Tutorial 3 I – Identify the issue: ‘whether’L – Legal principlesA – Application, Arguments, Assumption: ‘on the facts’ (apply the laws to the factsgiven)C – Conclusion: ‘likely’ (used if there’s assumptions made)1.Happening Place is a private company. Tuf Tan holds 45% of the shares inHappening Place Pte Ltd. Advise Tuf Tan and the directors as to the following:(a) The directors appoint Payne Soh as the company’s public relations officer (ie anemployee). Payne Soh has a personal conflict with Tuf Tan on one occasion. As a result,at a requisitioned meeting of the members Tuf Tan manages to get a resolution directingthe directors to fire Payne Soh. The directors refuse to obey. The issue is whether the directors have to obey this resolution passed by Tuf Tan.Shareholders have certain rights. (elaborate on what rights)The issue is whether the directors have to obey the resolution passed by Tuf Tan.Shareholders have a right to attend meetings and vote. According to section157A, it is the directors who manage the company.Since the members passed a resolution directing the directors to fire Payne Soh, itshould be followed. (assuming Tuf Tan and the members are equity shareholdersand not preference shareholders)However, members also have a right to be treated fairly. Section 216(1) gives themember a right to apply to court if, among other things, the affairs of the companyare being run oppressively or in disregard of the members’ interest. (applicable tothe minority shareholders) There is unfairness towards an employee on thegrounds of wrongful termination.No the directors do not have to obey?Tuf Tan is a shareholder and thus the resolution he passed is not valid.Therefore the directors need not obey the resolution. Tuf Tan can howeverremove a director by ordinary resolution (section 152). The directors do nothave to fear Tuf Tan personally as he alone does not have the majority vote of50%+1 to pass an ordinary resolution. However he is close to obtaining themajority and is likely to be able to do so as he was able to pass the resolutionto fire Payne Soh.(b) Tuf Tan is also unhappy that one director’s mistress Lolli, has been appointedproduction manager (ie an employee) of the company’s factory. The issue is whether Lolli was appointed in the best interest of the company or forthe director’s personal interest
Under Director’s duties imposed by case law, directors have a duty to avoidconflicts of interest and to act in the best interests of the company. Also undersection 157(1) of the Companies Act, the director must act honestly and usereasonable diligence in the discharge of his duties. The term “act honestly” coversa multitude of matters, such as that the director must act in the best interests of thecompany, must not place himself in a position of conflict of interests, and mustnot use his powers for improper purposes.