Mary incorporated a private company with the name Best Bakery Limited, specializing in healthy baked products. She was the Managing Director owning 97% shareholding in the company and her husband and two children 1% each. Luke who was employed as a baker and driver entered into a contract with Best Bakery Limited that should he leave the company he would not solicit their customers. On Monday September 10, Luke left to pick up 20 bags of sugar a duty that he would normally perform as part of his job. On his way back to the company, he met in an accident with another vehicle owned by a Mr. Brown. Mr. Brown is contemplating suing Best Bakery Limited for the compensation The company however is refusing to accept liability on the ground that Luke should be held responsible as the driver of the car. A major disagreement developed between Luke and Mary, over the accident which resulted in Luke resigning from the company Based on the numerous phone calls received from his former employer's customers, Luke decided to form his own company in a commercial complex not far from his previous employer. He got his wife Sweety to incorporate the company with the name Bakers Delite Limited which started soliciting his former employer's customers. Given that Luke did not want to be directly linked to the company he owned only one (1) share, and the remaining ninety-nine (99) shares belonged to his wife, Sweety. When confronted about the soliciting, Luke purported that he only worked for the company. Mary is very upset and is deciding to take legal action. At the quarterly board meeting of Best Bakery Limited, Mary indicated that she will be making a claim for all the expenses she had incurred in the formation of the company. The other shareholders have strongly disagreed.

REQUIRED

1. Identify the main legal issues in the case above:

2. Explain the legal principles relating to the issues identified above, supporting your response with reference to relevant cases and sections of the Companies Act 2004:

3. Apply the legal principles explained above in your analysis of the case

4. Advise Mary