thảo luận corporation law

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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 purpose of selling the land: to transfer the risk from getting a small amount of compensation from him to Somerset Ltd, so he could get more money from selling the land to this company; get money from this company

(Johnson knew if he let the land recovered by the government he could get the lower price and if he sell the land for his company he could get a higher price) => Johnson is trying to withdraw money out of the company.

Apply VN law, Mr Johnson violated his obligation said at article 77.4 & 86.5

Based on the information of scenario number 1; we have:

• Somerset Ltd ends with “Ltd” in the name and it was owned solely by Johnson so based on section 59 (1) and section 123 Somerset Ltd is a company limited by share with only one member.

• The transaction here is that Johnson sold the land to his company to evade the fact that he could lose the land and just receive a small of compensation and to lower the financial liability to the creditors because the company will definitely decrease the money that they can pay for the creditors

If Johnson was only the owner:

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So based on the doctrine of “Lifting the corporate veil” we can surely have the grounds that the company was used to facilitate the evasion of legal obligation (pay the money to the creditors).

The creditors can succeed under UK law and force Johnson to be responsible if the company can’t pay enough the debt because of buying the land.

If Johnson was the owner and the director:

- He has breached Duty to promote the success of the company (s 172) because he surely knows that buying that land doesn’t make any profit for the company and even make the company a financial loss.

- The creditors can succeed under UK law and force Johnson to be responsible for the financial loss of the company.

If Vietnamese law applies:

• We also have Somerset Ltd is the limited liability company with only one member;

• Based on section 86 (5) Law on enterprises 2020, the provision just requires that the transaction between a single member limited liability company owned by an individual and the company owner must be recorded and kept as a separate file of the company. However, based on section 124 (2), In case a fake civil transaction is established in order to evade obligations towards a third party, such civil transaction is invalid.

The contract between Johnson and Somerset is valid because it establishes to evade obligation towards the creditors’ company. The creditors can succeed under Vietnamese law.

<b>2. Megaholdings Plc is the parent company of a large corporate group. Itsvarious subsidiaries operate in a number of different industries, includinghousebuilding. Arnold, a director of Megaholdings, learns that a large piece ofvacant land in London is about to be sold by auction. The land is suitable forhousebuilding, but houses can only be built if the Local Authority gives itspermission. The Local Authority says it will give permission, but only oncondition that the company building the houses carries out very expensive</b>

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<b>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-ownedsubsidiary, Shellbuild Ltd, with a share capital of £1. Shellbuild Ltd purchasesthe 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 landscapingworks. Shellbuild quickly builds, and sells, the houses for a substantial profit,which is immediately paid to Megaholdings as a dividend and as ‘managementcharges’. Shellbuild has now informed the Local Authority that it is insolvent,and does not intend to carry out the landscaping works. During theconstruction of the houses, Megaholdings told Shellbuild's sole director,Lorraine, that she must keep costs to an absolute minimum. Megaholdings wasaware that Shellbuild was using a number of very dangerous work practices inorder to cut costs, but Megaholdings did nothing to stop this. Cecilia, abricklayer employed by Shellbuild, was badly injured as a result.</b>

(a) the Local Authority whether it can force Megaholdings to pay for the costs of carrying out the landscaping works; and

They can sue. There is no separation between them. It’s impossible for shellbuild Ltd to build houses, so in fact, Megaholding was actually the builder. Furthermore, with the fact that the profit immediately returned to Megaholding under the term of “Management charge”. It is the main subject to do all of the activities hẻre and shellbuild is just a mask of megaholdings.

- The Local Authority can force Megaholdings to pay for the costs of carrying

<i>out the landscaping works. Because based on the doctrine “Lifting the corporateveil”; Megaholdings has incorporated a wholly-owned subsidiary that to</i>

facilitate the evasion of legal obligation “carries out very expensive landscaping works once the houses have been built”. In this situation, in the context of a group of companies: the veil of incorporation may be lifted to allow companies in a group to be treated as one.

The remedies: shellbuild Ltd is no longer a legal person.

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(b) Cecilia, whether she can claim damages from Megaholdings for the injuries she has suffered.

- Yes. Explain same above

3. Acom Plc was formed 3 years ago. At the time of formation, Acom Plc issued 1,000 shares to 130 different shareholders. These shareholders each hold 200 shares, the remaining 127 shareholders hold the other 400 shares. The stated business purpose of Acom Plc is to “purchase new computers for resale to consumers (người tiêu dùng) and to conduct all business incidents (sự cố) to the purchase and resale of new computers”. Justin, Jessica, and Jeremy, the three shareholders of 200 shares each, were the promoters (người sáng lập) of the company and were intended (dự định) to be the initial (ban đầu) members of the board of directors. The articles of the company were properly filed, and a certificate of registration was received a short time later. Justin was camed as the registered agent in the articles of association. Justin, Jessica, and Jeremy assumed (đảm nhận) the duties of running the company, but never held a shareholder's meeting. They have run the company for 3 years, and none of the other shareholders has objected to the fact that the shareholder’s meeting was not held. The business had been quite successful until last year. In the last year, Justin, Jesssica, and Jeremy have made some changes in the business. They have begun accepting used computers as trade-ins (thu mua những máy tính cũ để bán lại), and have begun offering computer-training classes. In addition, they have been offering word-processing (xử lý văn bản) services and have also been buying and selling used office equipment other than computers. All of these additional operations have been unprofitable thus far (cho đến nay). 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 (biện pháp khắc phục) would they have in accordance with UK Law?

- Basis for such a suit:

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First, determining Justin, Jessica and Jeremy are the directors of Acom Plc company because they have run the company for 3 years and most people accept them to do that. This detail means that 3 people openly occupy and assume the position of director, despite a lack of authority and right to act (they are not De Jure Directors because they were intended to be director not appointed in accordance with the AOA)

Second, there is no annual general meeting which is held from when the company was established legally. Meanwhile, due to s336 CA2006, this company must hold an annual general meeting within 6 months of the end of its financial year and the company has felt to do so, a criminal offense is committed by Justin, Jessica and Jeremy (who is the director of Acom Plc)

Third, the directors breach the duty acting within their powers s171: The directors have changed the purpose of the company - those activities are completely outside of the original purpose of the company.

<i>duty to promote the success: may breach (don't need to mention but could doso if have scenario about) if at the time they make the decision, they are well-aware</i>

of all of the risks of the new activities but they still let the company do it. - Remedy:

=> The shareholder don't need to wait for 21 days because the power of the director now give back to the shareholder because of the failure of the director.

If the company meets any damage, all of the 03 directors must be pay jointly-compensate (liên đới bồi thường thiệt hại cho công ty).

Bản dịch:

Cơ sở cho một bộ đồ như vậy:

Đầu tiên, xác định Justin, Jessica và Jeremy là giám đốc của công ty Acom Plc vì họ đã điều hành cơng ty được 3 năm và hầu hết mọi người đều chấp nhận họ làm việc đó. Chi tiết này có nghĩa là 3 người cơng khai chiếm giữ và đảm nhận vị trí giám đốc, mặc dù thiếu thẩm quyền và quyền hành động (họ khơng phải là Giám đốc De Jure vì họ được dự định làm giám đốc không được bổ nhiệm theo AOA)

Thứ hai, khơng có cuộc họp đại hội đồng thường niên được tổ chức từ khi công ty được thành lập một cách hợp pháp. Trong khi đó, do s336 CA2006, công ty này

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phải tổ chức đại hội đồng thường niên trong vòng 6 tháng kể từ khi kết thúc năm tài chính và công ty đã cảm thấy làm như vậy, tội phạm hình sự được thực hiện bởi Justin, Jessica và Jeremy (người là giám đốc. của Acom Plc)

Biện pháp khắc phục:

Theo giải pháp thông thường tại cuộc họp, một công ty có thể bãi nhiệm giám đốc trước khi hết nhiệm kỳ, bất kể điều gì trong bất kỳ thỏa thuận nào giữa công ty và ông ấy (s168 (1) CA2006). Vì vậy, nếu cổ đơng muốn ngừng tiếp tục hoạt động của các doanh nghiệp khác này, họ cần: (i) tập hợp một nhóm cổ đơng có ít nhất 5% quyền biểu quyết và yêu cầu giám đốc tổ chức họp và chờ trong 21 ngày. Nếu sau 21 ngày, Giám đốc từ chối hành động, các cổ đơng có thể tự mình triệu tập họp (theo s303, 304 CA2006); (ii) thông qua một nghị quyết thông thường (được 50% + 1 phiếu bầu thông qua - s282 CA2006) để loại bỏ Justin, Jessica và Jeremy khỏi vị trí giám đốc.

<b>4. Biztec Plc designs and installs computer software. Recently, the board haspassed resolution:</b>

<b>- To reject a proposed contract with Wintelli University to install a newcomputer system in its library. The board did not see that there wasenough profit in the contract to make it commercially viable. After themeeting, Derek, a director of the company, approached (đi đến) WintelliUniversity and has been offered the contract in his personal capacitywhich he intends to accept.</b>

<b>- to purchase some new computer equipment from Kitech plc. Thiscontract was negotiated by Lucas, one of the company's directors, who,unknown to Kitech plc, has been paid a £5,000 commission forrecommending Kitech plc to the company.</b>

<b>Have the directors violated any directors’ duties?</b>

In the first resolution, Derek - the director has violated duty to avoid conflicts of interest (s175)

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-> Mr Derek didn’t try to avoid the conflict of interest with the company (he intends to accept the offer from the Wintelli University): taken the interest -> Violated duty to avoid conflicts of interest

Because a breach of conflict-of-interest duties can also entail a breach of a

<b>management duty: There is a detail that “The board did not see that there wasenough profit in the contract”, and Derek is a member of the board - that means</b>

he also accept with the board that there is no profit when take in this contract. But in fact, Derek must see the profit of the contract so that is the reason why Derek tries to take the contract himself. Derek also violated the Duty to promote the success of the company (s172)

The second Lucas has violated the duty. Because, one of the company’s directors - Lucas has the duty not to accept benefits from third parties (s176). That means directors must not accept benefits from third parties conferred by reason of his being a director or going or not doing anything as a director. But, Lucas has been paid a £5,000 commission for recommending Kitech plc to the company, due to receiving the money, Lucas has to use his directors’ power to let the company enter into the contract with Kitech plc which made him breached this duty.

-> Mr Lucas has received the benefits, and in the returns, he has to exercise his directors’ power to let his company enter into the contract with Kitech’s company.

-> Because £5,000 is the money which given with condition, so, Mr Lucas did not violated the duty to exercise independent judgement if in the circumstances Kitech

Lucas and Derek này có vi phạm trách nhiệm quản lý của công ty không? => Đối

<b>với Derek, có vi phạm the duty to promote the success of the company (s172).</b>

Cơng ty Kitech có làm ảnh hưởng đến quyết định của Lucas? => Lucas tại thời điểm đó, khi ơng này khảo sát có nhiều công ty đều tốt như nhau nhưng Kitech cho 5000 pounds. Cho nên, Lucas phải chọn Kitech nên Lucas không vi phạm nghĩa vụ

<b>phán quyết độc lập nhưng vi phạm accept of benefits theo s176 </b>

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<b>5. Paradise Plc's board of directors has proposed that the company will employSummerest Ltd to carry out (thực hiện) an efficiency study (survey - đánh giáhiệu suất hoạt động). The principal (major) shareholder (must hold more than50% share capital) and managing director of Summerest Ltd is Mary; she ismarried to Smith, a director of Paradise Plc. Smith fails to mention theconnection. Advise Smith of the legal situation?</b>

<i><b>● s252 -s254</b></i>

<i><b>➔ Whether or not Summerset Ltd is a body corporate connected to MrSmith?: if Mary and Smith together interested in the share capital which</b></i>

Mary hold in Summerset Ltd → Smith is connected with Summerset Ltd → If the Summerset Ltd is a body corporate to Mr Smith: Treating like the contract between Company and the director.

⇒ Have to meet 2 conditions:

First: Declare interest in proposed transactions (s177)

Second: May need to be be approved by shareholders if there are the 4 types of contracts which Substantial property transactions (S190)

What is the main legal issue in this situation? => … However, in nature, a transaction between the companies (Paradise and a person connected to Mr Smith (he is a director of Ltd)

If MrSmith and his wife Marry are together interested (lợi ích liên quan) in the number of shares held by married in the share capital Summerest Ltd thì được xem là Smith is connected with Summerest Lt (S254.2.a45,b)

How many conditions for passing ? => 2 conditions First: the director

If Marry is just a director not shareholder in Summerest Ltd => Ltd not connected with Smith.

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<b>6. Donna formed a private company several years ago by issuing 500 shares inthe UK. There are 10 shareholders, with the smallest shareholder owning 25shares, and Donna holding the most at 100 shares. The company needsadditional cash, but the current shareholders do not wish to have anyadditional shareholder. What are their options and what additional factorsshould the current shareholders consider in raising the additional cash basedon the general rules on financing of a company?</b>

In this case, we can see that the problem is the company needs additional cash. But the current shareholders do not wish to have any additional shareholder. Fortunately, there are various ways for the company to raise additional cash, like: issuing corporate bonds (phát hành trái phiếu) or getting a bank loan (vay ngân hàng).

There are 2 options: get a loan (vay ngân hàng) and issuing corporate bonds (phát hành trái phiếu doanh nghiệp)

What is the best option? =>

<b>7. Five years ago Bolus, plc, a pharmaceutical manufacturing company boughtpremises (= real estate - bất động sản) in Smallville, as part of the town'sregeneration program. Bolus currently employs two thousand local people,many of them in lower-paid semi skilled jobs, and its business has thrived. Ithas a good reputation in the locality as a responsible employer and it sponsorsthe local football team. The factory is adjacent to farmland on the edge of the</b>

<i><b>town. Apply UK law, and discuss the legal issues concerning the directors andcompany secretary's duties arising from the following scenarios:</b></i>

<b>a) Bolus' premises are rapidly becoming too small to accommodate anticipatedgrowth in the next five years. At the last general meeting, the shareholdersauthorized (uy quyen) the directors to "decide, after further research, whetherto expand the existing site or relocate to Oldcastle" (an industrial city 100 miles</b>

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Through the authorization of the shareholders, the directors could do so because the shareholders have management power which they exercise through the form of resolution by meeting. In this case, the approval of the shareholders was defined so it is suitable for the directors to do so.

So they should follow general management duty

<b>3 duties:</b>

<b>● Duty to act within power: because the shareholder authorized the director to"decide, after further research, whether to expand the existing site orrelocate to Oldcastle" - that is the power which the shareholder give fordirectors.</b>

<b>● Duty to exercise reasonable care, skill and diligence (s.174): in the next 5</b>

years maybe the company will grow so the director must use their knowledge, skill and experience into making the decision whether to move or to stay.

<b>● Duty to promote the success of the company (s172): the directors must do</b>

research in order to decide which choice is better: "decide, after further research, whether to expand the existing site or relocate to Oldcastle". He must truly believe which choice is better for the company.

<b>b) The board has commissioned a feasibility study for the new developmentfrom Make-It-Happen Ltd, a small company owned by Arthur Tansy, stepson(con kế) to Basil Pepper who is one of the directors of Bolus. This cost Bolus£10,000</b>

The duties which concerned in this scenario is:

● Duty to declare interest in transactions (s177 + s182): Mr Pepper must declare any interest which he relates to the transaction.

also have to classify if the company is connect with the director through s254 if

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