2) Was it bona fide?3) Did it benefit the company and promote the prosperity of thecompany?(However, where is no clause, this test applies)
Re Lee Behrens (1932)Where there is no express corporate gifts object, must look atwhether:1) Was it reasonably incidental to the company's business?2) Was it bona fide?3) Did it benefit the company and promote the prosperity of thecompany?1) Was it reasonably incidental to the company'sbusiness?Simmonds v Heffer (1983)No corporate gift clause in the company's objects,and so:1) General purpose donation was ultra vires however;2) Commitment to animal welfare donations werewithin the purposes of the business and so intra vires.Hely-Hutchinson v Brayhead LtdSaid (before s.41 CA06) that a transactionmust be 'intimately' connected to a D'srole in order for them to be considereda corporate insider.Re Torvale Group Ltd (1999)If a transaction with a third party (under s.40)involves more than two parties and only one is acorporate insider (a director or a personconnected to a director under s.252 CA06) thenthe court can sever the transaction on justgrounds.(So discretion of the court?)Breach of director's dutiesWhat may happen following a breach of a D's duties?1) Board of directors may take action against the D2) A D in breach will bring down the value of the business, reducing thevalue of the shares, making the company vulnerable to a hostile takeoever -the Market for Corporate Control3) S.212 IA86 - liquidator can look to the director in breach.4) What about where the board are in breach or if the those in breach aremajority SHs or if there is ratification of the breach? Look to derivativeactions.
Minority SHMay own as much as 50% - to have a majority youneed just over 50%.May own most of the shares but still be a minority SHbecause you don't have a majority of voting rights.Yet in a derivative action it is the company which iswronged, not the SHs - hence why 'derivative' in thecompany's name.Barrett v Duckett (1995)Multiple voting rights may make aminority SH a majority vote holder.Article 3 Model Articles CA06Management of the company andexercise of all its powers is delegated tothe board - not the SHsS.33(1) CA06The provisions of the constitution bind the companyand its members to the same extent as if there werecovenants on the part of the company and of eachmember to observe these provisions.And the constitution says that the board has thepower to litigate. (Of course, majority can out voteDs, but they cannot sue a current board)Foss v Harbottle (1843)If a wrong is alleged to have been done to the company, then the proper claimant is the company itself.No individual member can sue in respect of any wrong which is ratifiable by ordinary resolution of the members - theGM reflects the will of the company.