Terry, Elias, Aly and Murat have kept a record and come to you for advice on ALL the following:
a) A shareholders’ meeting was called by the board by Email on Monday, 5th September 201X to be held on Friday, 9th September 201X at 8am. At the meeting, a resolution was put forward for the first time proposing two changes:
i) a clause that future amendments of or alterations to the articles would be allowed by ordinary resolution, and
ii) a slight change in wording in relation to the company’s articles of association clause on pre-emption rights on transfers of shares.
A vote by poll agreed on the changes by 74%. The articles kept at the company’s registered office were changed but a copy was not sent to the Registrar.
What is the position with regard to the meeting on 9th September 201X? Was it validly called and held? Are the changes that were proposed effective? Have the articles been lawfully amended?
b) On Tuesday, 4th October 201X, the company’s Finance Director took out a loan of £50,000 with Money Bank plc, secured by a mixture of fixed and floating charges over company assets. However, clause 10 of the company’s articles clearly states:
‘The company’s Finance Director, in order to carry out the duties and responsibilities of the position, has general borrowing powers on behalf of the company. This borrowing power, however, is restricted to a maximum limit of £35,000. Any sum above £35,000 for the purposes of indebting the company shall require a shareholder vote at a duly convened meeting of not less than 75%.’
TEAM are not aware of any shareholders’ meeting at which such a resolution authorising the Finance Director was tabled or, indeed, passed. Moreover, on checking the charges register on Friday, 3 February 201X, TEAM discovered that the charges have never been registered at Companies House.
Did the company’s Finance Director have the authority to take out the loan with Money Bank plc? If not, what are the potential consequences for him? What is the position with regard to the fixed and floating charges? Does it matter that they have never been registered?
c) One of TEAM, Murat, recently saw the company’s Managing Director drive a luxury car. He also observed the Managing Director having lunch with executives of Predatory plc. Several weeks later, Predatory plc makes a take-over bid for MarVellous Ltd. The Managing Director speaks strongly in favour of the take-over. It has now come to light that he holds about 10% of Predatory plc’s shares, and he and his family have been enjoying several expensive holidays at a private resort owned by Predatory plc.
Is there potentially a breach of duty on part of the company’s Managing Director? If so, what are the potential consequences for him?
d) Finally, TEAM have discovered that several of the company’s directors have been diverting contracts from the company to other companies owned by them, thwarting the company’s opportunities. TEAM estimate that this has cost the company around £750,000 in lost income, severely impacting on its end of year balance sheet.
Is the diversion of contracts a breach of duty? What, if any, are the consequences? Could TEAM claim for unfairly prejudicial conduct here or is there a potentially better remedy they should seek?