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.

Which one of the following generally has the customary authority to bind the company?

Group of answer choices

A non-executive director

Any individual director

The chairperson

The managing director

2.

The duty of care, skill and diligence contained in s174 was inspired by which offence?

Group of answer choices

Wrongful trading (s214(4) IA 1986)

Insider dealing

Market abuse

Fraudulent trading

3.

The duty of care, skill and diligence is measured by looking at the objective element - the care, skill and diligence of the reasonable director; and the subjective element looking at the actual director in question's knowledge and experience.

Group of answer choices

True

False

4.

Two non-executive directors were found to be negligent in Dorchester Finance v Stebbings this was because :

Group of answer choices

A director used two blank cheques handed to him by the two non-executives and he used them to misappropriate funds

A director signed two blank cheques handed to him by the two non-executives who used them to misappropriate funds

The non-executive directors were accountants and should have known better

The non-executive directors were accountants

5.

How was the director found negligent in Re D'Jan of London Ltd?

Group of answer choices

The form was filled in by his insurance broker and therefore he did not need to check it

He didn't check the renewal insurance form before signing it

He showed reasonable diligence when he signed the form

A director must always read the whole of every document which he signs

Answer 1

1)

Which one of the following generally has the customary authority to bind the company?

The managing partner.

2)

The duty of care, skill and diligence contained in s174 was inspired by Wrongful trading (s214(4) IA 1986)

3)

The duty of care, skill and diligence is measured by looking at the objective element - the care, skill and diligence of the reasonable director; and the subjective element looking at the actual director in question's knowledge and experience.

The given statement is true

4)

Two non-executive directors were found to be negligent in Dorchester Finance v Stebbings this was because :

A director signed two blank cheques handed to him by the two non-executives who used them to misappropriate funds.

5)

How was the director found negligent in Re D'Jan of London Ltd?

He didn't check the renewal insurance form before signing it.

(which was void due to inaccuracies and the company was uninsured when it set fire.)