Oenomaus Ltd is a recently established company where two shareholders/directors have set up a biotechnology business.

The company forecasts high growth prospects and is managed by an experienced and ambitious team who are capable of turning their business plan into reality. M/s Suzie Wong an employee of ET capital, provider of venture capital funds to this biotechnology start-up has been invited to sit on the Board of Directors of Oenomaus Ltd. Susie is now seeking your advice on the following issues:

Susie is concerned that the companys affairs are being handled in a relatively informal manner. She has asked for advice on her position as a non-executive director (NED) given that Joe Soap and Joe Bloggs are the executive directors of Oenomaus Ltd?

Susie asks you to list and summarise the Common Law fiduciary duties of directors?

Susie has heard that company directors occasionally use company assets for personal purposes unrelated to the companys business. Briefly explain why some of these transactions are legally prohibited and for the benefit of whom?

Briefly discuss, citing relevant statutes and case law; the circumstances in which the veil of incorporation may be lifted at common law andunder theCompanies Act 1963, (Act 179)

The requirements that must be met under company legislation before a company may pay a dividend.

(Total: 15 marks)

QUESTION THREE

Beth, a fashion designer, wished to transfer her clothing business to a private limited company that she intended to incorporate, to be called AFL Ltd. Beth delivered all the necessary documents to the Registrar of Companies and received a Certificate of Incorporation (dated 24th February) on 1st March.

On 14th February Beth agreed, in a letter which she signed for and on behalf of AFL Ltd, Beth, Director, to purchase, from Kempstons Ltd, a quantity of materials that she would need for her new collection. At the first board meeting of AFL Ltd, the contract with Kempstons Ltd was approved and AFL Ltd received delivery of the first consignment of materials. However, the board has now decided to cancel the contract.

Beth also transferred some land to AFL Ltd for 250,000. It was later discovered by the board of AFL Ltd that she made a profit of 25,000 from that sale.

REQUIRED:

(a) Advise Beth with regard to her liability, if any, to Kempstons Ltd.

(b) How would your answer differ if, in the letter of 14th February, Beth expressly excluded her personal liability?

(c) Advise AFL Ltd as to any remedies it may have against Beth in respect of the profit she received on the sale of the land.

(Total: 15 marks)