Company Law Problem Question Essay Example | Topics and Well Written Essays - 2750 words

Company Law Problem Question - Essay Example The company under consideration, Homemaker Limited had three persons on its board of directors namely Jenny, Louis and Chris. Out of these directors, the most active role was played by Chris who also tended to act as the Managing Director though this was never formally recognized in writing. This indicates that Jenny and Louis were more or less passive directors of the company. Homemaker Limited was construed for construction of homes only, but Chris sought to diversify business into equipment and furniture supply. The shortage of work in the construction industry forced Chris to diversify business but he did not register another company to do so. Instead, the platform of Homemaker Limited was utilized by Chris to supply Easy Birds Limited with equipment and furniture which stands in direct violation of the original constitution of Homemaker Limited. Given the fact that Homemaker Limited was struggling with capital requirements, Chris decided to borrow one and a half million pounds f rom Star Bank. The transactions with Star Bank were executed by Chris and Louis alone without the consent of Jenny. The mutual agreement that the consent of all directors was required for transactions above one million pounds is clearly violated by the behaviour of Chris and Louis in this regard. Poor performance on the part of Homemaker Limited resulted in losses in the equipment and furniture supply domains leading to contractual failure with Easy Birds Limited. The failure of this gamble meant that Homemaker Limited was unable to deal with its fiscal obligation with Star Bank leading to liquidation of the company. A number of problems emerge in regards to Homemaker Limited and its liquidation. The majority of these problems span the domains of director’s conduct and the validity of transactions that resulted. The discussion provided below will cover these issues in detail relating applicable statutes and their interpretation as per case law. 2. Applicable Law In terms of s tatutory law the current case’s circumstances are covered by the Companies Act 2006 (which expanded on and replaced parts of the Companies Act 1985). Given the fact that the company Homemakers Limited was registered in 2007, the applicable legal elements will be derived from the Companies Act 2006 alone. This also means that previous positions on certain issues will have been revised even if they were fortified by case law on the matter. One of the largest directions taken by the Companies Act 2006 has been the roles, responsibilities and conduct of directors. The duties of directors had already been expounded by the previous Act but the new Act has consolidated these matters further by codifying principal common law as well as the equitable duties of directors. However, it must be borne in mind that the new Act is by no means an exhaustive account of the duties of directors. This therefore tends to indicate that the duties of directors expounded by common law still survive a lbeit in a reduced form. The Companies Act 2006 has revisited the domain of director’s duties as per Chapter 2, General Duties of Directors. The Chapter has been divided into an introduction, the general duties of directors and the supplementary duties of directors. The new codifications (in context of the duties of directors) will be used to evaluate the conduct of directors at Homemaker Limited. 2.1. Section 170 – Scope and Nature of General Duties This section serves as the