2007GIR – Legal Issues for Managers

Discuss about the 2007GIR – Legal Issues for Managers.

The matter arising emanates in the realm of the corporate world. Upon scrutiny, I find that the following issues arise that need further deliberations.

Negligence: It is because of Sheldon’s negligence that he forgets to inform his company that he had purchased a bulk order of microscopes on credit on behalf of the company amounting to $30, 000 in June 2016.

Conflict of interest and non-disclosure: In a monthly directors’ board meeting, Howard suggests to his fellow directors to buy test tubes manufactured by Lab Stuff Ltd, but fails to disclose that his wife Bernadette is one of the directors of Lab Stuff.

Duty to communicate: Sheldon failed to communicate to other directors on his intention to buy microscopes on behalf of his Company. He goes ahead and purchases a bulk order of microscopes on credit on behalf of his company amounting to $30, 000 in June 2016. Basing o the information that Howard had acquired from his wife Bernadette, he goes ahead to buy share from his wife’s Company ( Lab Stuff) and fails to communicate to his wife about the same.

Directors of a company have duties which except where specifically set in the Companies Act, are not limited to directors alone but relate equally to any officials of the company who are authorized to act as agents of the company and in particular to those performing in a managerial capability.  This is particularly so as regard fiduciary duty. These duties fall into two categories.

Duties of care and skill in the conduct of the company’s affairs: This duty, was summed up by Romer J. in Re City Equitable Fire Insurance Co.[1] where it was held that, the Directors were negligent. Romer J. stated that, “A Director require not display in the presentation of his duties a larger degree of ability than may logically be probable from a person of his understanding and skill.” These suggestions prescribe the standard of talent to be shown in actions that are undertaken by directors.  The analysis is partially objective and also partially subjective since a sensible person would be anticipated to have the information of a director with his familiarity. This can be related to Re Brazilian Rubber & Plantations Estates Ltd[2] where Neville J. stated in part that:

“It has been laid down that so long as they act honestly, Directors cannot be made responsible in damages unless they are guilty of gross negligence.  A Director’s duty requires him to act with such care as is reasonably expected from his having regard to his knowledge and experience….”

On conflict of interests, Wilberforce J. held in the case of Boardman V Phipps,[3] Boardman was accountable to pay for his contravene of the duty of allegiance by not accounting to the company for that sum of money, but that he could be rewarded for his services. A director has a duty of care and diligence as established by Section 180 of Corporations Act[4]. Furthermore, the Directors have a duty to disclose as per Section 191 of Corporation Act[5].

In conclusion therefore, Raj should know the following; since Sheldon had made his Company incur some debts, because of his negligence and failure to disclose his actions, he will be liable of all the expenses that his company will incur. Furthermore, the company may decide not to buy test tubes from Lab Stuff since it would be a conflict of interest on Howard’s part.

 

MyAssigmenthelp.co.uk is the best option for those who are looking for reliable academic writing services. To show our genuineness, we submit only high quality assignments so that students never lose out on important grades. Our mission is to provide plagiarism-free solutions at very affordable prices. Students can get academic writing help on any subject or topic from us.