Question

Read the following and answer the related questions that follow it.

Auric plc is a mining company, whose main business consists of open cast
mining. It has Articles of Association that are in the form of model Articles. The
board of directors includes Penny, Howard and Emily.

At a recent board meeting, the directors considered an offer from Trek Mines
plc to sell land adjoining one of Auric plc’s mining sites for £550,000. The
board of Auric plc decided that the company should not accept the offer as it
doubted whether it could raise the finance needed to buy the land. Penny then
formed her own company, Gold Ltd, which purchased the land for £550,000. At
the same meeting, the directors discussed a proposed contract with Texas plc,
which is being considered to survey a plot of land recently purchased by Auric
plc. Howard owns 10% of the shares in Texas plc, but did not reveal his interest
at the board meeting.

Emily has an arrangement with Comic plc whereby she receives a 10%
commission for all orders placed with it by Auric plc. Six months ago, Auric plc
purchased some drilling equipment from Comic plc for £100,000, for which
Emily was paid £10,000 commission.

The shareholders of Auric plc have discovered these facts, and they have
passed an ordinary resolution directing the board of directors to commence
legal proceedings against Penny, Howard and Emily.

1.

Does the duty of skill, care and diligence derive from common law, chancery or equity?

Group of answer choices

Equity

Common law

Chancery

2.

According to Regal v Gulliver it does not make a difference whether the directors act in good faith if there is a conflict of interest.

Group of answer choices

True

False

3.

A director has resigned from their post as a director, this will nullify any interest in the company and permit the director to take up a corporate opportunity which the company could not have obtained.

Group of answer choices

True

False

4.

A person who is held out by a company as a director and performs the duties of a director without actually being validly appointed is a:

Group of answer choices

Shadow director

Non-executive director

Executive director

De facto director

5.

The subjective element of the duty of care, skill and diligence will never allow the standard to fall below the objective standard of the reasonable director.

Group of answer choices

True

False

Answer 1

1) It is common law.

Explanation:

Many duties are thrusted upon the Directors of Company. These duties come to light frist come from two particular sources; statute and common law.

The responsibilities are laid down under common law can be sumed up into three main principles:

(i) Directors must act in honest faith and in the scrutiny of the company as a whole.

(ii) Directors are not authorized to make an unrevealed profit from their bearings as directors and should report any profit, which they in secret derived from their stance as a director, and

(iii). Directors are required to convey out their tasks with due care, expertise and conscientiousness.

Since, in this case of the above situation, the three duties were not performed by the directors.

2) The answer to this is True.

Explanation:

First, we must understand the case Regal (Hastings) Ltd v Gulliver:

The board of directors of Regal (Hastings) Ltd, had a drama together and honestly, bought company shares in a ancillary of the company set up to ease the sale of the company’s business. Regal (Hastings) Ltd had been given the choice to obtain the shares, but did not have the money to do so. On the following sale of the company and the not completely owned subsidiary, the directors made profits on their portion(shares) in the ancillary company. The current owners of the company, after acquisition, brought affairs in opposition to the directors to recover those profits.

Held: The directors did not disclose their purpose to obtain the shares to the shareholders and obtained the acceptance shareholders to their drama. Accordingly, the directors were in violation of the duty not to make a not disclosed profit.

It is very clear that Regal (Hastings) Ltd v Gulliver would be concluded in the same way were it to come to court today and section 175 to examine whether or not the directors were guilty to account for the profits they made based on a violation of the duty to put themselves in a position which their personal interest and the interests of the company clashes.

3) The answer is False.

Explanation:

Even when you leave you are not allowed to take up a majority business opportunity, that belongs to the firm, even if that firm is not actually going to be able to take up that opportunity (Reference: s170(2) and IDC v Cooley)

4) The Answer is Defacto director.

Explanation:

A de facto director is a individual who carry out the purpose of a director, however has not been officially assisgned as such. The de facto director is a kind of individuals, who presumes the role of director despite not having been officially appointed and duly registered

5) The answer is True.

Explanation:

The impartial component lays the basic standard, while the personalized element takes in to consideration to elevate the standard, if the director under consideration, has enough knowledge and experience. The personalized element will not allow the standard to fall below the objective standard of the sensible director.