Tổng hợp các bài tập thảo luận trong tài liệu chất lượng cao được chỉnh sửa bởi giảng viên và được note lại có hệ thống. Tài liệu phục vụ cho việc ôn thi bảo đảm đạt kết quả cao. Ngoài ra nếu bạn kết hợp với tài liệu lý thuyết 4 chương corporation law bạn có thể làm đề thi cuối kì (gồm nhận định và bài tập) một cách dễ dàng và đạt kết quả cao.
Trang 1Analyse the dữ kiện
Analyse the điều kiện áp dụng doctrine
Chứng minh dữ kiện phù hợp với doctrine
1 Johnson, who was the sole owner of a piece of land, after knowing that such piece
of land would be recovered by the local government to build a road, sold the land to Somerset Ltd - his solely owned company The land was then recovered by the government with a small amount of compensation Somerset Ltd.'s creditors take legal action against Johnson Can they succeed under UK Law? Will your answer be different if Vietnamese law applies?
The government would recover the land with a small amount of compensation He knew that he would receive a little amount of money from the government and he didn’t want that So he decided to sell the land to the company can earned him more money
The reason why the creditors take action against Johnson is the company had spent a bigger amount of money to buy the land and then the company just received a small amount
of money when the land was recovered by the government so the company was suffering
to a financial loss Then the financial loss can affect the company ability to pay debt to creditors They want Mr Johnson finish all the debt to the creditors
Lifting the corporate veil, prove: the company is a alter ego of Mr Johnson
- Mr Johnson dominated the company - He was the only owner of the company,
he can made all of the decisions of the company
- Mr Johnson misuse the company for improper purpose
(The sumerset Ltd has been established before the recover of the land happened -> Can not say that the existing of the company just show the purpose of evading the obligation -> The first legal ground of improper purpose is not relevant to this case
The second is also not relevant because Mr Johnson was not using Sumerset Ltd to create any fraud)
+ There is a legal obligation here that Mr Johnson was trying to evade Because there is
no separateness between Mr Johnson and the Somerset Ltd The contract of Mr Johnson and the company is very harmful to the company and there is the fact that nobody want to enter into a contract that doesn't bring them any benefits But this contract still successfully happened It means that the company didn't have any separated legal status at all
+ Because Mr Johnson dominated the company, he controlled the company, he can make the company enter into that contract He knew that the company would suffer to the financial loss and he left the company, he didn't try to help the company And it means that the company has no independence at all
-> Mr Johnson must be liable for all of the debt of the company to the creditors
Trang 22 Megaholdings Plc is the parent company of a large corporate group Its various subsidiaries operate in a number of different industries, including housebuilding Arnold, a director of Megaholdings, learns that a large piece of vacant land in London
is about to be sold by auction The land is suitable for housebuilding, but houses can only be built if the Local Authority gives its permission The Local Authority says it will give permission, but only on condition that the company building the houses carries out very expensive landscaping works once the houses have been built Arnold calculates thatcarrying out these works will make building houses on the land unprofitable
To get around this problem, Megaholdings incorporates a wholly-owned subsidiary, Shellbuild Ltd, with a share capital of £1 Shellbuild Ltd purchases the land and, in return for being given permission to build houses on the land, enters into an agreement with the Local Authority to carry out the landscaping works Shellbuild quickly builds, and sells, the houses for a substantial profit, which is immediately paid
to Megaholdings as a dividend and as 'management charges' Shellbuild has now informed the Local Authority that it is insolvent, and does not intend to carry out the landscaping works
During the construction of the houses, Megaholdings told Shellbuild's sole director, Lorraine, that she must keep costs to an absolute minimum Megaholdings was aware that Shellbuild was using a number of very dangerous work practices in order to cut costs, but Megaholdings did nothing to stop this Cecilia, a bricklayer employed by Shellbuild, was badly injured as a result
Advise:
(a) the Local Authority whether it can force Megaholdings to pay for the costs of carrying out the landscaping works; and
(b) Cecilia, whether she can claim damages from Megaholdings for the injuries she has suffered
Megaholding wanted to build the houses without carrying out the landscaping works so
it thought of a solution, that is to set up Shellbuild Ltd and left Shellbuild to do everything Lanscaping works is a condition for Megaholdings to build houses on that vacant land Megaholding wanted to build the houses without carrying out the landscaping works so it thought of a solution, that is to set up Shellbuild Ltd and left Shellbuild to do everything However Megaholding just provided £1 of share capital So basiclly Shellbuild Ltd existed with no substaince Shellbuild Ltd didn't own any assets
To build the houses, Megaholding provided enough money for Shellbuild Ltd to build the houses under no contract And for the landscaping works, Megaholding stopped providing money Without the money from the parent company, the subsidiary must go into bankruptcy
Trang 3a) the Local Authority whether it can force Megaholdings to pay for the costs of carrying out the landscaping works
The local authority can be do that if the local authority can lift the veil of Shellbuild Ltd, the local authority needed to eliminate the legal personality of Shellbuild Ltd
Prove: Shellbuild Ltd is nothing more than an alter ego of Megaholding
- Megaholding dominated Shellbuild Ltd – It’s obvious because Shellbuild Ltd is a
subsidiary of the Megaholding company
- Megaholding misuse Shellbuild Ltd for an improper purpose - Shellbuild Ltd was
formed to facilitate an evasion of legal obligation The only reason for Megaholding to set
up Shellbuild Ltd is to evade the obligation of building the landscaping works (khác với bài 1, bài 1 là công ty được thành lập rùi ông đó mới dùng Còn này là thành lập công ty
để dùng cho việc trốn tránh) Shellbuild Ltd was just a device, a sham, a mask for
Megaholding to build houses without doing landscaping works
b)
yes she can
She was employed by Shellbuild was no longer a legal person so Megaholding is directly liable to everything including the injuries of Cecilia
3 Acorn Plc was formed 2 years ago At the time of formation, Acorn Plc issued 1,000 shares to 130 different shareholders Three shareholders each hold 200 shares; the remaining 127 shareholders hold the other 400 shares The stated business purpose of Acorn Plc is to "purchase new computers for resale to consumers and to conduct all business incident to the purchase and resale of new computers" Justin, Jessica, and Jeremy, the three shareholders of 200 shares each, were the promoters of the company and were intended to be the initial members of board of directors The articles of the company were properly filed, and a certificate of registration was received a short time later Justin was named as the registered agent in the articles of association Justin, Jessica, and Jeremy assumed the duties of running the company, but never held shareholder's meeting They have run the company for 3 years, and none of the other shareholders has objected to the fact that the shareholders' meeting was not held The business had been quite successful until the last year In the last year, Justin, Jessica, and Jeremy have made some changes in the business.They have begun accepting used computers as trade-ins, and have begun offering computer-training classes In addition, they have been offering word processing services and have also been buying and selling used office equipment other than computers All of these additional operations have been unprofitable thus far A group of the other shareholders has sued in an effort to stop the carrying on of these other businesses
Do they have a basis for such a suit, and if so, what remedies would they have in accordance with UK Law?
The wrong doing of the BOD?
The legal consequences for each of the wrong doing?
Trang 4- For 3 years there has been no meeting of shareholders According to 336.1 CA 2006:
“Every public company must hold a general meeting as its annual general meeting
in each period of 6 months beginning with the day following its accounting reference date” So this is the wrong doing of the BOD
The legal consequences: They have committed a criminal offence according to
Articles 336.3 CA 2006: "If a company fails to comply with subsection (1) [F3or (1A)], an offence is committed by every officer of the company who is in default"
And in point 4, the BOD can be liable on conviction on indictment, to a fine
- The BOD didn’t have the power to change the business purpose of the company Shareholders have the power to change the business purpose of the company because the type of the business of the company is stated in the AOA When they changed the business of the company, it means they changed the AOA, and the subject has the power to change to AOA is shareholders This is a special resolution
according to Articles 21 CA, only shareholders can amend the AOA using special resolution The business purpose of this company is to purchase new computer But
in fact the director left company purchase used computer If the BOD wanted to change the business purpose of the company, they have to hold a general meeting shareholders But in fact the meeting of shareholders haven’t held for 3 years So there was no special resolution of shareholders to change the business of the company Therefore, the BOD didn't act within powers according to 171
4 Biztec Plc designs and installs computer software Recently, the board has passed resolutions:
a) To reject a proposed contract with Wintelli University to install a new computer system in its library The board did not see that there was enough profit the contract
to make it commercially viable After the meeting, Derek, a director of the company, approached Wintelli University and has been offered the contract in his personal capacity which he intends to accept
b) To purchase some new computer equipment from Kitech plc This contract was negotiated by Lucas, one of the company's directors, who, unknown to Biztec plc, has been paid a £5,000 commission for recommending Kitech plc to the company
What director duties that has been reached by the director?
a) The first case: The director duty has been reached by Derek is duty to avoid conflict of interest
Chứng minh có conflict of interest
Tại sao cái này là conflict of interest
Trang 5- The conflict of interest: There is the conflict between the interest of the company and the interest of Mr Derek Because when the company has already turn down the offer but Mr Derek was in the BOD, he joint in the process of considering this contract
The BOD turn down the contract it means he agree with the decisions of the BOD that there is no profit After that, he came to the Wintelli university on his own If
he knew there is no profit, why he offered the contract to the Wintelli university in his personal capacity? So in fact, the contract was actually profitable Therefore, he didn’t try to avoid conflict of interest (Maybe when he was in the process of passing the contract and he didn’t say anything about how he see the profit of the contract
in order to get the contract for himself)
According to the rules in case law [Canadian Aero Service Ltd v O’Mallym [1973]
40 DLR (3d) 371], “A director is in breach of this duty if he takes advantage of an opportunity that the company would otherwise be interested in but cannot or do not wish to pursue a corporate opportunity” is still in reach of the duty to avoid conflict
of interest
In conclusion, Mr Derek has reached the duty to avoid conflict of interest
b) The second case: Lucas was violated the duty not to accept benefits from third party according to articles 176
Requirement of S176: By the reason of his being a doctor or doing or not doing anything as a director
Kitech is the third party, the benefits is £5,000 commission and the reason for Kitech
to give £5,000 commission to Lucas is Lucas is the director and Lucas can exercise his own power to sign the contract with Kitech Lucas didn’t get the money for free, he has been offered this money but he has to do something in return for this money The benefit is given
to the director so the director can exercise on his own power The requirement of Section
176 is matched so Mr Lucas has violated the duty
In conclusion, he has violated the duty not to accept benefits from third party
SOLUTION for Mr Lucas:
- If £5,000 commission is approve by shareholders of the company then Mr Lucas can retain the money for himself and he doesn’t have to bear any personal liability for reaching the duty (the time that the approval of shareholders should be granted doesn’t matter As long as there is an approval then the director can be free from the liability of reaching the duty)
5 Paradise Plc's board of directors has proposed that the company will employ Summerset Ltd to carry out an efficiency study (a service of evaluating performance
Trang 6efficiency – dịch vụ đánh giá sự hiệu quả) The principal shareholder and managing director of Summerset Ltd is Mary; she is married to Smith, a director of Paradise Plc Smith fails to mention the connection Advise Smith of the legal situation?
Mr Smith should try to avoid conflict of interest (s175)
The conflict: Mr Smith is a director of Paradise Plc, as a director he must be working for the best benefits of Paradise However, in Sumerset Ltd, his wife is a principal shareholder Between husband and wife, there is some common asset Maybe Mr Smith had some interest in the capital of Sumerset Ltd When Mr Smith left Paradise to use the service of Sumerset Ltd, he may have to consider the interest of Sumerset
According to s175.1: “A director of a company must avoid a situation in which he has, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the interests of the company” As you can see, it requires the director to avoid even possibility
for conflict of interest, not just a real conflict of interest
So if there is any possibility for conflict of interest, he must be avoid it If he can not avoid
it, he can disclose the conflict of interest to the BOD of Paradise and asking for an approval from the BOD
BONUS: Paradise’s BOD has proposed that the company will purchase a piece of land worth £200.000 from Sumerset Ltd
Prove: It’s a substantial property transaction
- Substantial non-cash asset: According to s191: “An asset is a substantial asset in relation
to a company if its value exceeds £100,000” The value of the land here is £200.000 so it exceeds £100,000 Therefore the piece of land is substantial non-cash asset
- Who are the party of this transaction (company and director or company and a person connected to director – Sumerset is a person connected to Mr Smith): This is a transaction between Paradise and Sumerset, not between the Paradise and Mr Smith or Marry Sumerset Ltd is the body corporate connected to Mr Smith In Sumerset Ltd, Mr Smith and Marry, who is a person connected to him are together interested in at least 20% of the share capital or 20% of the voting right Then Sumerset Ltd is a company connected to Mr Smith
6 Donna formed a private company several years ago by issuing 500 shares in the
UK There are 10 shareholders, with the smallest shareholder owning 25 shares, and Donna holding the most at 100 shares The company needs additional cash, but the current shareholders do not wish to have any additional shareholder What are their options and what additional factors should the current shareholders consider in raising the additional cash based on the general rules on financing of a company?
The new share can be offered to somebody outside the company But the current shareholders don’t want to have new owner in the company
There are 3 ways:
Trang 7- Asking money on securing a loan from the bank or any other person
- Issuing bonds or debentures
The company must have a payment obligation if it chooses one in two ways
- Issuing non-voting shares In this case the company can have more shareholders but the new shareholders don’t have the right to vote The new shareholders can not affect the power of the current shareholders
7 Five years ago Bolus plc, a pharmaceutical manufacturing company bought premises in Smallville, as part of the town's regeneration program Bolus currently employs 2.000 local people, many of them in lower paid semi-skilled jobs, and its business has thrived It has a good reputation in the locality as a responsible employer and it sponsors the local football team The factory is adjacent to farmland on the edge of the town Apply UK law, discuss the legal issues concerning the directors' and company secretary's duties arising from the following scenarios:
a) Bolus' premises are rapidly becoming too small to accommodate anticipated growth in the next five years At the last general meeting, the shareholders authorized the directors to "decide, after further research, whether to expand the existing site,
or relocate to Oldcastle" (an industrial city 100 miles away)
- Duty to act within power, PROVE: The limitation for the BOD’ power
The limitation for this power is to expand the current site or move to another city They can’t have another choice other than these two options So the BOD have to act within it’s limit
- Bolus has been in Smallville for 5 years The company already has a good reputation
in this local area The company even employed 2.000 employees It means that the company has been successful here The only matter here is Smallview seems too small for the size of the company The BOD is given the authorization that deciding whether to expand the existing site or to move to Oldcastle To make that decision, they have to put the success of the company into their consideration
According to s172: “A director of a company must act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole” So when they exercise the duty to promote the success of the company, they have to do further research to prove that they have dealt this duty If they
do enough further research, it means that they have enough good faith into making this choice
(looking at the evidence of good faith and this is the evidence for the good face of the BOD If they truly believe that they are promoted the success of the company, they will carry all kind of researches to make sure that they are making the best choice for the company )
Trang 8- Duty to exercise care, skill and diligence (s174): They have to exercise their skill so that they make a choice for the company They have to use their knowledge, their experience, they have to exercise their diligence to make a good choice of the company
b) The board has commissioned a feasibility study for the new development from Make-It-Happen Ltd, a small company owned by Arthur Tansy, stepson to Basil Pepper who is one of the directors of Bolus This cost Bolus £10,000
Duty to avoid cconflicts of interest (s175)
- The conflict: There is maybe a possibility for a conflict of interest in this situation Because Mr Basil Pepper is a director of Bolus and his stepson is owning Make-it-happen Ltd The two company are having a contract, so maybe Mr Basil Pepper should give some favorable condition to the company of his stepson So maybe Mr Basil Pepper can not just focus on the interest of Bolus Because his company is dealing with the company of his stepson, maybe the connection between him and his stepson makes him just focus on the
interest of his own company (cannot confirm 100% that there is a conflict of interest but can be sure that there is a possibility for a conflict of interest) It’s just a possibility
but according to s175, the director must try to avoid even possibility for conflict of interest (không áp dụng 190 vì kh phải substantial property transaction between a director and the company or company and the person connected to director If Arthur Tansy and Basil Pepper are together interested in at least 20% of the share capital or 20% of the voting right (s254), only that case Make-It-Happen Ltd can be considered as a person connected to the director However, this company is wholly owned by Arthur Tansy and there’s no common asset between them (cha con không có tài sản chung) so Make-It-Happen Ltd cannot be considered as a person connected to the director)
c) Cedric Smeek, Bolus' company secretary, ordered a computer from Crast Ltd costing £1000 in Bolus name He then sold it on to his daughter in law for £1,300 The transaction was discovered by Prudence Hope, the head of Bolus accounts department, and she has refused to issue payment to Crash Ltd
*(secretary have the same duty as the director)
The duty to act within power (s171)
Cedric Smeek has the power to ordered the new computer but he used his power to an improper purpose In this case, he was trying to make a benefits from the transaction He has the power to buy a computer from Crast Ltd in Bolus name and then he sold the computer in order to earn money – that is not legal He didn’t exercise the power for the purpose the power is given to him
The solution: He was not the owner of the computer so basically the transaction between him and his daughter was invalid As a consequence for the invalid contract, the two parties
Trang 9must return what they have received from each other However, in this case it seems that the company didn’t really need the new computer but Cedric still purchased So maybe he has to made some compensation for the company
8 In a shareholders' meeting of Summer Holidays PLC (SHP) the following issues have been raised:
a One director of the company set up his own company
If he opens a company on his own, he has to make sure that there is no conflict of interest according to s175
However, if the new company has the same business with the old company, he need do avoid all the conflict of interest between him and the summer Holidays Plc There is very high chance that the new company may have some similar business activities to the summer Holidays Plc Therefore, if he set up the new company, he should be sure that no conflict
of interest If there is a conflict of interest or there is possibility for conflict of interest, he must get an approval from the BOD
If he can’t get an approval from the BOD but he still want to set up a new company, he must leave the Summer Holidays Plc
b Directors of the company decided to divide a current ordinary share into two (2) ordinary shares
In case the company issue shares with too high nominal value then the share split can bring down the nominal value of the share
In this case, maybe Summer Holidays Plc has issued share with high nominal value That is why the director of the company want to divide the shares of the company into two
in order to bring down the nominal value
c Directors of the company decided to transfer £500,000 to Harry, a director of the company, as compensation for loss of office
This is a transaction between a director and a company, and this is one of the 4 transactions that need to be approved by shareholders (substantial property, the party is director and company) The director decided to transfer the money to Harry so it means that there is no shareholder’s approval here Shareholders should approve the transaction first and then the director can transfer the money to Harry So the BOD can only execute the decision of the shareholders
In conclusion, the transaction here must be approved by shareholders first and then the director can transfer the money Therefore, the director has violated the duty to act within power
Provide your resolution with sufficient explanations to resolve the above issues according to Companies Act 2006 (UK) Would your answer be different of Vietnamese Law applies?
Trang 109 Mr A is a director of Mega Co Ltd which operates in hospitality industry Explain whether Mr A breaches his duty as a director in the following cases and if
so, what duties have been breached? Discuss any defense which may be available to A
in cases he breached his duty (Note that Companies Act 2006 (UK) is the applicable law):
a Mega Co Ltd signed a contract with Peter Electronic Co Ltd in which Mr A holds 35% of share capital for the provision of services
254: Director and a person connected with him are together interested in 20% of the share or voting right
175 phải thông báo cho BOD
The conflict: In this case, Mr A holds 35% of the share capital on his own It means
Mr A have a lot of interest in Peter Ltd and he is a director of Mega Co Ltd He interests in a conflict with his duty as a director
Mr A should inform to the BOD of Mega Ltd about the conflict
b Mr A failed to attend the meeting of directors of Mega Co Ltd due to his illness
If Mr A can still fulfill perform the function of the director, it is okay for him to miss
a meeting with or without illness
c Mr A made the investment decision that resulted in Mega Co Ltd.'s loss of profits by 20%
172
At the time he made this decision, did he truly with good faith believe that the decision would be successful and is there enough evidence showing that he did not stop considering the interest of the company If Mr A has carried out all types of research, all types of evaluation, all types of risk control methods, it means that he didn’t violate
d Mr A bought a majority share in a travel company
BOD’s approval is the solution for a director to avoid liability for breaching (breach rồi mới cần approval để avoid liability)
If he buy a majority share in travel company, he may become a big shareholder in this company In addition, Mr.na was also a director of Mega Ltd, if the travel company operate the same business as Mega These two companies might be a competitors So there is possibility for conflict of interest He knew that but he still decided to buy the share of the travel company
He didn’t need the BOD’s approval before buying the share Because this is the personal decision of Mr A nobody can interfere the decision of Mr A when he want
to make an investment so he didn’t need any approval to buy share