Law of business Enterprises

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 a longer time period. Thus, in respect to undertaking matters related to common law, the duties of directors related 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 maintain the statutory obligation such as working under the terms and conditions which is mentioned in the law and not blindly depending upon the contract. In the 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 matters such as maintaining close relationships with employees or resolving disputes if any they face in attaining tasks in the right manner.

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

Section 176: States that directors must not enjoy the benefits that are gained from involving themselves as third parties. This is one of the reasons for facing disputes regarding resolving matters as a third party.

Section 177: In this, directors had to inform or get consent from the directors before making any decisions. Most of the conflict arises through not taking the appropriate suggestions from any of the directors who are working in the same post in the company (Rahman and Ghadas, 2018).

Thus, in such manner, it is examined that directors, shareholders, and any other officer who carries the power to manage, control, and exercise the matters of the company must play the role of 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 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 a personal guarantee to the landlord. In such a 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). However, after settling the amount, the beneficiary filed a suit against the company for committing a breach of the fiduciary duty, as they did not inform the shareholder regarding the overall planning. In such a manner, the breach is conducted regarding violating the corporate opportunity by not maintaining the duty of loyalty at the workplace.

Application: By applying this section in the relevant case study, it is stated that Aisha and Diana who are in the post of directors had conflicted in their duties which are covered under sections 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 while accomplishing the task. Thus, they are liable to be undertaken under sections 175-177 of the director's duties to maintain the dignity of the business. In respect of Paul, who is in the post of sales director had to work according to the set budgets as he had to maintain a duty of care and skills during examining the matters. Similarly, in the case of Re City Equitable Fire Insurance Co, the claims were imposed in respect of not taking care during the task as by this aspect 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 duties when they are attaining the post of making the right and critical decisions (Baker, 2019). In respect of the corporate opportunity doctrine, the duty of directors is adapted to the fiduciary duty of loyalty regarding accomplishing the task or maintaining dignity in business. Thus, under the statutory and common law, the director's role is crucial, and they had to maintain certain care in attaining the work in the right manner.

B)

The directors are resultant to be a breach in the 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 suffers losses through the actions which are undertaken by directors and such actions result in earning profits by doing the same business with another company during working hours or using the company's confidential information to maintain their personal clients. This results in committing a breach of the company's reputation. Thus, in such a manner, the directors can be disqualified from the jobs in respect of attaining such tasks as doing fraudulent activities or any wrongful trading. Under the Company Director's disqualification act, of 1986, the directors who are working under the company can be disqualified for up to 15 years and also it depending upon the crime which they committed in business.

SECTION B

QUESTION 1

A)

Legal solutions: In this case study, the liquidator challenged the company's stability in respect of undertaking their decision in the following section of the Insolvency Act, 1986. Section 238 of the Insolvency Act, of 1986 it is stated that if the company is not working in the right direction which is stated under the law, then also gives a chance 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 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 business when the transaction is done at an undervalued. Such transaction is done with the connected person so that they grow the business in a 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 are adopted by the company in respect of providing security to the business (Repiquet, 2018).

In this case, insolvency is committed and the procedure is undertaken by the liquidators in respect of not being able to pay their debts or also the liabilities exceeds their assets which results in not managing the activities in a better way. Thus, the matters of insolvency arise in the case of selling the vehicle at undervalued prices and also applying for loans from the banks in respect of floating charges. These are the aspects through which the liquidator challenges the company with respect to dissolving the business or managing the funds in such a 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 out any such activities which affect the right of the business. As under section 213 of the Insolvency Act, 1986 wrongful trading is committed by the company after knowing the facts that liquidators are appointed to resolve the disputes. As wrongful trading results in violating the condition which is stipulated against the company in the winding-up procedure and in that case, he is personally liable to compensate for the losses incurred through such aspects. In the context of section 214 of the Insolvency Act, of 1986, the fraudulent activity is mainly committed to be a 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: All partnerships are built on the base of trust and thus a written partnership agreement is formed in relation to ensuring stability in the business and also maintaining the close relationship between the partners. This statement may be true or false.

Legal solution: According to the Partnership Act, of 1890, partnership refers to the relationship between two or more persons 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 statements and thus they can form a written contract which is termed to be known as the partnership agreement. This agreement legally bound all the partners to follow the terms such as sharing equal profits and equal losses, and also all the partners are liable to take an interest in managing the activities in a better way. Thus, the partnership can be established when all the partner mutually agrees to form the business and such partners can be more than two or more than two. It also examined that all the partners must agree with all the terms and conditions which is mentioned in the partnership agreement (Richard, 2017). In case of the death of any partner, results in the closure of the partnership business.

In respect of understanding this statement, the judgment is in favor of this statement to maintain the stability between the partner and if there is a partnership agreement, it results in securing the interest of the company for a 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 signs the partnership agreement (Das, 2019). This statement is supported by the case study of Hurst V. Bryk and others as in this case, Hurst is the appellant who appealed to a court regarding not dissolving the partnership agreement and on the other side, Bryk and others 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 judgment is raised regarding not dissolving the Malkin Janners as all the partners had signed the partnership deed regarding following the terms and conditions before entering into the partnership business. In such a manner, Hurst filed the case regarding committing a breach in terms of the agreement and it resulted in not agreeing to dissolve the partnership deed.

EXAM 2

QUESTION 1

Section 33 of the Companies Act, 2006 refers to the statutory contract in which the shareholder has been given the right to sue the company if they find their rights are infringed in respect of performing their duties. Thus, the statutory contract is made between the company and members in relation to examining their rights and duties regarding attaining their 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 the company or a wrongful act is committed, then it can be omitted or ratified by taking the majority of the members regarding suggesting the best way to overcome such issues. Through this manner, the court cannot interfere with 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 the model of an article, they are mainly a set of laws or rules that are provided to the company to perform in that direction only (Bawah, 2019). The rights which are covered under the model articles relate to passing special resolutions to direct the shareholder to make the right decision or the power and duties which are given to the 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 the right manner and it is the duty of the shareholder to manage it in a better way. In respect of entering into the contract by the members regarding acquiring shares, 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 by passing a special resolution in the general meeting. The constitution bound upon the company and members to work in a similar direction and also not violate any of the terms that affect the rights of the persons.

This is reflected in the case study of Foss V Harbottle (1843) 67 ER 189 as they both are the minority shareholders of the company and thus claimant claimed that the property of the company had been wasted or wrongful activity was committed. The claimant filed a suit against the partner regarding paying compensation for the losses incurred. According to the judgment of the court, the company is held liable and 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 a regular basis.

The disadvantage of these aspects is that:

Risk: It is difficult to find accurate investments if the company did not manage its financial records.

Cost: Had to repay the money within the set time period even if the company does not have good money management.

B)

In relation to entering into the partnership business, there are following terms and conditions it 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 partners are individuals and bring their own share or capital to manage the business in the right manner (Keay, 2016). In a partnership business, all the partners is joint and liable for the activities which are to be assigned to them and also have to work accordingly. Thus, they carry the liability in respect of working together to improve the performance of the company. Apparent and implied authority is to be set in the partnership business which is mentioned under section 5 of the Partnership Act, of 1890. The third partner is protected in respect of noticing the partner regarding securing the business from losses or strict provisions 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 procedures that are adopted by the company with respect to managing internal and external strategies. The role of the UK corporate governance code is to set out the standard procedure on the board composition or managing the remuneration and accountability of the business to retain in the market for the longer term. This code mainly carries the exception to the smaller listed companies. Compliance is monitored with respect to 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 the market. With respect to covering the growth of both Plc and large private companies, they are freely accessible and also manageable with respect to getting funds.

The purpose of non-executive directors in a company is that they plan the policies in respect of viewing the condition of the company and also make the 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 judgment to face the issues in a better way and also improve the performances by setting the particular standards.

QUESTION 4

Ans: In respect of undertaking the matters related to the Partnership Act, of 1890, a partnership business is established when all the partners mutually agree to share the profits and losses in business and also undertake various activities to gain profits, they enter into the partnership business by forming the partnership deed. It is not necessary that there must be a written agreement as an oral agreement is also undertaken to form the partnership business. It is considered to be a good idea before discussing all such terms and conditions regarding the resignation 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 is dissolved.

Statue refers to the rules and regulations that are mentioned in the constitution and thus in respect of a partnership agreement, it is legally bound by the court and also all the partners have to work according to the set norms. In the 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 partners 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. The impact is raised regarding unanimous consent regarding express or implied contract which affects the terms and conditions of the Partnership Act, of 1890. If the parties settle the terms and conditions previously before entering into the partnership agreement, they can resolve the matters easily (Dimopoulos and Wagner, 2016).

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