Directors Duties 2022 - Problem Question
Gillies Ltd is a transport and cargo delivery company which owns a large
number of lorries and ships.
The company has two directors, Cobb and McKendrick.
Cobb owns 60% of the company’s shares and McKendrick owns the
remaining 40%.
Cobb = a qualified lawyer and the company’s chairman.
McKendrick = a full time job as a radio jockey and does not attend board
meeting on a regular basis.
A year ago, Cobb proposed that the company should expand its range of
services to manufacturing and selling heavy construction equipment
but
McKendrick objected to this, saying that the company should not take on any
new spending.
The discussion quickly turned in to a fierce argument and McKendrick has
refused to attend any board meetings since.
Last month, Cobb was approached by Raydon, a third party individual, who
offered to sell Gillies Ltd a licence to manufacture and sell new excavators.
Cobb told Raydon that Gillies Ltd would not be interested in purchasing the
licence in view of McKendricks’ refusal to attend board meetings or to
contemplate any new spending and in view of the fact that the manufacture
and selling of the new excavators was outside Gillies’ existing line of
business.
However, Cobb then agreed to purchase, for his own factory (not owned by
Gillies), the licence from Raydon to manufacture and sell the new excavators.
, Cobb set up his own factory to manufacture and sell new excavators and is
earning £50,000 a month.
Advise McKendrick whether Cobb has breached his duties as a director and
also, if at all, McKendrick himself has breached his duties as a director. What
difference would it make if Cobb wrote a letter to Gillies Ltd saying that as a
60% shareholder in the Company he was authorising himself to purchase the
licence from Raydon.
Introduction
There are two directors in this company (Giles Ltd), Cobb and Mckendrick Cobb
owns 60% of the shares and Mckendrick owns the remainder of shares (40%).
There several issues at hand and among them are as follows:
1) Cobb is one of the directors of the company; he is a qualified lawyer and
the company’s chairman.
He had proposed that the company should expand its range of services to
include manufacturing and selling heavy construction equipment, bur
Mckendrick was against this and believes that the company should not
undertake further expenditure.
Cobb entered into a transaction with Raydon to manufacture to sell and
manufacture new excavators.
He purchased the licence to do so in his own capacity and set up his own
factory to do so, he earns £50 000 a month.
2) Mckendrick has a full time job as a radio jockey and does not attend
board meetings. He has also rejected the idea of expanding the
company’s services to include manufacturing excavators and selling
them.
Gillies Ltd is a transport and cargo delivery company which owns a large
number of lorries and ships.
The company has two directors, Cobb and McKendrick.
Cobb owns 60% of the company’s shares and McKendrick owns the
remaining 40%.
Cobb = a qualified lawyer and the company’s chairman.
McKendrick = a full time job as a radio jockey and does not attend board
meeting on a regular basis.
A year ago, Cobb proposed that the company should expand its range of
services to manufacturing and selling heavy construction equipment
but
McKendrick objected to this, saying that the company should not take on any
new spending.
The discussion quickly turned in to a fierce argument and McKendrick has
refused to attend any board meetings since.
Last month, Cobb was approached by Raydon, a third party individual, who
offered to sell Gillies Ltd a licence to manufacture and sell new excavators.
Cobb told Raydon that Gillies Ltd would not be interested in purchasing the
licence in view of McKendricks’ refusal to attend board meetings or to
contemplate any new spending and in view of the fact that the manufacture
and selling of the new excavators was outside Gillies’ existing line of
business.
However, Cobb then agreed to purchase, for his own factory (not owned by
Gillies), the licence from Raydon to manufacture and sell the new excavators.
, Cobb set up his own factory to manufacture and sell new excavators and is
earning £50,000 a month.
Advise McKendrick whether Cobb has breached his duties as a director and
also, if at all, McKendrick himself has breached his duties as a director. What
difference would it make if Cobb wrote a letter to Gillies Ltd saying that as a
60% shareholder in the Company he was authorising himself to purchase the
licence from Raydon.
Introduction
There are two directors in this company (Giles Ltd), Cobb and Mckendrick Cobb
owns 60% of the shares and Mckendrick owns the remainder of shares (40%).
There several issues at hand and among them are as follows:
1) Cobb is one of the directors of the company; he is a qualified lawyer and
the company’s chairman.
He had proposed that the company should expand its range of services to
include manufacturing and selling heavy construction equipment, bur
Mckendrick was against this and believes that the company should not
undertake further expenditure.
Cobb entered into a transaction with Raydon to manufacture to sell and
manufacture new excavators.
He purchased the licence to do so in his own capacity and set up his own
factory to do so, he earns £50 000 a month.
2) Mckendrick has a full time job as a radio jockey and does not attend
board meetings. He has also rejected the idea of expanding the
company’s services to include manufacturing excavators and selling
them.
