Bài tập thảo luận corporation law đã được chỉnh sửa kèm CA2006 rút gọn

Analyse 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

2. 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.

a) 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 cơng ty được thành lập rùi ơng đó mới dùng. Cịn này là thành lập cơng 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?

- 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

- 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

efficiency – 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:

- 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 )

- 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.
(khơng 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 khơng 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

must 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?

9. 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.

If the travel company is a direct competitor against the Mega, there is obvious a
conflict of interest. SOLUTION: Mr. A need to disclose conflict of interest to the
BOD. If the BOD approve the conflict then he doesn’t have to bear any liability. If
he doesn’t disclose, he will violate. If the BOD doesn’t approve the conflict, Mr. A
have to bear the personal liability (pay the compensation or he can be remove from
the BOD)
e. Mr. A received a commission of 5% of the room rates from the company which
wants to hold a clients' conference in one of the hotels that Mega Co. Ltd operates.
176
If the benefits given by the third party to Mr. A and Mr. a has to exercise his power to
take the offer as the return for the benefit.
In this case, he has already receive the money and used his power to help the company
have a room for a clients ‘ conference in one of the hotels that Mega Ltd operates. It is
clearly that he breached 176
SOLUTION to keep money: shareholders’ approval

10. Rustic Timbers Ltd makes low-price furniture, which it sells through
supermarkets. The company has three directors, Archie, Bella and Charles. Archie is
a qualified accountant, and the company's chairman. Bella, who has a full-time job
as a presenter of television programmers on furniture design, has not attended any of
Rustic Timbers' board meetings for over a year.
Rustic Timbers has been running at a substantial loss for many months. Archie
calls a board meeting to discuss the company's financial problems. Bella does not
attend the meeting. Charles argues the company should cease trading immediately.
Archie disagrees. He says the company might just survive if it opens its own furniture
store, selling its products directly to the public. He admits the scheme is very risky,
but argues the risk is worth taking to protect the jobs of its current employees. He
tells Charles he knows of a suitable store to purchase for £105,000, which is currently
owned by his daughter, Paula. Charles objects to this, but Archie uses his casting vote
as Chairman to pass a resolution purchasing the store. Charles storms out of the
board meeting, and has since refused to speak to Archie. After six months it is clear
Archie's strategy has failed, the company's losses have increased, and the company is
now being wound up. Joan has been appointed as the company's liquidator. She has
discovered that, although the price paid for the store at the time was quite reasonable,
it has since fallen in value.
Discuss the possible breaches of duty or potential liabilities by any of the directors.
In this case, Bella didn’t do anything in the BOD. She didn’t attend any meeting of the
Rustic Timbers’s board meetings for over a year.

Bella has breached the duty to exercise reasonable care, skill and diligence. She didn’t
do anything as a director, she basically could not fulfill any duties. She didn’t really care
about the company. She didn’t attend any meeting so she didn’t bring care about the
business of the company.

However, Bella had an excuse, that is she had a full-time job so she didn’t have any time
left for Rustic Timbers. This is not a reasonable excuse. According to s174, what we need

to focus on is the fact that she didn’t function as a director of the company no matter what
the reason is. So if that excuse is reasonable, she still violate the duty to exercise reasonable
care, skill and diligence.

In conclusion, Bella breached the duty to exercise reasonable care, skill and diligence
SOLUTION: She should be removed from the BOD.
Archie
From the beginning, Archie wanted to change the business of the company. The AOA is
where we check to see whether the Board of director had the power to change the business
to the company. But in this case, we don’t have enough information so we have to make
assumption.
If the AOA announce director to make all decisions concerning the business of the
company then there is no violation here. The director didn’t violate the duty to act within
power (s171)
If the AOA doesn’t mention anything about the power of the BOD in terms of changing
the business of the company, then the BOD has violated the duty to act within power s171.
However, for this case there is very high chance that the AOA allowed the BOD to make
this decision. That’s why Archie can naturally convinced a meeting and asked the
resolution.
Archie admits that the plan is very risky but argues the risk is worth taking. In this case,
we don’t have enough information about the good faith of Archie, so we’ll make
assumption.
If Mr. Archie could see the risk and he had some strategies for risk control. It means that
he has examined all types of risk and planned to control the risk. So in this case he didn’t
violate the duty to promote the success of the company s172.
If Mr. Archie could see the risk and he hasn’t planned for risk control. It means that he
hasn’t done everything to make sure that he minimized the risk. In this case, he violate the
duty to promote the success of the company s172.
In terms of the contract to purchase the store. Archie violated the duty to act within power
s171 and the duty to declare interest in proposed transaction or arrangement.

- Object: The store is a non-cash asset and the value of the store is substantial according
to s191
- The party: The company and a person connected with director, according to 190 the
transaction must be approved by shareholders before Archie left the company purchase the
store form Paula, he needed to get the approval of shareholders from Rustic Timbers.
Because he didn’t get any approval from the shareholders so the transaction here is not
legally value. This amount of money must be returned from Paula to the company.

The value of the store is fallen. Archie is a qualified accountant so he should know that
the value of the store will not raise. Because the store is owned by his daughter so he must
left the company know that he purchased the store from his daughter so that the daughter
can have some profits. There is maybe a violation the duty to exercise reasonable care, skill
and diligence S174.

Charles
If Charles really care about the benefits of the company, he should try to inform the
shareholders of the company know about the plan. If the shareholders have known about
the plans, there is no way for the plans to be executive.
As a director, he (BOD have authority to convince not the simple director) couldn’t
convince the general meeting but he can inform the shareholders of the company. Therefore,
Charles violate s174
11. Lesedi is one of the five directors of Surfs Heaven (Pty) Ltd. Her co-directors
are of the opinion that Lesedi is neglecting her duties as a director because she is out
surfing all the time. The board of directors has therefore passed a board resolution to
remove her as a director. Lesedi is unhappy about her removal as adirector of the
board, as she believes that she is in fact promoting the company by surfing regularly.
Can Lesedi be removed from the board of directors?
The resolution is not legally value. The BOD doesn’t have the authority to remove
Lesedi but shareholders have.

Requiring that the resolution of the BOD is not value. Only shareholders can remove
a director of the BOD. As a director, Lesedi has very much duties to do but she has
neglected her duties as a director. She didn’t fulfill any duties as a director because
she is out surfing all the time and her reason is nonsense. So in shareholders can
remove Lesedi out of the BOD
12. Mars Ltd, a company based in the city of Limpopo, has five shareholders. The
company wishes to convene a shareholders' meeting to vote on certain amendments
to the Articles. Four shareholders are currently overseas and are not able to attend
the meeting in Limpopo. Without these shareholders, Mars Ltd will not have a
quorum for the meeting. Mars (Pty) Ltd does not have the facilities to hold the
shareholders' meeting electronically. Advise Mars Ltd of any options available to it in
order to overcome this problem.
REQUIREMENT FOR THE QUORUM: If the company has 1 shareholder, 1
shareholder is the quorum. If the company has more than 1 shareholder, two shareholders
are the quorum.
Unless the AOA requires a higher number, they have at least 2 shareholders to meet the
quorum. However, the 4 shareholders are overseas and just 1 shareholder is in the city and
Mars Ltd doesn’t have the facilities to hold the shareholders’ meeting electronically. That
is why the meeting can’t be held.

This is a private company. Private company can pass resolution at meeting or in the
written resolution procedure. The resolution can be sent to all shareholders through email,
normal mail or fact.

If this is a public company, the public company must pass all the resolution.
(even private company can not use the written resolution procedure for the matter of
removal of director, )
Another option is that all the 4 shareholders to get agreement to appoint somebody
perform as their proxy.