Easy Ltd is a company that manufactures and sells golf clubs. The directors of the company...

Easy Ltd is a company that manufactures and sells golf clubs. The directors of the company are Dong and Anurpreet. Easy Ltd sold Fines Pty Ltd a piece of land at a price of $15,000. However the property’s market value is $25,000. Dong is a majority shareholder of Fines Pty Ltd. a) Do the directors need to get members approval for this transaction to proceed?  b) What duty has been breached?

(please answer using ILAC) I : Issue Law : Law --> with laws and Sections A: Application C: Conclusion

Expert Solution

A company is a legal entity which acts through - its shareholders and the board of directors.

The directors are in charge of the overall strategic management of the company and ensures the company meets its obligations as well as steer the company to greater heights.

The directors are elected by the shareholders who put their trusts to the directors to effectively manage the company and increase the shareholders wealth.

The directors must at all instances avoid conflict of interests.

A conflict of interest is where a director has other personal interest that conflicts that of the company.

Multiple directorship/ majority shareholder is a main source of conflict of interest where a director in one company is also a director in another related company.

In this case Dong is has a majority of shares in Fines Limited and is a also a director at Easy Limited and so he has an influence in both companies.

He therefore influenced the piece of land to be sold below the market price at $15,000 instead of $25,000.

There is thus the breach of duty of the conflict of interest.

ekkarill92 answered 1 year ago

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