Articles 2

Rather than think about the difficulties of passing a special resolution to ratify the contract because the voting would be 0% against 20% (because neither Liz nor Kim would be aable to vote, step back a pace! Let's propose a special resolution to alter the Articles. Ah! Now we can pass a special resolution 80% against 20% What Meg could do is complain to the Court on the grounds that Kim and Liz are altering the Articles for an improper purpose Meg could appeal on the basis that she holds not less than 15% of the votes and she didn't vote in favour of the resolution HOWEVER!!! The Court is not likely to hear her plea favourably - the majority wishes to proceed down a particular path so why should the majority be prevented at the behest on a moaning minority? Advice to Meg? Sell your shares to Kim and Liz and move on with your life! OK?

Yeah sir i got the difficulties but can meg ,if she will pass ordinary resolution for ratification, deny the ratification and make director compensate for breach of their duty??

If she can't stop a special resolution, why would Kim and Liz try the ratification route when it would be so much easier to alter the articles? If you become involved in a company KNOWING that you are to be excluded from control (and, in Meg's case, excluded also from negative control) then you can't complain if that situation is continued Lesson? Don't get involved in a situation where you have no control! OK?

No sir I think i misrepresented my question I am asking that Kim and liz are in breach of their duty So their act needs to be ratified or they can alter the articles Now since only meg has the power to vote in ratification since the other members are involved in breach. If Meg do not ratify it .They will still have to compensate for their breach though they can afterwards alter the articles Right?

No! Why try to ratify knowing that Meg will defeat your attempts? Move straight on to Article alteration. Furthermore, Meg would need to propose separate resolutions to be passed by the members to the effect that Kim and, separately, Liz should be held liable to compensate. Resolution 1 ' Following discussion, it is proposed that Kim should be held liable to compensate the company' All those in favour? Meg 20% Against Liz 40%. Resolution fails. Resolution 2 ' Following discussion, it is proposed that Liz should be held liable to compensate the company' All those in favour? Meg 20% Against Kim 40%. Resolution fails. Best advice for Meg is to sell her shares and move on ... and don't go into situations where you are denied any semplance of control (particularly in the context of private companies) OK?

But sir meg can call for ordinary resolution or written resolution as she has 5% of voting rights Required for calling general meeting But since you said that separate resolution will be held for both kim and liz That's where the problem is right?

It certainly is. Check out the case Greenhalgh v Arderne Cinemas OK?

Sir also Why there should be separate resolution for acts of both director Can't they do only one resolution for acts of both?

No - you can't hold one director responsible for the actions of another. That's also the reason why, on the re-appointment of directors retiring by rotation, it's necessary to have separate resolutions for each rather than a composite resolution for all OK?

So for ratification of acts of directors Every directors act should have a separate resolution Right?

If it's a ratification of a director's (or many directors') ultra vires actions, then yes. OK?

Thanks sir I just admire the way you keep on answer questions even though some might be silly Thanks for your help sir

What do you mean "SOME might be silly"? :-) :-) It's really not a problem and, so far, none of them has been silly. I've just seen the score that you achieved on the FA paper. Dare I say that I'm not surprised :-)

Sir i really got this complete doubt except one In bpp it is written that while voting for ratification for director's act of breach of duty any member or director may not vote. So i feel that meg can still call to ratify the breach of the act of directors and decide not to vote in favour of their act And she can make them liable for breach of fiduciary duty THOUGH afterwards the other two directors can pass a special resolution to alter the articles in their favour. Kindly tell me if this is right

You have written two sentences here that simply do not make sense! 1 "In bpp it is written that while voting for ratification for director’s act of breach of duty any member or director may not vote." I believe that the expression that you have (mis)quoted is either a) "... any member or director may CHOOSE not TO vote." or b) "In bpp it is written that while voting for ratification for director’s act of breach of duty any member or director ALLEGED TO BE IN BREACH may not vote". That's OK - that's in line with what I have previously responded. 2 "So i feel that meg can still call to ratify the breach of the act of directors and decide not to vote in favour of their act". Why would Meg want to call a meeting to ratify a breach? IF I pursue your line of thought, the meeting would be held with the intention of ratifying with (according to your thinking) only Meg being able to vote. And then Meg not voting in favour of the proposed ratification. OK, so then what happens? The alleged breach by the substantial majority is not ratified but that, in itself, does not render the other two directors liable. Krrish, you have pursued this quite relentlessly and I really admire your tenacity. But we're talking here about a law exam of questions with multiple choice answers for an accountancy qualification. Furthermore, I cannot imagine a question being set along the lines where your "what-if" scenaria would fit into the ACCA's anticipated thinking. This is from your opening post on this thread from February 18th - "Sir the answer stated that kim and liz may well seek to pass a special resolution and alter the object as they together hold 80 % shares and Meg will not be able to stop them." Accept it!

OK, so then what happens? The alleged breach by the substantial majority is not ratified but that, in itself, does not render the other two directors liable. Sir if only meg is going to vote and she votes NOT to ratify the act Then how the other director will not be liable Won't they be required to compensate for breach of fiduciary duty

Who are they fiduciarily liable to? The company as represented by the members! Each individual member? No, the members as a whole. 100%? No, the majority. Who is the majority? Liz and Kim

Sir the directors have a duty to company as a whole it is their duty to act within their powers which if they do not ,they are in breach of their fiduciary duty

I told you in a previous post that I've had enough for today. ANY more posts from you today will be deleted and not read. The time now in my location is 9.43 so anything after 9.45 goes into Room 101