Not in statute book - must learn

Question 1

What is unfairly prejudicial conduct?

Answer 1

Re Guidezone Ltd (2000) - reasonably bystander test

Objective test

Question 2

Re British American Corp

Answer 2

If a D is also a SH of another company, any transaction made with that other company will be considered one which the D has an indirect interest in for the purpose of S177

Question 3

Purpose and function of Shareholder Agreements

Answer 3

Can agree things in SH agreement which is out of scope of articles, particularly as company cannot limit its statutory powers in its articles

Companies act will therefore prevail over a SH agreement i.e. removing Ds, but signatory can still claim for breach of contract under the shareholder agreement

If a company is a party to the SH agreement, can only sign up to the non-restrictive provisions

SH put things in agreement that would not come under S33 (membership rights)

Question 4

What is wrongful dismissal? When can it be claimed?

Answer 4

When employer dismisses employee in breach of employment i.e. no notice or PILON

6 year limitation period

Remedy - damages for breach of contract

Question 5

What is unfair dismissal? When can it be claimed?

Answer 5

Employee was dismissed and reason and procedure was not fair

capability & conduct are legit reasons

Procedure in line with ACAS procedure

3 month limitation period and must have been employed for two years

Remedies - reinstatement, reengagement, compensation

Basic award - age x yrs of service x pay

Compensation - actual loss suffered

Extra 25% if don’t follow ACAS procedure

Question 6

When are restrictive covenants enforceable?

Answer 6

Restraint of trade clause void not enforceable unless protecting legitimate interest of company, and goes no further than reasonable required to do so

Question 7

3 types of restrictive covenant?

Answer 7

Non-competition, non-dealing, non-solicitor

Question 8

What is the blue pencil test?

Answer 8

Will not rewrite a restrictive covenant to make it enforceable. Will strike out an unenforceable part but whats left must make independent sense to be enforceable

Will enforce at minimum level required to protect business legit interest

Question 9

What factors are used to assess the reasonableness of a restrictive covenant?

Answer 9

1) Duration - usually not valid over 12 months (not confidentiality)
2) Geographical scope - not too wide
3) Needs / interests of the business i.e. global?
3) Duties of employee - i.e. client contact?
4) Interest the business is trying to protect - will a lesser restriction suffice? Is the clause wider than necessary to protect legit interests?

Question 10

When happens to the enforceability of the restrictive covenants if the employer breaches the employment contract? (i.e. dismissed without following correct notice period).

Answer 10

Restrictive covenant will be void as employer has repudiated the contract

N.B. this is a reason why contracts have PILON clauses - prevents breach if do not give correct notice period

Question 11

Settlement Agreements between employer and employee

Answer 11

Right for employee to bring later action after settlement agreement executed cannot be excluded unless S203 ERA is fulfilled.

Question 12

S203(3) ERA 96

Answer 12

Employee not restricted from bringing a claim under the ERA unless settlement agreement:

1) is in writing
2) relates to a specific claim
3) employee has received independent legal advice
4) advisor is covered my indemnity insurance
5) advisor is listed and named
6) states the agreement complies with S203

Question 13

What type of clause needs to be in a director’s service contract which prevents the director from bringing a claim of wrongful dismissal in the event that the director is removed from position?

Answer 13

Needs to be a clause stating that if the exec ceases to be a director, his/her employment will still continue and the agreement shall continue to be void.

Question 14

When is a restrictive covenant likely to be unenforceable?

Answer 14

If the term is over 12 months and if it restricts the employees employability.

Question 15

What other clause is sometimes a preferable alternative to restrictive covenants in an employment / service contract?

Answer 15

A garden leave clause - this prevents an employee from working anywhere else for certain amount of time, but cannot access the office and confidential information etc so prevents them taking customer information, supplier information, long range plans with them

> garden leave clause may be possibly unenforceable in fast paced industry

Question 16

What things should a settlement agreement include?

Answer 16

Should restate the restrictive covenants - as this agreement is negotiated they are more likely to be enforced

Should not restrict future claims do not now about yet i.e. P.I., pension rights etc

Include agreed reference in schedule

Usually includes clause requiring buy-back of shares - do not want angry minority SH

Question 17

Pedley v Inland Waterways

Answer 17

Directors are not bound to be a removal of director resolution on a GM agenda if they have received notice under S312

Question 18

Is S303, clear days under S360 or not? Is S312 clear days?

Answer 18

S303 is NOT clear days, but S312 IS.

Question 19

In practice, what can a solicitor do to make removing a director under S168 as quick as possible?

Answer 19

Send S303 and S312 notices on the same day.

Question 20

When removing a director from office, and the director is also a shareholder, must always check the articles for what type of clause, and why?

Answer 20

A Bushell v Faith clause - which gives a director weighted voting rights in the situation where SH’s have sent notice under S168, which means that SH may actually be unable to pass OR with required majority.

Question 21

Can a written resolution be used to remove a director?

Answer 21

No. (But special notice can!)

Question 22

What does convening a GM refer to?

Answer 22

Convene means to call the meeting, rather than to hold.

Question 23

Re Yeovil

Answer 23

Applying rule in Clayton’s case, payments into bank always discharge the oldest payments first

Overtime take money out of overdraft, are advancing new money

Question 24

Re MC Bacon Ltd

Answer 24

Preferences - desire to prefer is subjective test - must want to put creditor in a better position

Undervalue transaction - security isn’t as doesn’t deplete assets (unless no consideration - Hill v Spread Trustee)

Question 25

Re Produce Marketing Consortium

Answer 25

Wrongful trading cannot be relieved by the court under S1157

Question 26

Under wrongful trading and reasonably diligent person test, court will apply objective or subjective test for that standard?

Answer 26

Whichever is highest

Question 27

Defence for fraudulent trading?

Answer 27

Believed things would get better - genuinely believed would trade out

Question 28

Order of priority on winding up?

Answer 28

1) Fees for realising fixed charge assets
2) Fixed charge holder
3) L’s other costs and expenses
4) Preferential debts
5) Ring fenced fund
6) Floating charges
7) Unsecured creditor
8) Interest on preferential
9) Shareholders

Question 29

Yorkshire Woolcoombers Assoc.

Answer 29

What is a floating charge?

1) charge over class of assets
2) assets may change from time to time in ordinary course of business
3) Free to dispose and replace assets until crystallisation