Problem
The constitution of Parrot Pty Ltd provides that the company is to carry on a business as a supplier of both physical and digital maps. The constitution of Parrot Pty Ltd limits the company's borrowings without shareholder approval to $100,000 and further restricts the company's business activity to making and supplying of maps only. Sean has recently been appointed the CEO and Managing director of Parrot Pty Ltd. Sean plans to expand the business to include the sale of tents and outdoor equipment. He feels that there is a certain synergy between the two products and the company's map business which will boost the company's profits.
The expansion will involve the rental of a much larger premises and hiring 10 new staff. Sean plans to fund this expansion with a bank loan of $200,000, which he has already arranged (and a loan agreement signed) with BNO Bank. He has also signed a $120,000 contract with Mountain Gear Adventures Pty Ltd (an outdoor equipment manufacturer) to supply tents and other outdoor equipment for Parrot Pty Ltd to sell.
A number of shareholders and directors have been very concerned by the plans of the new managing director since they have not been consulted. Sean's obvious disregard for procedures in the constitution has also annoyed them.
They have approached you for advice as to whether the company is bound by the loan agreement with BNO Bank, and also the contract Sean had signed with Mountain Gear Adventures Pty Ltd on behalf of the company. (Your answer should include case law and the provisions of the Corporations Act 2001 (Cth) (where relevant))