Northwest Transportation Company Ltd v Beatty (1887): the case involving ratifying breach of duty regarding self-dealing. The courts held that controlling shareholder-director can vote in favour of ratifying the breach. However, there are two restrictions: (i) directors cannot commit illegality, fraud and oppression and (ii) some rational basis for the decision.
Cook v Deeks (1916 Privy Council case): the case involving taking a corporate opportunity. The courts held that controlling shareholder-directors cannot ratify the breach of their duty. However, in Regal (Hastings), the court suggests that the controlling shareholder-director can ratify the breach of duty in relation to a corporate opportunity. How can we explain this? One could argue that in Regal (Hastings), the director acted bona fide for the best interest of the company and the company was not detrimentally affected but in Cook v Deeks the director's act detrimentally affected the company and benefit the directors personally.
[...] The court held that ‘bona fide for the benefit of the company' means ‘reasonable prospect of advantage to the company as a whole'. The court concluded the alteration should be allowed. There are another case which commentators mentioned as a misunderstood case. Dafen Tinplate Company Limited v Llanelly Steel Company (1920): the case involving alteration of articles to allow the forceable sale of shares from shareholders. There is an exclusion of the application to a particular customer who was not a customer from this provision. [...]
[...] Important points are price and when the price should be calculated. Price: typically there will be minority discount but dependent on circumstances. What time calculated: typically the award is issued but dependent on circumstances. O'Neill v Phillips (1999): Lord Hoffman stated that unfairness does not lie in exclusion alone. That is if the controlling shareholders or the company offer a reasonable offer in early stage and the petitioner rejects it, the court will reject unfair prejudice remedy even though there is an informal understanding to be protected from the use of corporate power in the equitable considerations category. [...]
[...] the court order which benefits the company rather than benefit the shareholder directly)? If it is possible, s 994 is used as a functional equivalent of a derivative action. Before 2006 CA, it is almost impossible to bring a derivative action therefore it is odd if s 994 can be used so. Re Charnley Davies Ltd (1990) held that you cannot get a corporate relief by s 994. However, Bhullar v Bhullar (2003) and Clark v Cutland (2003) granted corporate relief under the unfair prejudice remedy based on the breach of director's duty. [...]
[...] The law does not protect simple expectation of parties. The law protects promise-like agreement or understanding. This is clear in O'Neill v Phillips (1999) in which the Court of Appeal was misled by the word ‘legitimate expectations' O'Neill v Phillips (1999): the company was not originally a quasi- partnership company but it became a quasi-partnership company when Mr O'Neill became a managing director, was given 25% of the shares in the company and personally guaranteed the company's loan because there was a personal relationship involving mutual confidence. [...]
[...] Substantial shareholder is a shareholder who holds 10% or more of the votes to be cast. A substantial shareholder cannot enter into the related party transaction until disinterested shareholder approval obtained and directors disclose information which must include the statement that they obtained independent third party's confirmation that the transaction is reasonable and fair. Bibliography Legislation: - Insolvency Act 1986 (http://www.legislation.gov.uk/ukpga/1986/45/contents) - Companies Act 2006 (http://www.legislation.gov.uk/ukpga/2006/46/contents) Cases: - Allen v Gold Reefs of West Africa, Ltd - [1900-03] All ER Rep 746 - Brown v British Abrasive Wheel Co, Ltd and others. [...]
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