GROUP 81

KITTEN MITTENS (AUSTRALIA) PTY LTD
1 0 1 C O L L I N S S T R E E T , M E L B O U R N E , V I C T O R I A
MLL221 CORPORATE LAW INNOVATION PROJECT
77/100
Chloe Frantz
Jakem Marks
Luisa Sirianni
Matthew Campbell
Vernon Singh
214057659
213096616
214524962
215061055
214135333
Word count: 2200

BUSINESS PLAN
I. Overview
An opportunity exists for development of the cat fashion market in Australia. The core of the
business will be a licensing arrangement to distribute Kitten Mittens™1
with staged
expansion into a full line of seasonally updated apparel and ultimately development of
canine, aviary and aquatic-couture markets “for sophisticated fish of impeccable taste and
breeding”. The following steps have been identified:
1. Incorporate the business.
2. Establish a business headquarters with attached pet fashion boutique
3. Construct the ecommerce site and build our web presence on other platforms.
4. Create contracts with pet stores and other retailers to distribute our products.
5. Institute a marketing campaign to increase brand awareness and market penetration
(preparations have already commenced to run Melbourne’s first ever pet fashion
show).
II. Details of Incorporation
The business will be incorporated as Kitten Mittens (Australia) Pty Ltd (‘Kitten Mittens’).
Confirm that the proposed name is available. Indicate if a screen shot of an ASIC name
availability search showing that the proposed company name is available has been
provided.
A proprietary limited corporation structure has been identified as ideal for our needs.
2
While
this vastly untapped market offers the promise of huge profits there is a reported association
between cats whose owners make them wear shoes and feline depression. Others have
also raised concerns about injury and death resulting from cats’ inability to maintain traction
when jumping between tall objects if their feet are covered. Concordantly we would like to
minimise our personal liability to any disgruntled pet owners. We believe wholeheartedly in
1
Coby Huntington, Kitten Mittens (20 February 2012) FULL
STOP<https://www.youtube.com/watch?v=5fP4emqw7O4>.
2
See Phillip Lipton, Abe Herzberg, Michelle Welsh, Understanding Company Law (Thomson
Reuters, 18th
ed, 2016) 29 – 34.

the future of this business and as such a proprietary company structure will allow for
succession and exit planning.
3
- Discuss the benefits of incorporation (separate legal entity, corporate veil,
limited liability, perpetual succession ) compared with other business
organisations (trust, partnership ).
III. Share Structure
We have opted for a simple share structure consisting of one class of ordinary shares,
numbering 200 in total. The five founders have agreed to purchase all 200 shares at $1000
each, providing $200 000 paid up capital to commence operations.
IV. Internal Governance and Constitution
The business will be governed according to the replaceable rules of the Corporations Act
(‘the Act’).
4
Some concerns have already been raised, however, regarding how suitable
these will be for our purposes and subject to sections 134-6
5
a constitution including the
following may be preferable:
1. A formal table of authority regarding different officer’s sole and combined authority
would outline how much control individuals may exert without board approval. This
would lower the risk of obtaining unsatisfactory contractual relations between the
company and outsiders.
6
2. Written notice be given to the board of intent to appoint key employees. Any director
may raise an objection, in which case it is to be decided by resolution. This would
help to instil a culture of transparency and meritocracy.
7
3. Reasonable notice for calling of directors’ meetings
8
be defined as 30 continuous
days, unless otherwise agreed unanimously.
3
Ibid 55.
4
Corporations Act 2001 (Cth) s 141.
5
Ibid s 134-6.
6
See generally Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB
480.
7
See generally Crabtree Vickers Pty Ltd v Australian Direct Mail Advertising & Addressing
Co Pty Ltd (1957) 33 CLR 72 where appointmenting family produced uncertainty in
contracting.
8
Corporations Act 2001 (Cth) s 248C.

4. At a meeting of members any challenge to a right to vote must be based on
reasonable business grounds.
9
5. At the request of any director, the intending transferor of shares is required to make
full and frank disclosure to the entire board regarding any proposed transfer of
shares, including any related contracts. The directors of the company may only
refuse the transfer of shares on reasonable business grounds.
10
A small proprietary
company will only operate effectively with cooperation between members. This
modification will help control who’s able to be a member, while at the same time
protect the right of members to make a profit by sale of shares.
DISCUSS whether the replaceable rules adequately cater for this or whether it
would be desirable to enter into different arrangements and, if so, what. Whether
the replaceable rules are in fact appropriate for your circumstances:
Quorum for director and shareholder meetings. RR s.248F and s.249T set the
quorum of two. Should it be higher in a proprietary company with a small number
of shareholders who are (probably also) directors? Do you want the rules to allow
decisions to potentially be made by a minority or do you want to entrench
majority/unanimous decision-making? Equally, should the chair have a casting
vote (s.248G & s.250E)?
If partly paid shares are issued – the RR do not give the directors the right to call on
the payment of amounts owing on partly paid shares.
Convenience of having a separate constitution as a stand-alone document as
opposed to the replaceable rules that are contained in the Corporations Act and
subject to legislative change.
Is a separate shareholders agreement necessary? What issues would this
shareholders agreement deal with?
9
Ibid s 250G.
10
Ibid s 1072G.

PRE-INCORPORATION ADVICE
I. Pre-Registration Contracts
At common law Kitten Mittens cannot enter a lease with Vernon’s partner for 101 Collins St,
Melbourne right away because it is an unregistered company.
11
Section 131 of the Act
overcomes this, however, allowing Kitten Mittens to ratify the lease once it has been
registered.12
Kitten Mittens will have to do so within an agreed period,13
or if no time is
specified, then a reasonable period after the lease is entered into.14
The company will be
bound and entitled to the benefits of the lease from the date of ratification.15
Should Kitten
Mittens fail to ratify formally but proceeds to assert their rights under the lease the company
will be deemed to have ratified by conduct.16
II. Liability of Promoters
A promoter is someone involved in starting up the company, whether passively17
or
actively,18
before it is registered. Whoever secures the lease on behalf of Kitten Mittens will
be deemed an active promoter.19
While they would not traditionally be accountable,20
section
131 modifies the common law again by making these promoters personally liable on a
11
Newborne v Sensolid (Great Britain) Ltd [1954] 1 QB 45.
12
The Act s 131(1).
13
Ibid s 131(1)(a).
14
Ibid s 131(1)(b).
15
Keswick Developments Pty Ltd V Kevroy Pty Ltd [2009] QSC 176.
16
Phillip Lipton, Abe Herzberg, Michelle Welsh, above n 2, 174–175.
17
Tracey v Mandalay Pty Ltd (1953) 88 CLR 215.
18
Twycross v Grant (1877) 2 CPD 469.
19
Ibid.
20
Black v Smallwood (1966) 117 CLR 52.

contractual basis for the loss from any unratified contract21
and indeed a ratified but
incompletely performed contract.22
Only those promoters involved in the lease agreement
would be liable to the landlord but they may be able to make their own claim against the
other promoters if they are deemed to be their authorised agent.23
It is advisable for the
promoter(s) involved in leasing the premises to include a clause excluding their personal
liability if Kitten Mittens never registers as a company, never ratifies the contract or if Kitten
Mittens fails to perform it fully and adequately.24
III. Promoters’ Fiduciary Duties
Promoters have fiduciary duties to their company.25
A Disclosure
All promoters must ensure full disclosure TO WHOM ?
- The lessor is the partner of one of the members. This member is involved in
the incorporation of the company and may be deemed a promoter (even if they
are not the individual that enters into the pre-incorporation lease on behalf of
the yet to be incorporated company). In any event, this member/promoter can
effectively deal with the potential conflict and mitigate risk by making a full
disclosure to the other incorporations (directors and shareholders of the new
company).
is made of their interest in any contract entered into on Kitten Mitten’s behalf.
26
This is so
regardless of whether the promoter stands to earn a profit.27
B Conflicts of Interest
Vernon has disclosed his relationship with the potential landlord and would not be presumed
to be acting corruptly28
but he should not participate in the lease agreement personally, as
21
The Act s 131(2).
22
Ibid s 131(4).
23
Bay v Illawarra Stationary Supplies Pty Ltd (1986) 4 ACLC 429.
24
Aztech Science Pty Ltd v Atlanta Aerospace (Woy Woy) Pty Ltd [2005] NSWCA 319.
25
Aequitas v AEFC [2001] NSWSC 14.
26
Erlanger v New Sombrero Phosphate Co (1878) 3 App Cas 1218.
27
Fullwood v Hurley[1928] 1 KB.
28
Cf Lintrose v King [1995] 1 VR 574.

he may have a conflict of interests.29
This duty would extend to all promoters preventing
them from taking up opportunities for themselves to the detriment of Kitten Mittens.
C Confidentiality
Vernon (or any promoter) must not disclose to his partner any confidential information that
may injure Kitten Mittens in lease negotiations.30
D Undisclosed Profits
Promoters also have a duty to declare any profits they personally make through their
position.31
Ideally this should be disclosed to an independent board or if not, then to the
shareholders.32
In our case it would be sufficient for Vernon to disclose to the other four
founders any profits he stood to gain from the lease agreement.
E Due Care and Skill
While obtaining the lease may be time sensitive, the promoter(s) must ensure that the terms
are acceptable to Kitten Mittens and in the company’s best interests.33
IV. Remedies for Breach of Fiduciary Duties
Kitten Mittens but not individual shareholders may pursue one of several remedies against
promoters who breach their duties.34
A Rescission
Kitten Mittens may elect to rescind the lease so long as restitution is possible. 35
This is
generally the case for leases unless an innocent third party has become involved as a new
owner or by a subletting arrangement. Kitten Mittens will also not be able to rescind they do
not act promptly.
B Damages
29
Ibid.
30
Phillip Lipton, Abe Herzberg, Michelle Welsh, above n 2, 173.
31
Gluckstein v Barnes [1900] AC 240.
32
Ibid.
33
Cf Heytesbury Pty Ltd v Kelly [1997] WASC 970161 (15 April 1997).
34
Phillip Lipton, Abe Herzberg, Michelle Welsh, above n 2, 171.
35
Erlanger v New Sombrero Phosphate Co (1878) 3 App Cas 1218.

If the breach involves fraud or negligence, Kitten Mittens may be entitled to damages for any
arising losses36
or by way of recovering secret profits made by the promoter.37
36
Leeds v Hanley Theatres Ltd [1902] 2 Ch 809.
37
Tracey v Mandalay Pty Ltd (1953) 88 CLR 215.

MINUTES OF FIRST DIRECTORS MEETING HELD AT ITS
REGISTERED OFFICE
Tuesday 3 May 2016
(2.00 pm, Melbourne)
Present Matthew Campbell, Chloe Frantz, Jakem Marks, Vernon Singh and
Luisa Sirianni
Apologies -
By invitation -
Opening and welcome Luisa Sirianni opened meeting, welcomed those present and
declared that a quorum NUMBER? SPECIFY...was present.
- Notes Meeting called via email correspondence on Tuesday 26 April 2016. s.248C
and s.248D are the relevant replaceable rules that require reasonable notice to
be given to each director of the meeting and that this notice need not be in
writing.
It was agreed unanimously this meeting occur on this date, disregarding the required 30 days' notice.

1. Statutory matters
1.1 Election of chair
Vernon Singh was elected chair.
1.2 Report on incorporation
Incorporation took place on Monday 25 April 2016. The below named have been appointed and
consented to act as directors:
1 Matthew Campbell, Managing Director (MD)
2 Jakem Marks, Chief Financial Officer (CFO)
3 Vernon Singh, Chief Operations Officer (COO)
4 Chloe Frantz, Chief Marketing Officer (CMO)
5 Luisa Sirianni, Company Secretary (CS)
1.3 Company seal
In accordance with s127 of the Corporations Act 2001, the company will not sign under a seal.
However, two directors or a director and CS will sign.
1.4 Registered office
Notice will be prepared and placed in the reception at 101 Collins Street, Melbourne, Victoria.
1.5 Solicitors
Mr Joe Blogs from MinterEllison has been appointed solicitor of the company. Charges are
subject to individual cost agreements and approval from the MD prior to any work being
undertaken.
1.6 Public Officer
The CFO has been appointed.
1.7 Bank account
It was agreed Commonwealth Bank be the bank of the company.
The signatories of the bank account will differ depending on the nature of the transactions.
Limitations are defined below:
• Authority of the MD to enter into contracts is limited to $100,000.

• Joint authority of the MD and CS is limited to $250,000.
• All contracts above these amounts must be approved by resolution of the directors.
1.8 Share allotment
It was resolved that 100% of shareholdings be distributed equally between five directors. 200
one class of ordinary shares will be issued between the directors at a cash price of $1000 per
share. This equates to 40 shares at $40,000 per director.
• 20% MD
• 20% CFO
• 20% COO
• 20% CMO
• 20% CS
1.9 Company registers
The company will hold the following records at its registered office:
• General ledger, recording all the company’s transactions and balances;
• Cash/bank records;
• Purchase/sale records; and
• All company contracts, agreements and registrations.
1.10 Declaration of interests
It was communicated that all directors do not have personal interests that conflict with their
duties and are all over the age of 18 years.
It was agreed that directors cannot engage in any other business or occupation without prior
consent from MD.
1.11 Taxation and superannuation
The profits of the company will be assed at a 30% tax rate.
A director may nominate a superannuation fund. If a nomination is not made, contributions will
be directed to the company's default superannuation fund, REST Industry Super.

2. Communication
2.1 Directors and meetings
Directors will meet on the first Tuesday of each month at 2:00 pm at the company's registered
office. Notice of meetings will be sent 30 days prior.
If directors are unable to accommodate in one venue, facilities of a video conference or
teleconference will be arranged.
There must be at least two directors present at meetings for quorum.
2.2 Minutes
Minutes must be presented at the following meeting for approval and signed within a
reasonable time by one director.
The CS shall record all meeting proceedings in a book to be kept at the registered office.
2.3 Voting
A resolution will be passed by a majority vote casted by directors. Voting at meetings must be
decided on a show of hands unless a poll vote is demanded.
3. Member benefits package
3.1 Computer facilities at home
Directors are offered a laptop for both home and office use. Internet services at a directors'
home, is a personal expense.
3.2 Entertainment
Appropriate client entertainment expenses will be fully reimbursed by the company provided
the request for reimbursement is approved by another director.
4. Other business
4.1 Next meeting
Tuesday 7 June 2016 at 2:00pm
- YOUR MINUTES INCLUDED ONLY SOME OF THESE:
o time, place, date
o attendees

o quorum
o confirm appointment of directors and secretary (if applicable)
o confirm members
o confirm adoption of replaceable rules
o appointment of public officer
- Importantly, the minutes should also deal with the ratification of the pre-
incorporation lease by including a resolution to ratify the lease.The possible
conflict regarding the lease as the lessor is a partner of one of the group
members/directors. Under s.191 directors must give notice of any material
personal interest (although there is an exception for directors of a proprietary
company if the other directors are aware of the nature and extent of the
interest). Any conflicted director could give standing notice of the interest in
the lease under s.192. The notice would need to detail the nature and extent of
the interest and be given in writing and tabled at the directors meeting.
Meeting closed at 4:30pm
Signed as a true and correct record of the proceedings of the meeting
…………….….
Luisa Sirianni
Company Secretary
Kitten Mittens (Australia) Pty Ltd
101 Collins Street
Melbourne VIC 3000, Australia
Phone: +61 3 9205 2132
Fax: +61 3 9205 0000
Mobile: +61 448 953 181
luisa.sirianni@kittenmittens.com.au
www.kittenmittens.com

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