ACCA F4 Global Variant flashcards – set 1

Where a contract specifies that “it shall not be subject to the jurisdiction ….” then it is specifically excluding resorting to legal action to resolve a subsequent dispute

The extent of damages is restricted to damage which was reasonably foreseeable

Directors should act with such degree of skill, care and diligence as could reasonably be expected of a person of that age, experience and qualification

Directors should not take personal advantage of opportunities which “belong” to their company

Auditors owe their duty to the members of the client company as a whole and not to individual members

Proposed alterations to the constitution must be for the benefit of the company as a whole

Weighted voting rights may be written into the constitution of a company effectively preventing alteration ( 2 sisters and little brother )

Established the fiduciary duties owed by directors to their company:- 1) must act with reasonable skill and care,
2) should devote such time as is necessary to fulfil their duties, and
3) may delegate so long as there are no grounds for believing the delegate is not capable

An example of the Court lifting the veil of incorporation – to determine the commercial reality of a group of companies

Where a director is found to be competing against the company it is allowable to amend the constitution to enable the removal of that director

The constitution of a company acts as a contract binding the company to its members and its members to the company

Where a person is ( wrongly ) held out as a director of a company by the real directors, the real directors are estopped from denying the authority of the “wrong” director

The grand-father of company law cases which confirmed the principle that a company, when properly incorporated, is a separate legal entity distinct from those who are beneficially interested in the success or failure of the company and from those who manage its affairs

Where a director is defrauding the company it is allowable to amend the constitution to enable the removal of that director

The constitution of a company acts as a contract between the company and its members. Where a constitution says that disputes are to be settled by arbitration, then the Court will refer the case to arbitration

The constitution of a company creates a contract between the company and its members, but only in their capacity as members and not in any other capacity

Lifting the veil to determine the person who made the decision in a situation involving corporate manslaughter

Illustrated the three part steps to determine whether a charge over assets was a floating charge or a fixed charge

The Court WILL allow an alteration to the Articles even though it may adversely affect just one individual shareholder. So long as the alteration is for the benefit of the company as a whole, the Court will allow it

A minority shareholder can sue the directors on behalf of the company to recover a profit which rightly belongs to the company but which has been diverted by the directors to themselves

Deadlock on the board of directors is a just and equitable ground for the Court to grant a compulsory liquidation order

An alteration to the constitution of a company will only be allowed if the “individual hypothetical member of the future will be equally likely to benefit as be burdened by the alteration“ – an alteration allowing the majority to compulsorily buy out a minority was not allowed

An example of the Court lifting the veil of incorporation – American film company set up to take advantage of British Government’s grants to British film companies

A company secretary has the apparent / ostensible authority to bind the company in contracts of an administrative nature

Companies are separate legal entities

In the context of agency, an agent who exceeds his authority may nevertheless bind the principal in contracts where the agent could be held to have ostensible / apparent authority

Directors allotting shares to prevent a takeover bid, even though acting in their minds bona fide in the interests of the company, were found to be not acting in the interests of the majority and the allotment was held to be invalid

The date on a certificate of incorporation is CONCLUSIVE proof that that is the date the company was incorporated

In tort, auditors are not liable in negligence when someone, unknown to the auditor, relies on the audit opinion to make an investment decision. However, if they rely instead on the oral opinion of the auditor, then the auditor IS potentially liable.

Negligence on the part of the directors is not a ground for action against them to recover profits lost through their negligence

The extent of damages is restricted to that amount which could have been reasonably foreseeable at the time of the breach

When the substratum of a company has disappeared, that is a ground for the Court to grant a compulsory liquidation order

Loss suffered as a result of reliance on a negligent auditor’s statement – to be successful in a claim against the auditor it is necessary to show that the whole loss suffered was CAUSED by the reliance and was not due to any other cause

Promoters must disclose profits made by them in the course of promoting a company to the first INDEPENDENT board of directors

Directors should use their powers for a “proper purpose” – shareholders ratified the allotment of new shares to defeat a takeover is valid. Even though the allotment was itself a breach of fiduciary duty, the ratification validated the allotment

Negligence on the part of the directors resulting in a personal profit for those directors is a ground for action against them to recover profits lost through their negligence

An issue of shares to prevent an unwelcome takeover bid was a breach of directors’ fiduciary duties and whereas it COULD have been ratified by the members in general meeting ( like in Bamford v Bamford ), it wasn’t

An example of the Court lifting the veil of incorporation – husband sets up a sham company to get round a perfectly reasonable restrictive covenant not to compete

In a quasi-partnership company, where a director / quasi-partner is deprived of the right to take part in management, that is a just and equitable ground for the Court to order a compulsory liquidation

An example of the tort of passing off – using a name for a company which is similar to an existing company name in a similar business such that confusion is likely to result in the minds of the public

It doesn’t matter if ALL the shareholders in a company agree to a course of action; if it is prohibited by the company’s constitution then the company cannot pursue that course of action ( it is ultra vires )

A person who loses their position as a director automatically loses their position as chief executive – but compensation for breach of contract may then become payable