Q1.

Elements plc is the parent company in a group of companies operating in the production and distribution of water-sports equipment in the United Kingdom.

Elements plc holds the majority of shares in Aqua Ltd, which supplies the watersports equipment to local sellers. The remaining shares are held by two directors of Aqua Ltd, both of whom were appointed by Elements plc.

Swimmers Ltd is one Aqua Ltd's major suppliers and creditors. It has been striving to obtain payment for deliveries supplied to Aqua Ltd. However, it has recently learnt that Aqua Ltd has ceased trading. Moreover, it seems that in the last five months, materials delivered to Aqua Ltd, and orders received by Aqua Ltd, were all passed on to Waterfalls Ltd. Waterfalls Ltd is a wholly-owned subsidiary of Elements plc, and was only recently incorporated.

With reference to the UK common law:

Advise Swimmers Ltd whether it can obtain payment from either Elements plc or Waterfalls Ltd in respect of the debts of Aqua Ltd.

Q2.

Hoang Hai JSC was formed in 2010 as a shareholding company, and quickly established itself as a successful detail operator in the coffee shop market. The company sells high quality, highly priced coffees, teas, fruit juices and snacks from several location in Hanoi, and has plan to expand to several other towns and cities in the future.

The board of management has identified a new opportunity to diversify the businessand intends to open three fitness centres equipped with gymnasia, swimming pools and relaxations areas. Each fitness centre will also have its own coffee shop.

Three buildings suitable for conversion into fitness centres were found and the board of management has decided to acquire these and purchase the fittings and equipment necessary for the fitness centres. The board of management has also sanctioned a high-profile marketing campaign with a view to giving the new centres extensive publicity before the opening dates.

The fitness centres initiative has not been universally welcomed by the shareholders of the company. Despite announcing increased profits, the board of management has not increased the dividend this year, citing the need for reinvestment as a justification for this. Several shareholders have pointed out that the Charter of the company refers to its lines of business as a food and drink retailer, with no mention of fitness centres. These shareholders believe that the board of management has acted outside its authority, and that the new venture is highly risky, as most premium grade hotels already have well-established fitness centres that are open to the public.

Required:

1. Discuss the actions that can be taken by the shareholders who oppose the diversification plan of the board of management.
2. Examine the potential consequences to the members of the board of management of the actions that have been taken in diversifying the business.