Q: Perfect Pets Limited is a company that sells pet foods and accessories. There are three directors. Anita and Bob are executive directors and shareholders, being CEO and Finance Director respectively. Chris is a non-executive director. Chris is also a qualified accountant, but he retired five years ago and he lets Anita and Bob deal with most business matters. Bob is a retired vet. He leaves much of the work to Anita but he draws a salary as a full time executive director. A few months ago, Chris’s brother, Derek, who was also friendly with Anita told her that he had manufactured some new self-warming dog coats and invited her to purchase them for Perfect Pets to sell to the public. She used money from Perfect Pets Limited’s bank account to buy the stock of 1,000 dog jackets for a total of £3,000. She did not tell Chris or Bob about the purchase. She kept the dog coats at her home and then three months later she sold them all online to Swanky Dogs Ltd, another pet accessories retailer, for a total of £20,000. Chris also discovers that Bob has been providing veterinary and grooming care in the store and charging customers. He has been keeping the money for himself and has earned £50,000 from his secret business. Unfortunately, some advice he has given was wrong and the pet owners are claiming compensation for their pets’ illnesses.
Advise the company regarding any possible liability of the directors.
Notes:
No footnote but reference as smith argues or suggest.
Identify issue of each incident and the role of each director based on articles from the Companies law and an example case and application of the law to the facts, Then a conclusion.
Sources must be included:
companies act 2006
Self-dealing and conflicts of interest :
Hannigan, chapter 12
R. Grantham, ‘Can Directors Compete with the Company?’ (2003) 66 Modern Law Review 109
Kershaw, ‘Does it matter how the law thinks about corporate opportunities?’ (2005) 25 Legal Studies 533
Duty of skill and care:
ii. Riley, ‘The Company Director’s Duty of Care and Skill: The Case for an Onerous but Subjective Standard’ (1999) Modern Law Review 697
iii. J. Lowry, ‘The Irreducible Core of the Duty of Care, Skill and Diligence of Company Directors’ (2012) Modern Law Review 249
iv. Hannigan Chapters 9-12; paras 13.24-13.33
v. Percival v Wright [1902] 2 Ch 421
vi. Re D’Jan of London [1994] 1 BCLC 561
vii. Re City Equitable Fire Insurance Co Ltd [1925] Ch 407
viii. Cook v Deeks [1916] 1 AC 554
ix. Bhullar v Bhullar [2003] 2 BCLC 241
x. Regal Hastings Ltd v Gulliver [1942] 1 All ER 378
xi. Howard Smith Ltd v Ampol Petroleum Ltd [1974] AC 821
xii. Hogg v Cramphorn Ltd [1967] Ch 254
Industrial Development Consultants Ltd v Cooley [1972] 2 All ER 162
Island Export Finance v Umunna [1986] BCLC 460
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