Tutorial

Bài 1:

 Johnson under the doctrine of lifting the corporate veil? Rules: Doctrine of lifting
the corporate veil (John v. Lipman)
 Apply: The company is suffering from a financial loss. The company will become
the subject of the land after Johnson sells his land to the company and the
company will become the subject to handle the land to the government but the
amount of compensation is lower than the amount of money the company has
bought the house from Johnson. The main purpose of selling the land to his
company is to secure his own benefits/interests related to the land, he didn’t want
to give the land to the government for a cheap price.
 Conclusion: The creditors can take legal action against Mr. Johnson under the
doctrine of lifting the corporate veil.

Bài 2:

Bài 3:

Shareholders can bring a lawsuit against the director of the company.

 The BoD did not convince any annual meetings of shareholders for 3 years.
Meanwhile, this is a public company. According to S336, public company must
hold an annual meeting of shareholders. If the BoD fails to do this, a criminal
offense is committed by all directors. => In this situation, Justin, Jessica and
Jeremy have committed a criminal offense because they did not hold an annual
meeting of shareholders for 3 years.
 The directors have changed the business of the company/did not act in accordance
with AoA of the company. According to the AoA, the main business of the
company is purchasing new computer. The BoD decided to change the business
activities by used computer and offering computer-training classes. These two
activities are outside of scope business of the company. => They were not acting
within their power. So they have violated the duty to act within power under S171
CA2006.

Bài 4:

 Derek has breached the duty to avoid a conflicts of interest. The BoD of Biztec has
rejected the contract with Wintelli University. Then Derek came to Wintelli
University and tried to get the contract for himself. Rule from case law Canadian
Aero Service that a director cannot take an opportunity which the company could
have been interested in but refuse to take for his own capacity. Even though the
 company has rejected the contract, the director cannot take advantage of that
contract just because the company say no doesn’t mean the director can.

⇒ Derek has breached the rule of the case law. He put himself into a situation where he
has a conflicts of interest.

 Lucas has breached the duty not to accept benefits from third parties according to
S.176. Mr. Lucas has received £5,000 commission and this money is a benefit
from Kitech so Mr. Lucas has to do something in his director’s power, in detail let
his company use the new equipment from Kitech.

⇒ Mr. Lucas has to exercise his power as a return for the benefit that he had received

 Derek and Lucas have violated the management duty.

o Mr. Lucas may have violated the duty to promote the success of the
company. In this situation there are not enough information about the belief
was in the mind of Lucas at the time he accepted £5,000. Choosing Kitech
is not violating duty to promote the success of the company, because he
chose the right partner for company. But if beside Kitech there was better
choices for the company but Mr. Lucas didn’t choose the better choice. He
still decided to choose Kitech, because choosing Kitech helps him receive
£5,000.
o When Derek joined the meeting in the board, he rejected to the contract
with Wintelli. Because the board did not see that there was enough profit.
Later on, Mr. Derek came to Wintelli Uni and tried to get into the contract.
So we can understand that the contract was actually very profitable, if the
contract was not profitable then why Mr. Derek came to Wintelli Uni
sequently and got it in his personal capacity.

⇒ Mr. Derek violated duty to promote the success of the company. The contract
would have been a success for the company and Mr. Derek knew it but he didn’t
let the BoD know about that.

Bài 5:

 Mary holds more than 50% of the share capital in Summerset Ltd (principal
shareholder) and Mary is the person connected to Mr. Smith ⇒ Summerset Ltd is a
body corporate connected to Mr. Smith
 A director is connected with a body corporate if he and a person connected to him
together are interested in more than 50% in that company.
o If Mr. Smith and Mary are together interested in the share held by Mary in
Summerset Ltd then Summerset Ltd is the body corporate with Mr. Smith.
 A body corporate is a legal person so Summerset Ltd in other words is a
person connected to Mr. Smith.
 The transaction between Paradise and Summerset is not only a transaction between
those 2 company. This transaction between Paradise and person connected with
the Director of Paradise
o If the transaction between Paradise and Summerset. There’s a substantial
property transaction. So the transaction must be approved by shareholders
of Paradise before Paradise can sign the contract.

Bài 6:

 When a company issue new shares, pre-emption right must apply to the new
shares if the new shares are ordinary shares. If all of the current can buy the shares
has been offered to them, then there’s number of shareholders
 There options:
o Debt financing: the share capital won’t increase so that numbers of
shareholders remain the same. This is a ideal method since there will be no
chance for new members to join the company.
o Issuing new more ordinary shares then offer to current shareholders. If all
of the current can buy the shares have been offered to them, there’s no new
member in shareholders. There’s a risk if one shareholder does not have
enough money to buy a new share.
o Issuing non-voting share

Bài 7: The directors have the duty to promote the success of the company (s.172).
Directors must act in the way they consider in good faith would be most likely to promote
the success of the company for the benefit of the shareholders.
 If they choose to (i) expand the existing site: it would be better for the company as
well as the employees.
 The company can still maintain its reputation in the locality.
 The employees’ interests can still be ensured, they can keep their jobs and
homes. Also, expanding the site means expanding the opportunity for local
people in the future (create more jobs and places to accommodate).
→ more research to consider whether it is a good choice
 If they choose to (ii) relocate to Old Castle: the employees have to move to a
further place → a disadvantage for the employees since they are all local ppl in
Smallville. If the employees don’t want to go to the new place, Bolus will have to
hire new workers, train them and will need a long period of time to build their
reputation again.
Duty to act within powers (make sure they are practising their power).
Duty to exercise reasonable care, skill and diligence (s 174) “the general knowledge,
skill and experience that may reasonably be expected of a person carrying out the
functions carried out by the director in relation to the company, and the general
knowledge, skill and experience that the director has”.
 The beliefs of the director related to the decision whether to expand the existing
site or relocate to Oldcastle will be considered in deciding whether the directors
have followed this duty.
 Courts have introduced an objective dimension test into consideration of whether
or not the duty has been breached. If there is evidence that the director did not stop
to consider the interest of the company or if an intelligent and honest person in the
position of the director could in the circumstances have reasonably believed he
was acting in the interests of the company, then the duty has been followed by the
directors.
Why it is relevant: because the BoA is given the authority to decide (duty to act within
powers); put good faith + do enough research (duty to promote the success of the
company); exercise reasonable care, skill and diligence (Duty to exercise reasonable care,
skill and diligence).

a. The BoD commissioned a feasibility study (evaluation for business and

management performance) (that costs 10k pounds) for new development from
MIH ltd - a company owned by Arthur Tansy (Basil Pepper’s stepson - director of
Bolus).
According to s.252(2)(a) and s.253(2)(c), Arthur is identified as person connected with a
director.

S.190, 191
Advice:
 Basil has to disclose all interests in transaction
 Examine the relationship between Basil and MIH.
Presumption 1: MIH is a body corp connected to Basil. The feasibility study costs 10k
pounds, and if this exceeds 10% of the company’s asset, it is a “substantial asset”
(s.191).
 Basil (director) has the Duty to declare interest in a proposed transaction (s.177):
If a director of a company is in any way, directly or indirectly, interested in a
proposed transaction or arrangement with the company, he must declare the nature
and extent of that interest to the other directors. Since MIH ltd is owned by Arthur
(Basil’s stepson), an interest may arise indirectly in the contract b/w his company
and MIH → Duty to declare interest in transactions.
 Approval must be given in advance by a resolution of the shareholders’ meeting
(s190.1).
Presumption 2: MIH is not a body corp connected to Basil → the transaction is not
subjected, there’s nothing for shareholders to prove.
b. Cedric (company’s secretary) ordered a computer from Crash Ltd (costs 1000p in
Bolus name) → sold to his daughter-in-law for 1,300p. Prudence (head od Bolus
accounts department) discovered the transaction and refused to pay Crash ltd.
Cedric ordered the computer (using the company’s assets) for his personal interest, then
sold it to his daughter-in-law.
Based on the basic rules of contract law, the contract is invalid → both parties. return the
computer and money.
Cedric is the company’s secretary (s.271). The functions of the company secretary are not
defined in the Act. They are administrative rather than of a business nature. Thus unless
otherwise stated in the Articles, Cedric is not authorised to make transactions under
Bolus’s name (including buying the computer from Ltd and selling it to his own
daughter). If Cedric does indeed have the authority to make transactions on behalf of the
company according to the Aoa, then the transactions are made under the company’s name
and payment (300 pounds) must be made to the company.

Bài 9:
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.
Mr. A breaches the Duty to avoid conflict of interest (s.175) and Duty to declare interest
in transaction (s.182).
→ He must inform the board about the contract and get the approval from the board. He
also has to declare the nature and extent of the interest to the other directors at a meeting
of the directors.
contract was already signed
 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. The board of directors can authorize conflicts of interest (a
director is not liable for the breach of this duty if the conflict of interest is
approved by the board).
 He should disclose.
 Duty to declare any interest in existing transactions (s 182). If a director in any
way, directly or indirectly, has interest in an existing transaction or arrangement
with the company, he must declare the nature and extent of the interest to the other
directors at a meeting of the directors. → 182 stops at duty to disclose interest (tại
thời điểm kí kết k có lợi ích liên quan, lợi ích chỉ phát sinh khi đã ký kết) =/= 175
provides a solution.
Mr A has interest in both companies.
might be: a transaction between the company and a person who is connected with a
director (190)
175 directly provides solutions to the problem, no need to consider 254 (A owns Peter
Ltd → clearly a conflict of interest)
CA 2006 s.254(2) là về mối liên hệ giữa 2 người, A already owns Peter ltd.
175(5) → does not specify the time the approval should be given to the conflict of
interest. Directors should inform the conflict of interest before the transaction is
concluded.
academic opinions: If there are no damages, then the conflict is disclosed after the
transaction is concluded. Case by case basis; must consider the interest of the company
(damages can be accepted, nhưng vẫn trong tổng thể to promote success of the
company).

b. Mr. A failed to attend the meeting of directors of Mega Co. Ltd. due to his illness.
Unlike company general meetings and annual general meetings (AGMs), there are no
specific provisions in the Companies Act 2006 (CA 2006) regulating board meetings or
prescribing who can call a board meeting or any notice period that has to be given to
directors when convening a board meeting. Instead, the procedure for calling and
conducting board meetings is usually set out in the articles of association.
If the AOA allows directors to be absent from the BoD meetings for reasonable reasons,
Mr. A does not breach any duty. If not, Mr. A may breach the fiduciary or statutory duty.
→ Mr. A could appoint a proxy. Proxy is a person appointed by a member of a company
to attend and to speak and vote at a meeting of the company.
Just fail to attend one meeting → no breach.
Fail to attend all meetings in a year → fail to exercise executive powers → not qualified
as a director anymore (no need to care abt his reasons) ⇒ be removed. Legal basis:
 Default power of director: Management power will revert to the shareholders in
circumstances where the board is unable to act (Barron v Potter [1914] 1 Ch
895).
 A provision in model AOA states that a director can be removed if absent for a
period of 6 months → has been adopted by many companies in reality.

c. Mr. A made the investment decision that resulted in Mega Co. Ltd.'s loss of profits by
20%.
Duty to promote the success of the company (s 172). Must consider the beliefs of the
director → cannot conclude that Mr.A breached this duty. Have to do an objective
dimension test. Should not look at the damages/results to deem the director to have
breach the duty. must: look at evidence pointing at the belief of the director.
Mr. A breaches the Duty to promote the success of the company (S 172) on the basis of
Mega Co. Ltd.'s loss of profits by 20%. Directors must act in the way they consider in
good faith would be most likely to promote the success of the company for the benefit of
the shareholders. Mr. A could have foreseen the potential loss from the investment but
still made the decision → violation
Mr. A may breach the Duty to declare interest in proposed transaction or arrangement (S
177) if he did not inform the board about the investment and get the approval from the
board before making the decision.
d. Mr. A bought a majority share in a travel company. (như câu a)
There is no rule that prohibits Mr. A from becoming a major shareholder in a travel
company while being a director of the hospitality company.
→ He must inform the board about the contract and get the approval from the board.
Mr. A breaches the Duty to avoid conflict of interest (s.175). Must take into account the
business of the travel company. If the business is similar, then breached the duty.
Mega: hospitality (which could include travel).
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.

s176. Duty not to accept benefits from third parties

(1) A director of a company must not accept a benefit from a third party conferred by
reason of—
(a) his being a director, or
(b) his doing (or not doing) anything as director

The commission was given to A by a third party who wanted to secure a reserve in one of
the hotels that Mega Co. Ltd operates. By giving A the commission, the third party
expected A to do something within his director power to fulfil its purpose. In other
words, the commission was given to A solely because of his being a director.
→ A has breached his duty not to accept benefits from third parties by receiving the
commission.
5% of the room rates is the benefit given by the third party given to Mr.A. MR. A
must exercise executive power to do something within his director power.

Defence:

s180(4) The general duties—

(a) have effect subject to any rule of law enabling the company to give authority,
specifically or generally, for anything to be done (or omitted) by the directors, or any
of them, that would otherwise be a breach of duty, and
(b) where the company's articles contain provisions for dealing with conflicts of
interest, are not infringed by anything done (or omitted) by the directors, or any of
them, in accordance with those provisions

A cannot be held liable if:

- the third party benefits was approved by the shareholders s180(4)(a)
- the AOA contains provisions that permit the act of receiving such benefits s180(4)(b)

Bài 11: Khoản 3 Điều 148

Unless, otherwise stated by the Articles, number of votes: (500 + 200 x 2) x 5 = 4500
votes.

Bài 10:
 Bella failed to play the role Director of the company. When a director fails to
exercise executive’s power, the executive’s power will be given back to
shareholders of the company. Bella didn’t attend any meeting of the company. She
can be removed from the BoD. We don’t have to examine which duty she has
breached because she didn’t perform any function, power.
 Charles has breached 2 duties
o Duty to promote the success of the company
o Duty to exercise reasonable, skill and diligence care
 Archie: