In the matter of Molopo Energy Limited; Molopo Energy Limited v Keybridge Capital Limited

In this matter, Molopo Energy Limited contested a requisition by Keybridge Capital Limited, a shareholder, to convene a meeting of the company. The dispute centred on Keybridge's attempt to propose resolutions that would permit the company to reduce its share capital and also effect that reduction. Additionally, the requisition contained a condition that the resolution for capital reduction would only proceed if a separate resolution to remove certain directors of Molopo and replace them with nominees of Molopo was not passed. Furthermore, the condition provided for the removal of any directors appointed between the service of the requisition and the meeting date. Molopo Energy Limited sought an injunction to prevent the meeting from taking place and to declare the requisition invalid, on the grounds that the conditionality of the resolutions and the potential prejudice to the company's creditors made the requisition improper.

The primary legal issues revolved around whether the Corporations Act 2001 (Cth) section 256B allows shareholders to directly effect a capital reduction without a board proposal, and whether a company can proceed with a capital reduction if it might prejudice its ability to pay creditors. Another issue was the validity of a resolution that was conditional upon the non-passage of another resolution, specifically whether this conditionality rendered the resolution invalid or if it infringed upon the directors' duties under section 203D of the Corporations Act 2001 (Cth). The court had to determine whether the conditional resolution concerning the directors' removal was permissible and whether the directors could be held accountable for contravening the Act by allowing such a resolution to proceed.

The court found that under section 256B of the Corporations Act 2001 (Cth), a company could not effect a capital reduction through a shareholder resolution without the board's proposal. The court also held that the proposed capital reduction might prejudice the company's ability to pay its creditors, making it improper. Moreover, the conditional resolution regarding the directors' removal was deemed invalid as it infringed upon the directors' duties by potentially causing the company to contravene the Act. Consequently, the court granted Molopo Energy Limited's application for an injunction and declared Keybridge's requisition invalid. The court ruled that the conditions attached to the resolutions were not permissible, and the directors were not to be held responsible for allowing the meeting to proceed under these conditions.