Directors’ Duties Problem Question

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The establishment of Shine Ltd was with the sole intent to produce industrial solvents and cleaning solutions. Appointment of the office of managing director was given to John to cover that post. During this course, the company acquired an agreement with XYZ plc a conglomerate. While still under the directorship of John the company came up with a new super glue. In his capacity as a director, he presented this to the manager with the hope that it would be supported, and the production would continue since he felt it would be a lucrative business. The board of trustees were however of a different opinion, and they ended up rejecting the project. The managing director of XYZ plc is a friend of John, and so he disclosed their intentions not to renew their contract with Shine Ltd. Their reason was that the partnership had not born as much success as they had hoped. He would, however, continue his dealings with John if only he were not attached to Shine Ltd. With this in mind, he resigned and instead formed his company, Flush Ltd. A company that later partnered with XYZ plc. The company also took up the project of manufacturing the glue Shine Ltd board of directors had rejected, and it has proved very profitable. The corporate opportunity dictates that the director is not allowed to take for themselves any business opportunity that otherwise would have been beneficial to the corporation. It falls within the fiduciary duty of loyalty applications. The conditions in the act are clearly stipulated. It becomes limited to the Director, officers, and controlling shareholders (Esser, 2007). The act specifies that it is applicable whether the transaction harms the corporation. That is to say should the director go against this rule in the process make the cooperation benefit it does not mean he gets exempted from having broken particular law. The other part of this rule is that the corporation should not have obtained information regarding the opportunity that was presented. In the case where the board is aware and declines to take the opportunity then the fiduciary would take the opportunity for himself. Should the rule apply however the corporation becomes entitled to the profit earning for the fiduciary from the transaction? Having considered all the activities that took place in case study this particular rule might not apply to John. While being the director of Shine Ltd, he took the idea to the board of trustees and following the rules stipulated in the Company act that would have been his responsibility. In this case, both John and the board of directors were aware of opportunity yet the board choose to ignore. With this in mind, it then becomes apparent that the opportunity would now belong to John. However, that does not mean that he gets to walk (Lowry, 2009). Section 170 deals with the responsibility of the director of an organization. In as much as they are given the top most job, this section dictates what is expected of them from the daily operation of the group.

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