Comlaw 203 : Commercial And Assessment Answers

Answer:

1).Issue

The issue is whether the directors breached any company act for breach of duty.

 Law

According to the Company act of 1993, section 145 (1) directors must not use information that they accessed through their capacity as directors of the organization must not use that information for any other purpose that does not benefit the company (Newzealand Companies Act, 1993).

Application

By using the details of the company in another company, Huan and Feng contravened the company law of Chinese Mineral Limited by downloading the client list and the marketing strategy to use it in their newly formed company Springbok mines. Corporate law grants directors power to exercise in the interest of the company (Armour, Hansmann, Kraakman, & Pargendler, 2017). Their role is to manage the business of the company and protect its rights. By using the company’s information in another company Huan and Feng abused their powers and privileges that they have to access the company strategy and client list. This is termed as mismanagement as seen in Richardson & Cruddas Ltd. vs Haridas Mundhra And Ors (1973) where the court held that when group of persons in the management conspires to defraud the company and one of them did not know then this is an example of mismanagement. This means that the two breached the company’s’s rights by using the information for their personal gain.

Conclusion:

Chinese minerals has the right to sue for mismanagement of its information since the two used this information for their own gain in another company. The company can get compensated for damages since the information can compromise its business advantage. The situation could not have been different since Huan and Feng were determined to see the gold mining business through.

2). Issue

Whether Daiyu has any other avenues for taking on the case against Huan and Feng.

Law

Section 138A (1) states that a director performs a serious breach of duty by acting in bad faith and thus an employee or a fellow director can gather information as evidence through company reports or the help of an expert as allowed by section 138 to prove that the directors had contravened the requirements of the law by acting in bad faith. The doctrine of ultra vires and personal liability requires directors to be liable for personal actions (Newzealand Companies Act, 1993). Daiyu can use the doctrine of ultra vires to push for criminal proceedings against the two as seen in Peskin v Anderson (2000) where the court ruled that the directors do not owe their duty to shareholders but to the company, therefore, Diayu can file for breach against the company to seek court redress to recover the lost resources.

Conclusion:

Diayu can seek redress from the court for mismanagement as an individual since proceedings against directors ae handled by fellow directors which can compromise the intended outcome. This means that she can seek for the dissolution of the board of directors through shareholders and then start proceedings against the two.

3). Issue

Whether calling for a meeting of shareholder to ratify all the proceedings of the directors meeting solves the problem

Law

Section 105 (1) of the company act allows ordinary resolution of shareholders for issues that are affecting the company. Daiyu can use this to review the resolution that the shareholders made arguing that all the facts of the case were not presented to them (Newzealand Companies Act, 1993). This review can influence the directors to give factual information on the issues of Huang and Feng which can lead to other resolutions. According to Cripe (2003), shareholder accountability can be used to question the acts of directors by shareholders as a way of protecting their interests against fraud and mismanagement against directors. By using this approach, Diayu can convicne shareholders through an ordinary resolution to review the ratification. This will ensure that they are given the right information on what transpired before the meeting rather than the resolutions of the meeting which may be compromised.

Conclusion:

Company law gives directors privileges because they enjoy protection against shareholders. By making them accountable to their fellow directors, it means dissatisfied directors can push further issues that they feel were not properly addressed by director meetings or were compromised in one way or the other (Keay & Loughrey, 2015). This privilege is enjoyed by shareholders and thus Daiyu can use this opportunity to assist the shareholder to understand the future challenge facing Chinese Minerals and the effects that the company can suffer due to mismanagement and breach of company privacy.

References:

Armour, J., Hansmann, H., Kraakman, R., & Pargendler, M. (2017). What is Corporate Law? Oxford: Oxford University Press.

Cripe, A. B. (2003). Employee and director accounatbility to shareholders: doing business for business owners. DePaul Business and Commercial Law Journal, 1(153), 153-178.

Keay, A., & Loughrey, J. (2015). The framework for board accountability in corporate governance. egal Studies,, 35(2), 252-279.

NewzealandCompaniesAct1993. (1993). Companies Act 1993. 

Peskin v Anderson, EWCA Civ 326 (2000).

Richardson & Cruddas Ltd. vs Haridas Mundhra And Ors, Cal 119 (Calcutta 1973).