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Company Law > 4 > Flashcards

4 Flashcards

1
Q

s239 CA 2006

A

Directors may avoid liability if breach is capable of subsequent approval / ratification by sharheolders

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2
Q

Are remedies for breach in the CA 2004?

A

No s178 provides that common law and equitable remedies still apply

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3
Q

Shareholders sanctions

A

MA 4 - SR can force to do or not to do
s168 CA 2006 - Removal by SR
s21 CA 2006 - Amendment of Articles

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4
Q

Key powers of directors

A

MA 3 - Manage company
MA 8 - pass decisions by unanimous consent

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5
Q

Principle of equitable fiduciary duties

A
  • Must not benefit from their position of trust
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6
Q

Case law for Directors Duties

A

Older case law still valid, as Directors duties are interepted in line with Common Law and Equitable Principles

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7
Q

General Duties of Directors under Part 10 CA 2006

A

171 - Act within powers
172 - promote success of company
173 - Independent powers
174 - Reasonable skill care and diligence
175 - Avoid CoI
176 - Benefits from third partes
177 - Interest in transactions

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8
Q

s171 - Quick fire

A

Act within powers

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9
Q

s172 - Quick fire

A

Promote success of company

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10
Q

s173 - Quick fire

A

Independent judgement

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11
Q

s174 - Quick fire

A

Reasonable skill, care and diligence

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12
Q

s175 - Quick fire

A

Avoid Conflicts of Interests

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13
Q

s176 - Quick fire

A

Avoid benefits from third parties

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14
Q

s177 - Quick fire

A

Disclose interests in transactions to the board

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15
Q

Section 171 Components

A

Act within powers
- Duty to act within company’s constitution
- Duty to exercise powers for the purposes they are conferred (Proper Purposes)`

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16
Q

Proper Purpose

A

Bona fide interests of the company, not for any collateral purpose.

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17
Q

Hogg v Cramphorn

A

New shares issued to employees
Special voting rights
Avoid hostile takehover.
* Allotment of shares held to be void and improper use of directors power to issue shares
* Capable of ratification by shareholders.

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18
Q

Howard Smith v Ampol Petroleum Ltd

A
  • Issue of shares to frustrate takeover
  • Not proper purpose
  • Proper purse raising equity
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19
Q

Eclairs Group Ltd v JKX Oil & Gas Plc

A
  • Disenfranchise for non comopliance
  • Corporate raid
  • Exploiit minority to get effective voting control, without paying pprice for shares
  • Disclosure notices - used to prevent minority voting
  • Not proper purposes
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20
Q

Key case for determinining improper purpose

A

Extrasure travel insurances ltd v scattergood.

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21
Q

Extrasure travel insurances ltd v scattergood.

A
  • Objective test for improper purpose
  • Identify power exercise in question
  • Identify the purpose of the delegated power
  • Identify the substantial purpose of powers use
  • Decide if proper
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22
Q

Teck Corporation v Millar

A
  • Overlap between proper purpose and successs (172)
  • If takeover will cause substantial damage / be a bad deal
  • May be able to issue shares for other reasons that raising capital
    Provided it is for benefit of the whole
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23
Q

Section 172

A

Promote success of the company
* Act honestly and in good faith
* In the interests of the company
* Subjective test - element of objectivity (Reasonable director)
* Success of company - relies on relationships

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24
Q

Defining success

A

s 172(A)
Long term increase in value

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25
Q

What is not success of a company

A
  • Preference payments - breach of creditors interests
  • Hiding director misconduct
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26
Q

Section 173

A

Independent judgment - bust not agree to fetter discretion of directors
Individual nature of duty

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27
Q

Fulham Football Club v Cabara Estates

A

Legitimate business interest to fetter directors discretion

28
Q

Madoff Securities INternational v Raven

A

Individual nature of duty when acting

29
Q

Section 174

A

Duty to exercise reasonable skill and care and diligence

  • Reasonable foresight of “reasonably competent”
  • Subjective / objective test - whichever is higher.
30
Q

Re D’Jan of London Ltd

A

Directors actions measured against the conduct of a reasonably diligent person.
* Must maintain sufficient knowledge
* Must have supervisory oversight if delegate

31
Q

Re Barubgs Okc

A

Supervision of a director / Deputy Chairman expected.

Collective and individual duty to maintain sufficient knowledge

32
Q

Lexi Holdings Plc v Luqman

A

Two sisters not absolved from brother who stole £60 mill
Negligent and jointly liable for

33
Q

Defer to creater experience

A

Legitimate to defer to fellow director with greater experience.
Madoff Securities International Ltd v Raven

34
Q

Fiduciary directors duties include

A

175 - Conflict of Interest
176 - Benefits from third parties
177 - Disclose third party transactions

35
Q

Boardman v Phipps

A

Whether a reasonable man looking at the relevant facts and circumstances would think that there is a real and sensible possibility of conflict.

36
Q

Corporate opportunities are…

A

an asset of the company

These cannot be misappropriated by the director.

37
Q

Cook v Deeks

A

3 directors wanted a personal contract for railway company.
Built up considerable good will
= opportunity of company

38
Q

Can a director resign to exploit a corporate opportunity

A

Clearly no

39
Q

Setting up a company to exploit commercial opportunity

A

Not okay to exploit / not disclose intentions

40
Q

Can a person have competing directorships

A

Generally no unless gain informed consent from both principals

41
Q

Plus Group Ltd v Pyke

A
  • Stoke
  • Business relationships deteriorate
  • Competing business.
  • No breach of duty - large sums of money
42
Q

Difference between 177 and 182

A
  • Sanctions
  • Civil sanctions for failure to disclose prior to transaction
  • Criminal sanctions for failure to disclose after transaction
43
Q

What can be sanction by disclosure to board, and what needs member approval

A
  • 177 - transactions with interest - disclosed to the board
  • 190 - 203: provisions do not apply to property transactions, loans and quasi loans
44
Q

Shareholder approval required for

A
  • Long term service contracts
  • Substantial property transactions
  • Loans, quasi loans and credit transactions
  • Payments for lost offic
45
Q

Substantial property transactions

A
  • Between company and directors (or connected person)
  • Non cash assets
  • Require PPR approvalS
46
Q

Substantial assets

A
  • Exceeds 10% of company asset value and is more than £5k
  • Exceeds £100 000
47
Q

Approval of Substantial Property Transactions

A
  • Approval obtained before by OR
  • Or transaction subject / conditional to approval
  • Can be approved after the event (s196)
  • Does not absolve directors of potential liability
48
Q

Connected person

A
  • Family (not siblings, aunts, grandparents)
  • Companies that director or connected persons own more than 20%
  • Business partner
  • Trustees of a trust benefitting directors or connected persons
49
Q

Remedies: Substantial Property Transactions

A
  • Voidable if no shareholder approval
  • Unless
  • Resitution not possible
  • Indemnified
  • Rights acquired by another party in good faith for value, without notice of contravention
50
Q

Directors are liable

A

To account for profits made, and indemnify the company for losses

51
Q

Loans to directors

A

OR required
Shareholders must get a memo - detailing, amount, purpose, company liability, nature of transactions.

52
Q

Is it possible for shareholders to approve loan transaction after event?

A

Yes - 214
Does not absolve liability under s2139

53
Q

Payments for loss of directors

A
  • To be approved by way of ordinary resolution if over £200
  • If not approved by shareholders - payment is held on trust for the company
54
Q

Remedies for breach of fiduciary dity

A
  • Damages
  • Injunction
  • Account for profits (property and personal)
  • Recission
55
Q

Account for profits - personal remedy

A

Only profits received as a result of breach are payable
Regardless of whether an honest breach

56
Q

Profits from fraudulent misrepresentation

A

All repayable

57
Q

Account for profits -proprietary remedy

A
  • Profits held on constructive trust where identified as an asset that can be.

FHR European Ventues LLP v Cedar Capital Partners LLC.

58
Q

FHR European Ventues LLP v Cedar Capital Partners LLC.

A

10 MILL EURO secret commission,
Held on trust for princial

59
Q

Relief from liability

A
  • Prior authorisation by directors (175 and 177)
  • Prior consent from shareholders (180)
  • Ratification by shareholders 239
  • Relief granted from court
60
Q

Prior approval of directors

A

No breach of duty for the transactions (175 or 177)

61
Q

s180

A

Retains common law and equitable rules which allow shareholders to authorise in advance conduct
Not acts that are unlawful
s180

62
Q

Ratification

A

Can ratify any conduct amounting to breach of duty
By Ordinary Resolution s 239
Must be passed disregarding votes from connected persons or director involved.

63
Q

Approval by shareholders will only be effective if….

A

Decision is honest
Bona fide
In the best interests of the company, including creditors

64
Q

Relief granted by court

A

s 1157
Acted honestly = subjective
reasonably = objective
* Considering all circumstances
ought fairly to be excusd

65
Q

Indemnity and insurance

A

Cannot exempt from liability - any such provision will be void
But can provide insurance against liability, third party indemnity, pensionscheme indemnity.

66
Q
A

Company Law (12 decks)

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