Company Law Issues Essay Example | Topics and Well Written Essays - 1000 words

Company Law Issues - Essay Example The question of majority rule and minority protection arises in the van purchase, mismanagement of Resort Ltd by Samson and Delilah and the sale of shares to prevent a take over bid. Another significant issue raised by this case scenario is the liquidation of â€Å"Crystal Ltd† which increases the level of scrutiny of director activity. 1. The relevant issue that arises here is the pre incorporation of the contract for the purchase of the van. Per Section 36 (c ) of the Companies Act of 1985, any contract made prior to the incorporation of a Company by a person will make the person himself/herself liable for said contract. Muddle has signed the sale document on behalf of resort Ltd, in February, when the Company was not formed. Moreover, Muddle is a minority shareholder with only 20% of the shares, he can only table resolutions, he cannot push them through. If the Articles of association of Resort Ltd do not provide him authority to make the van purchase, it should have been ratified at a Board meeting with requisite majority, otherwise it will not stand. The rule established in Foss v Harbottle1 provides minority protection in that a corporation can sue where a wrong arises that is ratifiable. However, since Samson and Delilah oppose the purchase, hence Muddle may be personally liable for payment on the van. 2. Mr. Muddle may be found guilty of a serious breach of fiduciary duty that is expected of a Director of Resort Ltd. He has used his influence as Director in order to derive personal benefit through the sale of the building in Mislington to Restore Ltd, to the tune of 250,000 pounds2. Section 317 of the Companies Act of 1985 also places on directors a statutory duty to reveal any interest, profit or financial advantage accruing to them by virtue of their position. Therefore, by using his position to influence the purchase of the building in Mislington which he owns, he has breached his fiduciary duty and