Question

1. Herb Ltd has three directors: Parsley, Sage, and Rosemary. Occasionally Parsley and Rosemary come into the company's premises but all decisions about running the company are left to Sage, who acts as managing director although he has never been appointed as such. In lanuary, Sage enters into a contract with Supermarkets Ltd to supply organic herbs at a fxed price for a year. Shortly afterwards the price of organic herbs increases enormously, and Herb Ltd seeks to have the contract with Supermarkets Ltd set aside on the grounds that Sage had no authority to act on his own. Advise Herb Ltd if they are bound by the contract 2. Pike, Harri, and Raj are directors of a beauty products company. Pike is responsible for negotiations with suppliers and customers. He agrees a contract between the company and Bleach Ltd for the supply of various chemicals. Bleach Ltd give Pike a commission of E3,000 which he does not declare. Pike enters into negotiations for the supply of who owns a fleet of hairdressers. Unknown to Pike, Julie is Harri's wife. Raj is responsible for research into new products and, during trials to produce a new face cream, he accidentally discovers a formula that promotes rapid hair growth. Raj does not inform the other directors of his discovery but resigns and forms a new company on his own to market the hair growth product. The new company is very successful and makes substantial profits. Discuss. 3. Under the Companies Act 2006, directors owe various duties to a company. Outline the seven general hair dye with Julie, duties of directors which are set out in sections 171-177 of the Companies Act 2006. 4. Explain where a director gets authority to act on behalf of a company and how third parties are protected if a director acts outside his authority. 3. George owns shares in Organic School Dinners plc. He wants to propose a resolution that the company should endeavour to source organic food locally. He has gained the support of a number of other shareholders. Explain to George whether he can require the company to hokd a meeting to consider his resolution, or if his resolution could be added to the agenda of the company's Annual General Meeting, or if he could require the company to circulate the resolution as a written resolution. Would your answer be different if the company was a privatedimited company, Organic School Dinners Ltd? 4. Flora Exotic Ltd, a company selling plants, has a large number of debts but continues to trade. Kerry has supplied large quantities of fertiliser to Flora Exotic Ltd but, despite several reminders, their account for £5,000 has not been paid. a) Advise Kerry, who wishes to petition the court to have Flora Exotic Ltd wound up. b) Consider if the directors of Flora Exotic Ltd may be liable for wrongful trading. 5. Explain the difference between an ordinary and special resolution and how these are made. Can company resolutions be made without the need for a meeting?

Answer 1

1.He limited is bound by the contract. Since Sage is one of the three directors of the company and all the decisions were left over him, he owns the right to enter in such contract and therefore it can't set aside the contract.

2. Duties of directors

- to act within powers (171)

- to promote company's success (172)

-to exercise independent judgement (173)

- to exercise reasonable care, skill and diligence(174)

- to avoid situations causing conflicts (175)

- to accept third party benefits (176)

- to declare it's interest in proposed transaction (177)

A director gets authority to act on behalf of a company if he is authorised for it by the board of directors.

If a director acts outside it's authority, it gives third party the chance and helps to make unauthorized profits from the company and thus third party gets protected.

3. Simply owning shares is not enough to make the company consider it's resolution.

If it had been a private limited company then George could propose the resolution.