Company Law (overview od development of company law in cwc Caribbean)
Not signing as an agent thus not personally liable in this case
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THE SALOMON PRINCIPLE OF WHAT RELEVANCE
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- Phornogram v Lane
- Director’s Duties – examinable Two organs of company-BOD and shareholders
| Not signing as an agent thus not personally liable in this case; just authenticating what he thought the co. was part of ; i.e. to endorse a contract he believed th co. would enter into
Parliament intervened through company acts for this ; section 61 Co act 2006 UK says in our co act s20 TT s16 Barbados s29 Jamaica- page 16 Phornogram v Lane prompter was held personally liable for a death he purportedly signed for a company which was never formed Lord denning; a contrarary agreement must be expressly stated and clear for a promoter not to be liable Our statue speaks abut express statement in writing; express statement cannot be oral Consequences of s20 Company is never liable on a preincrop contract unless it ratifies the contract made on its behalf according to subsection 2 OR there is an express statement to that effect in the written contract as provided for under s20 ss5 of our company’s act (TT) Read newbourne case Question no 3 Director’s Duties – examinable Two organs of company-BOD and shareholders - one key issue of corporate management , in respect to directors is how to fashion rules with respect to accountability given extensive powers in management which are now vested in directors by the typical by laws of company and company acts NB: in the very early stages in the development of the law the shareholders were conceived of both managers and owners of the company Changed rapidly so shareholders were quickly assigned limited functions as investors – they just gave money While the separate but equally important function of management came to be almost the exclusive province of the directors Initially, the issue of the accountability of the directors to the managers, is viewed principally as being one of the accountability of the managers to the shareholders “the directors of a company shall exercise the powers of the company directly or indirectly through the employees and agents of the company ; and the direct management of the affairs of the business The act therefore contemplates the decision between directors and shareholders and ;directors and managers on the other hand Section in act which Prohibits directors from diluting the assets of the company Paying unlawful dividends Granting financial assistance to others If company buys back capital it diminishes the pool of assets available to creditors When a company pays unlawful dividends those dividends are paid in circumstances where they ought not to be paid; diminish cash on hand available Rationale for protecting groups such as creditors extends to the protection of other groups such as employees and members of society general One can argue as an interest in how the company is run..when a large company fails eg CLICO that often has disasterous consequences for the company itself and each of those stakeholders mentioned Director is person involved in the management of the company ( Not day to day management, because the exercise of his functions impact on a wide constituency of persons. Employees.creditors.members of public How are 3rd parties to treat directors – indoor management rule- how exposed are 3rd parties who treat with a company good faith relying on the fact that the company has done all that is within its power to enter into a commercial venture with it At common law persons dealing with a company are deemed by virtue of the constructive notice doctrine to have knowledge of all of those documenst which form part of the public records in Trinidad that is by laws of the company Mahon v east case; bank entitled to accept cheques drawn and sign by directors in the manner authorized by the articles of association of the company and was not obliged to query whether the individual signing the cheques were validly appointed as directors. They were entitled to assume people appeared in the public registry as directors where in fact validly appointed as directors. NO FURTHER ENQUIRY WAS REQUIRED BYT HEM ROYAL BANK v. Turquands – Indoor Management rule: Common law established principled that a 3rd party may deal with a company without being obliged to inquire into the internal processes and management of the company Title to assume that all acts of internal management has been properly carried out so as to enable to company to enter into the relevant transactions. Exceptions: 1. Where an outsider knows or is put on inquiry as to the failure to adhere to procedures he cannot claim the shield afforded by the indoor management rule In case of insiders Morris v Kanssen; posed that persons who hold positions within the company are prevented from relying on the rule because they are in fact in position to note whether there has been appliance with the internal requirements Hely Hutchinson v. Brayhead see also In Turquand’s case borrowed money without ..such borrowing resolution had to be authorized not by the resolution of directors but by the resolution of shareholders in general meetings Court held that company was bound by the borrowing because the resolution was a matter of internal management which 3rd parties could properly ASSUME to be carried out correctly Court noted that the 3rd party here on reading the articles would find not from borrowing but a permission to do so subject to resolution of shareholders in general meeting THIRD PARTY WILL HAVE CONSTRUCTIVE NOTICE OF WHAT IS ON PUBLIC RECORD There was no meetings of shareholders was therefore irrelevant for the purposes of constructive notice and consequently for the purposes of liability Why? because the indoor management rule allows an outsider to assume that which is required to be done by the company to properly to execute the transaction had in fact been done Section 85 ( featured in exam last year) Section 86(1) Section 23 Section 24 S23 of comapmy act- square this with what is said in Turquands’s case Content of director’s duty itself To whom does the director owe a duty; directors owe duties to a company Device often used by directors to acquire shares at discounted prces from shareholders Permissible because D doesn’t owe a duty to shareholder If the D was a fiduciary then would amount to breach in such duties A director of a company is not required to disclose to a shareholder who shares his purchases all the information that he has which might affect the value of the shares in less special circumstances – fraizer and Southerland Duff v rodulf 1929 –in the effect of an ordinary case , common law rule, no fiduciary relationship exist btw directors and shareholders were affirmed Able to deal with his share sin a manner which is infact prejudicial to the interest of the general shareholders that is to say he is as free to deal with the shares as any other shareholder Re Crawley & company fraizer pg 233 Automatic self cleansing filter v cunninghame 1906 gramophone and type wirter co v Stanley director’s duty statutory duty- duty to act honestly and in good faith with a view of the best interest of the company s 99 (1) (a) Download 154.95 Kb. 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