Answer BOTH Question 1 AND Question 2, which both carry EQUAL MARKS:
1. Projects Plc is a property development company. It has four shareholders. Joan owns 60% of the company’s shares. David, who founded the company with Joan, still owns 16%. Simon, owns 12%. Tessa owns the remaining 12%.
The company has four directors: Joan, Simon, Tessa and Wendy. Tessa is a qualified surveyor. Each of the directors has a 5-year service contract.
Six months ago, Simon, Tessa and Wendy decided that the company would henceforth operate in a more environmentally friendly way. They changed the company’s electricity supplier to one that provides only renewable-energy. Because this electricity is more expensive, Joan estimates this has reduced the company’s profits by £30,000 per year.
Three months ago, Simon and Tessa learnt about some land that was coming up for auction. Tessa drove to the land, looked at it through her car window for 5 minutes, and decided it would make an ideal site on which to build a factory. She and Simon attended the auction and bought the land for the company for £110,000. Unfortunately, because of problems regarding access to the land, it cannot be used for the intended purpose, and is worth only £50,000.
At the end of the auction, when almost everyone had left, a vacant warehouse came up for sale. Simon asked Tessa if he could buy this warehouse for himself. She agreed he could. Simon then bought the warehouse, with a winning bid of £40,000. He is now proposing to sell this warehouse to Projects Plc for £90,000. Joan accepts the warehouse is worth £90,000, but says that Simon should have bought it for the company (and not for himself) when he was at the auction.
Joan wants a shareholders’ meeting to take place, and she wants to use this meeting to prevent the company buying Simon’s warehouse and also to remove Simon and Tessa as directors. It is not known whether David will attend the meeting or, if he does, how he will vote.
Advise Joan:
a) whether she can use the shareholders’ meeting to achieve her wishes. Would your answer be any different if Simon were selling the warehouse to the company for £120,000 (again, assuming the warehouse were worth that amount); and
b) whether any of the directors have breached their duties to the company.
2. Shareholders cannot effectively enforce directors’ breaches of duty in the UK.Discuss.
Total Word Limit: 3,000 words
Referencing style: OSCOLA (footnote and bibliography)