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Summary LAWS08134 Business Entities-Company Law
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LAWS08134 Business Entities-Company Law
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Company Law (still) S. 175 Prevents directors from having conflicting directorship
IDC v Cooley
o In charge of building stuff for EGB> Rejects IDC did not like the organization.
Colley was approached by EGB, but still working for IDC as a result. He then
did IDC’s work. When IDC found out they sued Cooley for breach of his
fiduciary duties of conflicting personal interest and they wanted Colley’s
profits. The court of first instance found there was a clear conflict of interest,
even though there was little change that IDC would get the contract.
S. 172 of CO
Other conflicts provision
You are doing business with your own company.
o E.g. you are buyer and seller
It requires that you declare interest, whether direct or indirect, to your fellow
directors
This involves a pre-transactional disclosure, leading to liability under s. 178
This disclosure is mandatory, did not rely on assumed knowledge
o Se Aberdeen Railway v Blakey Brothers
You may not be director, but for example have a large amount of shares
S. 176
Secret profits
If you are under a fiduciary duties you cannot make secret profits
o E.g. being bribed usually follows together with conflicts of interest
No secret profit rule
o This section is not as wide as the old general rule
o A director may not accept a benefit from a third party. There is a defence if it
does not give rise to a conflict of interest.
The problem of the common law rule
o Regal v Guthier (applies in Scotland)
Regal Hastings was owner of cinemas in Hastings. Reagan wanted to
lease more cinemas. As a result created a subsidiary to get lease
done. The owner of the cinemas wanted rent guarantees by the
directors, thus the capital would fall below £5000, and they only had
£2000. The directors were the same as in Regal, except there was one
additional in the subsidiary. The directors were buying the other 3000
shares which meant that they did not have to give a guarantee. IN
addition there was a lot of capital in the company. The shares of Regal
were bought by another party. As a result the directors made a profit.
The new board sued the old directors for making a profit. It was
argued that the result was that they had made a profit. The 4
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