The Law of Contract Law Essay

2050 Words9 Pages
In a limited liability company, the most common form of corporate existence in the UK, ownership rests with the shareholders and control rests with the directors, in broad terms. Most day-to-day management is done by directors, including most corporate decision-making. Shareholders, however, are often required to ratify or authorise actions by shareholder resolution passed in general meetings. Yet this is subject to particular voting levels being met such as 50% majority required at a minimum to pass the simplest ordinary resolution Bushell v Faith [1970] AC 1099). Certain decisions require a special resolution which would need a no less than 75% of the voting members approval to be passed (s. 378(2) Companies Act 1985 (CA)). In this scenario, Frank, Emily and Tim (FET) are the directors of the company managing the day-to-day organisation of the company for the owners of the company, which includes William (W) holding a 10% share. FET have various obligations they owe to the company and cannot freely make decisions which give them a benefit or are not in the interests of the company as a whole. A director can occasionally be described as taking on the role of a trustee with respect to a company, with the main difference that the director rarely holds any property on trust for the company. The duties owed by and responsibilities imposed on directors are termed fiduciary duties and fall into three main areas. Firstly, a director must not put himself in a position where the interests of the company conflict with the director's personal interests or the interests of a third party. This duty is activated, not when the potential conflict arises but rather when it arises and the director does not act in accordance with the benefits of the company in mind. Secondly, a director must not make profit out of his position as director unless the company has given the

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