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WS4- director's duties, PRINT RELIEF AND REMEDIES - Coggle Diagram

- - - - CMS Dolphin Ltd v Simonet- resigning and starting a new business to exploit business opportunity of the previous business is a breach, he became a constructive trustee of the fruits of his abuse of the company's property, which he had acquired in circumstances where he knowingly had a conflict and exploited by resigning
      - Shepherds Ltd v Walters- setting up rival companies before resigning, without disclosing to shepherds board was a breach and they were help liable for 'advance start' period their breach gave them but not for further damages as no loss was found to be made to Shepherds
    - - Plus Group Ltd v Pyke- Director had a stroke and was subsequently excluded from the management/director duties and no longer received a salary, he therefore constructed a new company and entered into a contract with an old company client. He was found not to breach as he had no access to old company accounts/information, he was not permitted to act on behalf of the old company
  - - - S188- applies with contract for guaranteed term which is or may be longer than two years . This term of length in the contract would then require shareholder approval by ordinary resolution
      - Example of this: a one year contract with an option to renew for further two year term at their sole discretion
      - If no shareholder approval- it will be void under S189(a) CA 2006, also under S189(b) it will have a term entitling the company to terminate the contract at any time by giving reasonable notice to the director
    - - transactions involving a company and its directors or a connected person concerning ‘substantial non-cash assets’. These again require shareholder approval by ordinary resolution
        
        substantial set out in S191: an asset is substantial in relation to a company if it’s value (a) exceeds 10% of company’s asset value and is more then £5,000 or (b) exceeds £100,000
        
        Shareholder approval must be given before transaction entered into or after, provided transaction is made conditional on approval being obtained
        
        Shareholders can approve after the event (S196) but this does not take away director liability under S195
        
        Definition of persons connected with a director is in S252-254 CA 2006, it is complex but key categories are 1. Members of director’s family: spouse, civil partner, children, step-children (S253). Brothers, sisters, grandparents, grandchildren, uncles, aunts are NOT connected persons under CA 2006 2. Companies in which the director (and others connected with them) hold more than 20% of shares (S254) 3. A business partner of the director or those connected with them (S252(2)(d)) 4. Trustees of a trust the beneficiaries of which include the directpr or those connected with them (S252(2)©)
        
        consequences if entered into without shareholder approval
        
        S195(2) the arrangement is voidable, unless: (a) restitution of any money or other asset that was the subject matter of the arrangement or transaction is no longer possible (b) the company has been indemnified in pursuance of this section by any other persons for the loss or damage suffered by it or (c) rights acquired in good faith, for value and without actual notice of the contravention by a person who is not a party to the arrangement or transaction would be affected by the avoidance
        
        In relation to directprs involved and those ‘connected’ consequences in S195(3) – liable to account to the company for any profits made and to indemnify the company for any loss incurred
        
        look at: does transaction involve aqcuisition of non-cash asset from a company to or from either a director OR a connected person? If yes, is the asset substantial? If yes, shareholder approval needed by ordinary resolution. If not obtained, transaction may be voidable in certain circumstances, directors involved liable to account for profits and indemnify for loss
    - - Company loans to directprs, although permitted may also be subject to the requirement of shareholder approval by ordinary resolution
      - Before shareholders can be asked to approve the loan, they must be provided with information of the nature of the transaction, amount and purpose of loan, company’s liability (S197(3)) in the form of a memorandum so they can make an informed decision
      - S197 applies to all companies. Public companies only: S198-201 which regulate loans to persons connected to directors, quasi-loans, credit transactions
      - Shareholders can approve after the event (S214) but this does not absolve directors of liability under S213
      - Loan defined in Champagne Perrier-Jouet SA v HH Finch Ltd as ‘a sum of money lent for a period of time, to be returned in money or money’s worth’
      - Difference between loan and remuneration case: Currencies Direct Ltd v Ellis: remuneration is consideration for work done and may take different forms, not only direct payment of a regular wage. Remuneration and money like expenses can be different to loans
      - exceptions i.e. where you dont need to get shareholder approval for loans to directors: - S204: expenditure on company business (max 50k) - S205: loans for defending proceedings brought against a director - S206: loans for defending regulatory actions or investigations - S207: minor and business transactions (loans of up to 10k) - S208: Intra group transactions - S209 money lending companies (where loan is made in ordinary course of business of the company)
      - Remedies: S213(2) the arrangement is voidable at the instance of the company unless (a) restitution of any money or other aset that was the subject matter of the arrangement or transaction is no longer possible (b) company has been indemnified in pursuance of this section by any other persons for the loss of damage suffered by it or (c) rights acquires in good faith, for value and without actual notice of the contravention by a person who is not a party to the arrangement or transaction would be affected by the avoidance
        
        for directors involved and those connected under S213(4) consequences are S213(3) liable to account to the company for any profits made and to indemnify company for any loss incurred
    - - Under S217 any payment for loss of office to a director needs to be approved by shareholders by way or ordinary resolution
      - Exception: payment made in good faith: S220(a) in discharge of an existing legal obligation (b) by way of damages for breach of such an obligation (c) by way of settlement or compromise of any claim arising in connection with the termination of a person’s office or employment or (d) by way of pension in respect of past services
      - Exception: S221- no shareholder approval needed if the payment is less than £200
      - Consequence: if no shareholder approval obtained S222- director holds the payment on trust for the company and any director who authorised payment is jointly and severally liable to the company for any resulting loss
- - - - These do not apply to property transactions, loans, quasi-loans, credit transactions which require approval of the company’s members