Directors, Shareholders, and Spending: Applications of Case Law

1157 WordsJan 15, 20185 Pages
Directors, Shareholders, and Spending: Applications of Case Law Question 1: Advice for A There are several issues confronting A in this scenario, and the specific advice to be given depends on certain details not stated in the case. As a significant (presumably 10%) shareholder in the company and as the appointed managing director, it is likely that A was within his stated rights in purchasing a Mercedes Benz as a company car, even for his personal use; his claim on the car would terminate along with his employment in the firm (without regard to his status as a shareholder), and according to prior case law the director of the company is entitled to do anything the company is entitled to do unless explicitly prohibited (and even then, others outside the company are entitled to presume in most cases that the director is acting with proper authority) (Singh, 1971). B, C, and D, on the other hand, are likely not entitled to make travel purchases (which do not provide the company with any assets in the way that a car does) and quite possibly are not entitled to make purchases without cosignatories at all, as they are not the managing directors of the firm. If B, C, and D had been authorized to make such purchases in the company's name before, however, case law asserts that the travel agent is entitled to presume that they were authorized to make the current purchases, and the company will have to honor those purchases (Royal British Bank v Turquand [1856] 6 E&B 327; Freeman

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