EXERCISE QUESTION LAW CHAPTER 10

Issue
- whether Aman is breah of his fiduaciary duty or not?

Law
-According to under section 218(1)(b), from using information acquired by virture of his position as a
director of a company to make personal profit or profit for others persons or to cause detriment to
the company. The information is only to be used by the director for the company’s benefit. The
information here may include confidential information, customer list or trade secrets. The
prohibition continues even after resignation of the director.

Case
-Regal (Hasting) Ltd v Gulliver
-Regal was a company operating a cinema, and its directors wished to acquire the lease of two other
cinemas in the town with a view to sell the three altogether. For this purpose, à subsidiary company,
Hasting, was formed with a capital of 5000 £1 shares. Originally it was intended that Regal would
own all the shares in the subsidiary company. However, Regal was only able to contribute €2000.
The remaining 3000 shares were taken by the directors and Regal's solicitors. The cinemas were
acquired. Ultimately, however, it was decided that the property of the company not to be sold, but
to sell the shares in Regal and Hasting. The shares of the Hasting which the directors had purchased
at par were sold at a profit. When the new board was appointed, they then caused the company to
bring action against the former director seeking to recover the profit they had made.

The House of Lord held that the directors were in breach of fiduciary duty to the company as they
have obtained these shares by reason and only by reason of the fact that they were directors of
Regal, and in the course of the execution of their office, they must account for the profit they had
made. The House of Lord noted that it was irrelevant that the company could not take up the
opportunity to acquire shares in the subsidiary. The directors were in breach of duty despite
appearing to act honestly and the company did not suffer any loss as he had used his position to
make personal profits.

APPLICATION
- Aman was a director for Mega Bhd and the duty of director is to avoid conflicts of interest. He
should not enter to any agreement in which there is a possibility that their personal interest could
conflict. Aman breached the fiduciary duty as he place himself in a position where they put or may
have put his own personal interest in priority over the interest of the company.

Conclusion
-Aman breached the duty as a director in Mega Bhd despite appearing to act honestly and the
company did not suffer any loss as he hd used his position to make personal profit.
•(a) the duties of directors
-a) Duty to exercise power for proper purpose and in good gaith in the best interest of the company
-under section 213(1) provides "A director of a company shall at all times exercise his power in
accordance with this Act, for a proper purpose and in good faith in
the best interest of the company"
-The directors must exercise their power in good faith and in the best interest of the Company. The
director must advance the best interest of his or her company and not the interest of any sectional
or particular group.
-Example cases is Re W & M Roith Ltd

b)Duty of skills, care amd diligence

-Section 213(2) of the CA 2016 provides "A director of a company shall exercise reasonable care, skill
and diligence with
-The knowledge, skill and experience which may reasonably be expected of a director having the
same responsibilities; and
-any additional knowledge, skill and experience which the director iin fact has.
-Example case is

C)Loan to directors
-Section 224 provides that "a company shall not make a loan to a director of the company or of a
company which by virtue of section 7 is deemed to be related to that company.
-Enter into any guarantee or provide any security in connection with a loan made to such a director
by any other person.
-The section prohibits company from giving loan being guarantor or providing securities for loans
-

•(b) the business judgement rule

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-In section 214(2) as any decision on whether or not to take action in respect of a matter relevant
to the business of the company.
-To protect honest directors and ofticers from being liable for wtheir unsuccessful decisions and give
some sort of confidence and bravery.
-Hence, as long as the directors act honestly and within their powers, they are not liable for any
error of business judgment.
-makes the business judgment in good faith for a proper purpose
-Does not have a material personal interest in the subject matter of the business judgment;
- Is informed about the subject matter of the business judgment
to the extent the director reasonably believes to be appropriate
under the circumstances
-Reasonably believes that the business judgment is in the best interest of the company.

•7. Briefly explain who is a company director.

-Any person who accupying the position of director by whatever name called.
-Includes a person in accordance with whose directions or instructions
the majority of directors of a corporation are accustomed to act; and
-An alternate orsubstitute director".
•4. Based on the business judgement rule:
•(i) Define the rule.
-

•(ii) State four (4) requirements in determining the rule.

-Makes the business judgment in good faith for a proper purpose

-Does not have a material personal interest in the subject matter of the business judgment;
- Is informed about the subject matter of the business judgment
to the extent the director reasonably believes to be appropriate
under the circumstances
-Reasonably believes that the business judgment is in the best interest of the company.