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Tutorial 6 WIP - DIrector Duties

Leah, the managing director of Yasmin Ltd, was negotiating an internet supply contract with Otarah Ltd but the negotiations broke down when Otarah learnt Yasmin supplied a competitor. Otarah then offered the contract to Leah, who resigned from Yasmin and set up her own company, Lisa Ltd, taking the contract. Makela, a Yasmin director, purchased expensive furniture from Avisha Ltd where she is a majority shareholder, without board approval. Makela used her majority shareholding to pass a resolution clearing herself of liability. Yasmin Ltd seeks advice.

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Gurrajvin Singh
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344 views

Tutorial 6 WIP - DIrector Duties

Leah, the managing director of Yasmin Ltd, was negotiating an internet supply contract with Otarah Ltd but the negotiations broke down when Otarah learnt Yasmin supplied a competitor. Otarah then offered the contract to Leah, who resigned from Yasmin and set up her own company, Lisa Ltd, taking the contract. Makela, a Yasmin director, purchased expensive furniture from Avisha Ltd where she is a majority shareholder, without board approval. Makela used her majority shareholding to pass a resolution clearing herself of liability. Yasmin Ltd seeks advice.

Uploaded by

Gurrajvin Singh
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Tutorial 6: Directors Duties (I)

Yasmin Ltd. is a company formed to provide internet services. Leah, the managing director
of Yasmin Ltd ., was involved in negotiating an internet supply contract on behalf of Yasmin
Ltd. with Otarah Ltd . Otarah Ltd. broke off negotiations with Yasmin Ltd. because Otarah
Ltd. learnt that Yasmin Ltd. was supplying internet services to Cedia Ltd., one of Otarah
Ltd.'s fiercest competitors.
Otarah Ltd. then contacted Leah at her office and offered her the internet supply contract.
Leah resigned her position of managing director of Yasmin Ltd., incorporated a company,
Lisa Ltd. and took the contract for her company, Lisa Ltd. Lisa Ltd. made a huge profit from
the contract.
Makela, a director in Yasmin Ltd., agreed with Avisha Ltd. to buy some very expensive office
furniture from Avisha Ltd., although there has been no resolution of the board of directors of
Yasmin Ltd. to make the purchase. Makela is a majority shareholder in Avisha Ltd. Makela,
who owns the majority of shares in Yasmin Ltd. used her voting power to pass a resolution
exonerating her from any possible liability for her action.
Advise Yasmin Ltd.
Intro : section 4 (1)
Table a article 91.
122(2) human of full age of capacity

Leah left primarily because of the contract. Issue to discuss: whether leah has
acted bona fida to the company.
Bring in the common law position. Will smith and foses (must appear in your
answer). Basically companys must act in the best interest of the company.
Must talk about Section 132 1.
Under old section 132 1. Must act honestly and - then talk about the problem with
this. Must proove the directors actors dishonnestly and fraudently which is hard to
proove in law (beyond reasonable doubt). This doesnt reflect the common law
position.
Ammended it - 132 1a must be acting in good faith in the companys best interest.
Key thing to say bring us back to common law position and civil law burden of
proof which is on the balance of probabilities. Which means do not need to proove
fraud or dishonesty anymore. Easier to proove this as compared to the earlier one.
Lack of care/skill and diligence (need to discuss to attract more marks)
132 1a. the common law position for care, skill and diligence is found in the re city
acquitable case. In the case director must act honestly, exercise degree of skill and
diligence. Wont kena if he honest and not too much negligence (found in the case).
UK has moved away from this position. Norman vs theodore section 174 CA 2006
English law has now move into objective test. However malaysia maintains its
position that it will follow Re city aquitable in the case abdul mohammead kareem.
the judge said. Re city aquitable submit the director to subjective test. Based on his
belief and experience whether he acted in care not. Big problem because Leah can
argue back. No benchmark standard.
Leah resign because of the contract. No other reason is visible. Indicate very
strongly that she breach good faith. For duty of care we cant pin her down cause of
the subjective testing. But she should be liable for breach of good faith.
Section 131 1
Director must declare to the company if they are taking any contract they are
interested in. she got the contract after she resigns. 131 (1) unlikely to apply. She
only entered into the contract after she resigned.

Another point duties to avoid conflict of interest
Regal hasting she makes personal profit.
Recite position in malaysia 132(1) and 132(2).

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