Directos Duties Cases

Question 1

Howard Smith Ltd v. Ampol Petroleum Ltf 1974

Answer 1

Directors cannot issue more shares to avoid a takeover bid, but they can issue more shares to increase the companies capital. 171

Question 2

Smith v. Fawcett 1942

Answer 2

The court said it was what the director thought was in the companies best interest and not what the court thought was.172

Question 3

Fulham Football Club Ltd v. Cabra Estates Plc 1994

Answer 3

It was held that directors could not enter into contracts, which will restrict them in the exercise of their future dissection and how they will vote in future elections. However, they can do an agreement, which can prove to be very beneficial to the company, where they are acting in good faith in the companies best interest. 173

Question 4

Baring Plc 1999

Answer 4

Power was delegated to a junior trader who make major losses - resulting in the bank becoming insolvent. The directors had not thought about the risk or implemented safety measures. All the directors were deemed unfit and disqualified. 174

Question 5

Industrial Development Consultants v. Cooley 1972

Answer 5

A situation arouse where for the managing director and he did not disclose this to the board. The third party did not want to contract with the company; however, the court said this was irrelevant and the director should have got the third party to change their mind. 175

Question 6

JJ Harrison Ltd v. Harrison 2002

Answer 6

A director bought land from the company at a cheaper price and then sold it on for a large profit. The court said that the profit should be paid back to the company. 177