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Public company model articles provide that a director must vacate office if:
They become bankrupt or enter into an arrangement with creditors.1. What does mean by enter int arrangement with creditior? This mean that if director take personal credit, he must vacate office?
2. I don’t get it… Colud you explain why director is entitled to claim?(below case)
Southern Foundries (1926) Ltd v Shirlaw 1940
The facts: In 1933 S entered into a written agreement to serve the company as Managing Director for ten years. In 1936 F Co gained control of the company and used their votes to alter its articles to confer on F Co power to remove any director from office. In 1937 F Co exercised the power by removing S from his directorship and thereby terminated his appointment as Managing Director (which he could only hold so long as he was a director).
Decision: The alteration of the articles was not a breach of the service agreement but the exercise of the power was a breach of the service agreement for which the company was liable.3.Could you explain whether court MAY or MUST disqualify director when he is involved in company insolvent liquidation.
I ask because BPP wrote that:
The court MUST make an order(under CDDA) where it is satisfied that the following apply:
– A person has been a director of a company which has at any time become insolvent (whether while
they were a director or subsequently).but OPENTUITION course notes:
On application to the Court, a director MAY be disqualified by court order on a number of grounds:
-when involved in a company insolvent liquidation
THANK YOU IN ADVANCE FOR REPLY
Entering into an arrangement is where a director settles his private debts by an arrangement such that the director pays only, say, 60c in the $
Southern Foundries – the resolution had the effect of removing the director. But that removal effectively breached the separate contractual agreement for being managing director. They could have removed him without altering the articles just by using their majority. Really, the alteration is a bit of a red-herring
A director may become disqualified on a number of grounds one of which is by being disqualified by the Court OK?
1.Entering into an arrangement is where a director settles his private debts by an arrangement such that the director pays only, say, 60c in the $
I am not sure yet. So by above you mean that director pay only part of his debt?
2.Southern Foundries – the resolution had the effect of removing the director. But that removal effectively breached the separate contractual agreement for being managing director. They could have removed him without altering the articles just by using their majority. Really, the alteration is a bit of a red-herring
So can i uderstand this case in this way: everyone with majoriy votes can expell director before 10 years pass without changing articles despite fact that written agreement exist for 10 years??
3. A director may become disqualified on a number of grounds one of which is by being disqualified by the Court OK?
Sorry but I have to ask again because i dont realyy understand..
I know that director can be disqualified by court order. I am asking about particular situation when director is involved in insolvent liquidation. When such situation exist court MUST OR MAY Disqualified director??thank you in advance
1) Yes – that’s what “entering into an arrangement” means – effectively, the director is bankrupt and unable to settle his / her private debts in full
2) Yes – the people controlling the majority of the votes in a company can remove a director at any time. However, in doind so, they face the likely consequences of having to pay compensation for breach of director’s service contract
3) You’re getting hung up on “may” and “must”. The course notes / lectures say that “a director may lose his office in a number of ways”. This is exactly the same as saying that “a director can lose his office ….” or “there are a number of ways in which it is possible that a director may lose his office” or “the possible ways in which a director may lose his office are many”
Neither the notes nor the lectures give any degree of emphasis to the “may”
thank you for reply, as always you are very helpful, december nearer and nearer and so much to learn
You’re welcome. Just keep on reading the notes and the past exam questions and answers from a reputable revision kit. Sometime towards the end of October, start trying to plan 10 points for a question within 5 minutes. Keep doing that for a month and then around week 2 in November – half way through the month – try writing out some answers under exam conditions. So read, think, plan (5 minutes), re-read (to make sure that you have addressed the question, the whole question and nothing but the question) and then write (13 minutes) Do that for 2 weeks and you’ll cream the exam 🙂
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