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As a director must be accounted for{regal(hastings

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Unformatted text preview: As a director) must be accounted for {Regal (Hastings) per Lord Russell} C.3 Can Shareholders General Meeting allow director to keep profit? The general meeting is the ONLY appropriate organ to determine whether the director should be release from what otherwise would be a breach of duty It would be approved under the process of ratification by shareholders If the Directors are also shareholders they cannot vote if they hold the majority of votes {Cook v Deeks per Lord Buckmaster} However it is hard to organise a general meeting to get this approved, therefore the most recent question in relation to this issue is whether just board approval can be enough? C.4 Can just a Board allow the director to keep profit? Unless the constitution makes the board the appropriate organ to excuse a breach of duty by a director it is unlikely that the Board can allow director to keep profit (you would need a general meeting instead) HOWEVER there are some instances where the Board can approve the director’s taking up of opportunity in a personal capacity {Peso Silver Mines; Queensland Minds v Hudson} Firstly based on Peso Silver Mines the court would have regard to the following factors to find that director has not breached duty: 9 o Person does not obtain opportunity by his position as director (rather it is obtained in a personal capacity) o Person participates in good faith as director when the board rejects the plan o The opportunity sought the person out o Person had not acquired any additional information as director that put him at an advantage to other potential investors – just an “individual member of the public” However it should be noted that {Peso Silver Mines} the Board did not approve the opportunity, however the court gives regard to allowing the director to keep profit {Queensland Mines} is the case that is authority for allowing board approval to allow directors to keep profits o However its important to note that in this case, 2 major shareholders were also directors on the board – therefore board approval was effectively shareholder approval o Here also the court emphasised the fact that the director had obtained the opportunity outside the scope of his role as director as soon as they rejected the proposal {Queensland Mines per Lord Scarman} Particularly {Queensland Mines} has been criticised for seemingly conflicting with {Regal (Hastings)} This has led most commentators to conclude that for there to be no issue – there needs to be a general meeting of shareholders where majority shareholders (who want the opportunity) cannot vote 10...
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As a director must be accounted for{Regal(Hastings per Lord...

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