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Law of business Enterprises

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  • Unit No:
  • Level: High school
  • Pages: 13 / Words 3171
  • Paper Type: Assignment
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Question :

This assessment will cover the following questions:

  • Identify and explain, by reference to statute and case law, any relevant director’s duties that may be engaged by the activities of Diana, Paul and Aisha.
  • Identify possible remedies for the Company for the breach of duties.
  • Generate comparative advantages and disadvantages of financing growth of the company through relying on borrowing from banks.
Answer :

EXAM 1

SECTION A

QUESTION 1

A)

Issue: In this case study, the issues is raised in the Higson's Ltd regarding not managing the duties in right manner. As there are three executive directors in the company who are assigned the particular work which is to be stipulated within the particular time period (Repiquet, 2018). The issues are raised regrinding acquiring the land which the board feel that it the director’s duties to take the right decision to secure from the debts.

Rules: Under the Companies Act, 2006 the statutory duties of the directors are resulting to taking the foster decision, so that they can retain the business for longer time period. Thus, in respect of undertaking the matters related to common law, duties of directors it is relating to undertaking the decisions of discretion. Their main duty is to avoid conflict of interest which can be either personal or professional terms. In relation to examining the matters related to statutory law, the director’s duties are to be maintained the statutory obligation such as working under the terms and condition which is mentioned in law and not blindly depends upon the contract. In context of avoiding the conflict of interest directly or indirectly, it carries various duties under the following sections such as:

Section 174: Directors carry reasonable care and duty regarding undertaking the matters such as maintaining close relationship with employees or resolving disputes if any they face in attaining task in right manner.

Section 175: In these sections, directors must avoid the conflict through which they affect the dignity of the company by not managing the personal and professional life in right manner. Thus, directors carry the duties in respect of avoiding the conflict which arises through using the company information for personal use or not taking strict action regarding avoiding offences in company (Morse, 2016).

Section 176: It stated that directors must not enjoyed the benefits which is gained from the involving themselves as third parties. This is one of the reasons regarding facing disputes in respect of resolving matters as third party.

Section 177: In this, directors had to inform or take consent from the directors before taking any decisions. As most of the conflict is arises through not taking the appropriate suggestion with any of the directors who are working as the same post in the company (Rahman and Ghadas, 2018).

Thus, in such manner it is examined that directors, shareholder and any other officer who carry the power to manage, control and exercise the matters of the company must play the role of the fiduciary duty. Thus, directors had to disclose all such matters or any of the information which is the basic priority of the clients regarding knowing the facts regarding the company working.

In the case of the Regal Hastings v Gulliver [1942], the case states that Regal owned a cinema in Hastings in respect of taking property on lease, they had to give personal guarantee to the landlord. In such manner the money is invested by the Regal itself and also four directors of the company, company solicitors and subscribers (Regal (Hastings) Lts V Gulliver [1942] UKHL, 2019). But after settling all the amount, the beneficiary file the suit against the company regarding committing breach of the fiduciary duty, as they not informed the shareholder regarding the overall planning. In such manner, the breach is conducted regarding violating the corporate opportunity by not maintaining the duty of loyalty at work place.

Application: By applying this section in the relevant case study, it is stated that Aisha and Diana who are at the post of the directors had conflicted their duty which are covered under the section 175, 176 and 177 of the companies act, 2006. Under the corporate opportunity, directors had to carry the fiduciary duty in respect of maintaining loyalty during accomplishing the task. Thus, they are liable to be undertaken under section 175-177 of the director’s duties to maintain dignity of the business. In respect of Paul, who is at the post of the sales directors had to work according to the set budgets as he had to maintain duty of care and skills during examining the matters. Similarly, in case of Re City Equitable Fire Insurance Co as the claims are imposed in respect of not taking care during acting the task as by this aspects company had to face the issues regarding paying £1,200,000 for the losses incurred.

Conclusion: From the above study, it is concluded that directors carry certain duty when they are attaining the post of taking the right and critical decisions (Baker, 2019). In respect of corporate opportunity doctrine, the duty of directors is adapted the fiduciary duty of loyalty regarding accomplishing the task or maintaining dignity in business. Thus, under the statutory and common law, director’s role is crucial, and they had to maintain certain care in attaining the work in right manner.

B)

The directors which are resultant to be breach in company in respect of engaging this interest in earning profits for their personal interest or also using the company information for gaining profits (Berry, 2018). As in most cases, the company suffered losses through the actions which is undertaken by directors and such actions are resulting to earning profits by doing the same business with another company during the working hours or using the company confidential information to maintain their personal clients. This resulting in committing breach with company reputation. Thus, in such manner the directors can be disqualified from the jobs in respect of attaining such task as doing fraudulent activities or any wrongful trading. Under the company director’s disqualification act, 1986, the directors who are working under the company can be disqualified up-to 15 years and also it depends upon the crime which they committed in business.

SECTION B

QUESTION 1

A)

Legal solutions: In this case study, the liquidator challenge the company stability in respect of undertaking their decision in the following section of the insolvency act, 1986. Under section 238 of the insolvency act, 1986 it is stated that if the company is not working in the right direction which is stated under the law, then also its giving chances to the liquidator to wound up the company. Under section 239 of the insolvency act, 1986, the things are applied in this section which is not covered under the section 238 and also it is examined as the task which is attained within the relevant time period. The liquidator also had the chance in respect of adapting section 241 of the insolvency act, in relation to doing the business when the transaction is done at an undervalued. Such transaction is done with the connected person so that they grow the business in better way. It is also examined by implementing section 245 of the Insolvency act, 1986 it is applied in respect of avoiding the invalid floating charges which is adapted by the company in respect of providing security to the business (Repiquet, 2018).

In this case, the insolvency is committed and the procedure is undertaken by the liquidators in respect of not able to pay its debts or also the liabilities exceeds its assets which results in not managing the activities in better way. Thus, the matters of insolvency arise in case of selling the vehicle at undervalue prices and also applying loan from the banks in respect of floating charge. These are the aspects through which the liquidator challenges the company in respect of dissolving the business or managing the funds in such manner (Cumberlege, 2016).

B)

In respective of undertaking the matters which is carried by Helena regarding managing the company to save it from insolvency is related to not carrying any such activities which affects the right of the business. As under section 213 of the insolvency act, 1986 wrongful trading is committed by company after knowing the facts that liquidators are appointed to resolve the disputes. As wrongful trading resulting in violating the condition which is stipulated against the company in winding up procedure and in that case, he is personally liable to compensated from the losses incurred through such aspects. In context of section 214 of the insolvency act, 1986, the fraudulent activity is mainly committed to be the civil wrong and for committing such crime not only the directors who attain the post of the company but also the person who accomplished such activity, are liable to pay compensation for the losses incurred.

QUESTION 2

Case: As all partnerships are built on the base of trust and thus a written partnership agreement is formed in relation to ensuing the stability in the business and also maintain the close relationship between the partners. As this statement may be true or false.

Legal solution: According to the partnerships act, 1890, partnership refers to the relationship between two or more person who are sharing the business with each other in respect of earning profits. Under section 1 of the partnership act, 1890. Thus, partnership can be established either through oral or written statement and thus they can either formed the written contract which is termed to be known as the partnership agreement. This agreement legally bound on all the partners to follows the terms such sharing equal profits and share equal losses, and also all the partner is liable to take interest in managing the activities in better way. Thus, partnership can be established when all the partner mutually agrees to form the business and such partner can be more two or more than two. It also examined that all the partner must agree with all the terms and condition which is mentioned in partnership agreement (Richard, 2017). In case of death of any partner, it resultant to closure of the partnership business.

In respect of understanding this statement, the judgement is in favour of this statement as to maintain the stability between the partner and if there is partnership agreement, it results in securing the interest of the company for longer way. The main advantages of partnership agreement are that the role of every partner is clarified and also, they had to attain the task within the set targets. The chances of risk are reduced and the money management is better if the partner signed the partnership agreement (Das, 2019). This statement is supported with the case study of the Hurst V. Bryk and others as in this case the Hurst is the appellant who appealed to court regarding not dissolving the partnership agreement and on the other side the Bryk and other are the respondents against whom the suit is filed in court regarding committing breach from partnership conditions (Hurst V Bryk and others, 2019). Thus, the judgement is raised regarding not dissolving the Malkin Janners as all the partners had signed the partnership deed regarding following the terms and conditions before entertaining into the partnership business. In such manner Hurst filed the case regarding committing breach in term of the agreement and it results in not agreeing to dissolve the partnership deed.

EXAM 2

QUESTION 1

Under section 33 of the companies act, 2006 it refers to the statutory contract in which the shareholder had given right to sue the company if they find their rights are infringed in respect of performing their duties. Thus, statutory contract is made between the company and members in relation to examining their right and duties regarding attaining they particular task and thus, it later carried to be the part of the articles which is to be mentioned in the articles of the association. If any illegal activity is examined in company or wrongful act is committed, then it can be omitted or ratified through taking the majority of the members regarding suggesting the best way to overcome from such issues. Through this manner, the court cannot interfere the decision which is undertaken by the company in respect of resolving the disputes. The contract governs the rights of the parties which they had to perform if they enter into the agreement with any other person.

In respect of model of article, they are mainly set of laws or rules which is provided to company to perform in that directors only (Bawah, 2019). The rights which are covered under the model articles is relating to passing special resolution to direct the shareholder to take right decision or the power and duties which is given to director or meeting to be held by the directors or avoiding conflict in retaining interest regarding accomplishing the task. It is necessary that such right is to be governed and managed in right manner and it is the duty of the shareholder to manage it in better way. In respect of entering into the contract by the members regarding acquiring share, they enter into the sale and purchase agreement which is not negotiated and also the members can buy the share when they are offering at low prices and sell it when the prices are higher (Relief, 2016). It can be amended through passing special resolution in the general meeting. The constitution is bound upon the company and members to work in the similar direction and also not violates any of the terms which affects the right of the persons.

This is reflected with the case study of the Foss V Harbottle (1843) 67 ER 189 as they both are the minority shareholder of the company and thus claimant claimed that the property of the company had been wasted or wrongful activity is committed. Claimant filed the suit against the partner regarding paying compensation for the losses incurred. According to the judgement of the court, company is held liable and be sued for the damages incurred.

Also Read :- Evaluation and Implementation of Property Law

QUESTION 2

A) The advantages of undertaking the financial growth of the business relied on the following perceptive such as:

Investment: This is one of the major benefits through which risk is to be reduced in respect of getting money from banks.

Control: It is undertaken in respect of facing no losses if the financial growth is pertaining on regular bases.

The disadvantage of these aspects is that:

Risk: It is difficult to find accurate investment if the company not manage their financial records.

Cost: Had to repay the money within the set time period and even if the company is not having good money management.

B)

In relation to entering into the partnership business, there are following terms and condition which is the duty of every partner to follow it or are legally bound to work according to the set instructions. The nature of the partnership is that all the partner is individual and bring their own share or capital to manage the business in right manner (Keay, 2016). In partnership business all the partner is joint and liable for the activities which is to be assigned to them and also had to work accordingly. Thus, they carry the liability in respect of working together to improve the performance in the company. Apparent and implied authority are to be set in the partnership business which is mentioned in under section 5 of the partnership act, 1890. The third partner is protected in respect of noticing the partner regarding securing the business from losses or strict provision are implied in respect of retiring the exiting partner (McCahery, Sautner and Starks, 2016). Through this manner, it helps in gaining advantages to secure the rights of the partner before attaining any task in business.

QUESTION 3

Ans: Good corporate governance refers to the rules, laws or procedure which is adapted by company in respect of managing the internal and external strategies. The role of the UK corporate governance code is to set out the standard's procedure on the board composition or managing the remuneration and accountability of the business to retain in market for longer term. This code mainly carries the exception to the smaller listed companies. Compliance are monitored in respect of inspecting and investigating the working of the governance and also by viewing the financial records of the company. This helps in determining the actual position of the company in market. In respect of covering the growth of both Plc and large private companies is that they are freely accessible and also manageable in respect of getting funds.

The purpose of non-executive directors in company is that they plan the polices in respect of viewing the condition of the company and also take right decisions. They monitor the activities of the executive directors and also maintain the interest of the stakeholders in the business (Yermack, 2017). The role of NED in Cadbury company is that they bring independent judgement to face the issues in better way and also improve the performances by setting the particular standards.

QUESTION 4

Ans: In respect of undertaking the matters related to partnership act, 1890, partnership business is established when all the partner is mutually agreed to share the profits and losses in business and also undertaken various activities to gain profits, they enter into the partnership business by forming the partnership deed. It is not necessary that there must be written agreement as oral agreement is also undertaken to form the partnership business. It considered to be good ideas before discussing all such terms and condition regarding resigning of any members or if any partner dies. Usually the partnership can also be formed through the deciding the appropriate share regarding managing the business, if the partnership dissolved.

Statue refers to the rules and regulation which are mentioned in the constitution and thus inn respect of partnership agreement, it is legally bound by the court and also all the partner had to work according to the set norms. In case of Dakshu Patel v Kesha Patel[2019] EWHC 298 (Ch) the case is relating to challenging the arbitration awards in respect of settling the matters in the partnership business (Patel V Patel, 2017). As both the partner entered the business by deciding the equal profits and losses ratio and after facing variation in contract the share is divided in respect of 100% and 65% of the profits respectively. As the impact is raised regarding unanimous consent regarding express or implied contract which affects the terms and condition of the partnership act, 1890. If the parties settle the terms and condition previously before entering into the partnership agreement, they can resolve the matters easily (Dimopoulos and Wagner, 2016).

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