 257B of the Corporation Act 2001 regarding the buy-back process of the shares. The provision regarding the cancellation of shares is mentioned under section 256B of the Corporation Act 2001. The impacts of the capital reduction do not affect the interest of the shareholders much. It has been observed in the case that this company is also intending to use the capital reduction process (Yarram Dollery, 2015). The process of capital reduction is a process of systematic thought. It is to be kept in mind that the process should not based on the arbitrary procedure. Notice regarding the same is to be sent to the creditors in this aspect and it is necessary to make an entry regarding the capital reduction in the record book of the company. The company should conduct a general meeting and if the resolution were passed on the behalf of the reduction, the same will be recorded after three months of the assurance. In the provinces of Australia, Australian Security and Investment Commission is in the charge of regulate the capital reduction. Certain consents are necessary regarding the capital reduction system. Special resolution is needed to implement the policies regarding the capital reduction. It is not possible to reduce the capital without conducting the special resolution. However, consent is also necessary regarding the reduction. All the problems relating to the matter should be resolved by the interference of the tribunal. Reference: Akyol, A.C. and Foo, C.C., 2013. Share repurchase reasons and the market reaction to actual share repurchases: Evidence from Australia.International Review of Finance,13(1), pp.1-37. Dhaliwal, D., Li, O.Z., Tsang, A. and Yang, Y.G., 2014. Corporate social responsibility disclosure and the cost of equity capital: The roles of stakeholder orientation and financial transparency.Journal of Accounting and Public Policy,33(4), pp.328-355. Galloway, C., 2016. Crisis Communication Research in Australia.The Handbook of International Crisis Communication Research, pp.337-346. Garling, S., Hunt, J., Smith, D. and Sanders, W., 2013.Contested governance: culture, power and institutions in Indigenous Australia(p. 351). ANU Press. Hooi, S.E., Albaity, M. and Ibrahimy, A.I., 2015. Dividend policy and share price volatility.Investment Management and Financial Innovations,12(1), pp.226-234. Iftikhar, A.B., Raja, N.U.D.J. and Sehran, K.N., 2017. IMPACT OF DIVIDEND POLICY ON STOCK PRICES OF FIRM.Theoretical Applied Science, (3), pp.32-37. Jacob, M. and Jacob, M., 2013. Taxation, dividends, and share repurchases: Taking evidence global.Journal of Financial and Quantitative Analysis,48(4), pp.1241-1269. Mitchell, J., Izan, H.Y. and Lim, R., 2015. Australian on-market buy-backs: an examination of valuation issues. Wood, D., Watson, L. and Chung, E., 2014. Cancellation of elective surgery within 24 hours: avoidable and can we improve the outcome?.Bju International,113, pp.28-29. Yarram, S.R. and Dollery, B., 2015. Corporate governance and financial policies: Influence of board characteristics on the dividend policy of Australian firms.Managerial Finance,41(3), pp.