Company Law Study Questions

Company Law Study Questions

Globe Industries Ltd was incorporated in November 2016, and its articles of association follow the Model Articles for Private Companies Limited by Shares. Upon incorporation, the following clauses were included to the model articles:
“Tim has the right to be a director for 30 years from the date of incorporation or until he decides to retire, whichever arises first.”
“On any resolution to remove Tim from his role as director, he shall have 4 votes per share.”
“If Brigid holds 10% of the company’s share capital, she shall have the right to appoint a director to the board of directors.”
“Frank has the right to be the company’s lawyer for a period of 5 years from the date of incorporation.”
The share capital of the company is divided between the following people:
1. Tim holds 200 ordinary shares
2. Frank holds 100 ordinary shares
3. Caroline holds 200 ordinary shares
4. Anna holds 300 ordinary shares
5. Brigid holds 200 preference shares

The articles of association are silent as to any restrictions on the voting rights associated with the company’s preference shares.
The directors of Globe Industries Ltd are Tim, Anna and Brigid. Each one has a contract of employment (service contract) with the company for a period of 3 years, which contain a compensation clause for early termination. The compensation clause is void if the director is found to have breached his/her statutory duties to the company.
In terms of relationships / friendships between the parties:
1. Tim and Frank are best friends and will always support one another
2. Anna and Brigid are sisters
3. Caroline is Tim’s ex-wife and will take any opportunity to vote against him
4. Caroline is the cousin of Anna and Brigid

Scenario 1
Brigid and Anna wish to remove Tim from his role as director of Globe Industries Ltd. For the past 4 years they have felt that he doesn’t undertake his role professionally, taking long lunch breaks and spending a lot of company money on “entertaining” clients. However, he has continued to meet targets throughout this period. When they have confronted Tim about his behaviour, he laughed at them and said “my right to be a director is part of the company’s constitution and there is nothing that you can do about it.”
Since his divorce from Caroline there have been rumours that Tim has set up a separate company, (World Industry Ltd), to which he is diverting some business opportunities, instead of keeping them for Globe Industries Ltd. Brigid and Anna suspect that this has been to hide his true income from Caroline but they don’t have any evidence at the moment.
Brigid and Anna ask you for advice as to the validity, and likely impact, of the clauses contained in the company’s articles of association relating to Tim. They have a number of questions, including: Does he have the right to always be a director of Globe Industries Ltd? Can they still use section 168, CA 2006 to remove him? Would they have to pay him compensation for termination of his service contract? Should they gather evidence relating to Tim’s suspected establishment of World Industry Ltd and the rumours of his diversion of business opportunities to that company? Might Tim have a claim against the company under s 994 of the CA 2006?
Provide advice to Brigid and Anna relating to their questions, as well as any other advice that you feel may be relevant to them.

Scenario 2
Frank currently operates as the company’s in-house lawyer for an annual salary of £120,000. Despite the high level of this salary, Frank appears to outsource a lot of the company’s legal work to local solicitors and barristers due to their “expertise”. Anna and Brigid are unhappy with this situation as they feel that they’re paying twice for legal advice. Whenever this is discussed with Tim he defends Frank. However, both Anna and Brigid are determined to remove Frank from his post.
Once again they have a number of questions, including: Does he have the right to be the company lawyer until November 2019? Can they remove him before this time? Would they have to pay him compensation for termination of his service contract? Should they gather evidence relating to Frank’s outsourcing of legal work? Would this help them?
Provide advice to Brigid and Anna relating to their questions, as well as any other advice that you feel may be relevant to them.

Scenario 3
At a subsequent meeting, Anna asks for your confidential advice regarding Brigid’s role within the company. Although they are united on the need to remove Frank and Tim from their roles in the company, she is also concerned about Brigid’s increasingly dominant and aggressive behaviour over the past year, which she doesn’t feel is good for the business.
Anna would like advice as to the validity and impact on Brigid’s clause in the articles of association. She would also like advice as to how her cousin, Caroline, could be appointed a director of Globe Industries Ltd.
Provide advice to Anna relating to her questions, as well as any other advice that you feel may be relevant to them.

Your assignment must be a maximum of 3,500 words. You are allowed to go below or above this word count by no more than 10% without your mark being affected
Please refer to the OSCOLA Referencing Guidelines from Law Department homepage, it is vital that you correctly reference any parts of your assignment that are not your original work.

Requirements: 3100

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