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Company law, study case - Essay Example

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Company Directors Question 1 Advise Ben and Holly on the ways in which Gaston and Poppy’s potential investments can be accommodated in light of the wishes of Ben, Holly, Gaston and Poppy. In order to advise Ben and Holly in respect of the accommodation of potential investments by Gaston and Poppy, the relevant provisions of the Company Act 2006 have to be examined…
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Download file to see previous pages 1 Thus, in Rolled Steel Products (Holdings) Ltd v British Steel Corporation the disputed transaction was not held to be void. The court came to this decision as the transaction was not wholly beyond the capacity of the company.2 The directors of a private company with just one class of shares are permitted to allot the same class of shares. In addition, they can convert securities into such shares. 3 Moreover, such directors can grant rights to subscribe to such shares. However, these share allotment activities are subject to the prohibitions of the Companies Act 2006. 4 In all other instances, share allotment is permitted to the directors of the company, only if there is specific authorisation to do so by the Articles of Association of the company or there is a company resolution to that effect. Such authorisation has to specify the maximum number of shares that can be allotted under the authorisation. 5 As such, directors are instrumental in decision making and other critical functions of the company. The law relating to conflict of interests is intricate, and the director of a company should seek legal advice in this regard. In addition, it is necessary to ensure that the company’s constitution provides the required authority to a director in a specific situation. 6 However, Section 175 of the Companies Act 2006 does not cover all the functions of the directors. For instance, it does not deal with instances, where a director intends to have transactions with his company. This should be permitted by the constitution of the company. Moreover, under the provisions of section 177, the director has to make proper disclose to the board of the company. 7 There should be proper flow of information to the directors of a company. This is indispensable for the proper and efficient functioning of the company. As such, it is obligator for the company board to ensure that the directors have a proper flow of information. This is essential, as there is a statutory obligation on directors to take into consideration particular matters at the time of taking decisions. 8 Companies formed prior to the enactment of the Companies Act 2006, can acquire the same status regarding the issue of shares, by resolving to excise the clause relating to authorised share capital from their articles of association. In addition, these companies should resolve to bestow upon their directors the powers granted under section 550 of the Companies Act 2006.9 Companies formed under the Companies Act 2006 are not limited with regard to the number of shares that they can issue. 10 Section 550 of this Act provides that in the absence of a specific prohibition in the articles of association, the directors of a company with only one class of shares are at liberty to allot shares without requiring the authorisation of the shareholders.11 In addition, section 550 of the Companies Act 2006 empowers the allotment of shares by the directors of a private company that has only one class of shares. Such allotment of shares does not require prior authority from the members of the company. Furthermore, this power can be precluded or restricted by the members, via the Articles of Association of the company.12 In our problem, Ben and Holly realized that the Kingdom Ltd company would not be in a position to grow without the obtention of further financing for ...Download file to see next pagesRead More
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