It was held that the allotment was void since it was

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takeover of the company – a takeover that was sponsored by the board of directors. It was held that the allotment was void since it was made for a collateral purpose (changing the balance of power), and for an improper motive. Similarly, in Hogg v. Cramphorn (1967) Ch. 254, one of the directors of a company allotted shares to employees under an employee share scheme in order to fight off a take-over bid, which he believed would not be good for the company. It was held that the allotment was invalid. Where directors have exercised their powers for an improper purpose, the shareholders, if they wish, may ratify the transaction, as in Hogg v. Cramphorn , where the shareholders later ratified the allotments. Download free eBooks at bookboon.com
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BUSINESS ORGANISATIONS AND AGENCY 437 COMPANY DIRECTORS 24.11.2 DUTY TO PROMOTE THE COMPANY’ SUCCESS Under s. 172 CA 2006, directors have a duty to act in good faith and in such a way as would promote the success of their company. In so doing, directors should: • Consider the long-term consequences of their actions; • Consider the interest of the company’s employees; Foster good business relations with the company’s suppliers, customers, and others; • Consider the impact of the company’s activities on the environment; • Endeavour to maintain good reputation and high standard in business; and • Treat members of the company fairly. This duty is also referred to as enabling “enlightened shareholder value” and allows directors to adopt a wider, holistic, and longer-term approach in the assessment of what is for the benefit of the company. Thus, genuine long-term strategic decisions will not be contrary to the interest of the members even if they lead to loss of profit to the shareholders in the shorter term. 24.11.3 DUTY TO AVOID CONFLICT OF INTEREST Another important fiduciary duty is the duty of directors to ensure that their personal interests do not conflict with their official responsibilities. This duty, which is provided in s. 175 CA 2006, states that directors should not involve the company in transactions in which they stand to benefit personally. For example, if a director of a company awards a contract to himself, his wife, father or son, etc., this might be a conflict of interest. In any of these situations, the director’s interest in looking after his close family might undermine his responsibility to look after the interest of the company. According to Bray v. Ford (1896) AC 44, a fiduciary (including a director) is not entitled to make a profit or to put himself in a position where his duty and interests conflict. The following cases illustrate this principle: Aberdeen Railway Co. v. Blaike Bros (1854) 1 Marq 461; [1854] 17 D HL 20 – A company entered into a contract with a firm for the supply of some goods. The chairman of the company was also a partner in the firm supplying the goods. It was held that there has been a breach of duty. The court stated that no one having fiduciary duties to discharge shall be allowed to enter into engagements in which he has, or can have, a personal
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