QUESTION ONE

At a members' meeting of Construction Ltd the shareholders passed two resolutions, each with a 90% majority. The first was that the company should invest its excess cash in the Hong Kong stock market and the second was to set up a constitution with a clause stating that the company's activities are to be restricted to real estate development and investments.

At their next monthly board meeting the directors voted not to invest in the Hong Kong stock market. They also decided that the members had no right to set up a constitution to restrict the company's activities, so they would also ignore the second resolution.

REQUIRED:

Using the four step process, discuss whether the directors are legally required to observe either or both of the resolutions passed by the members in general meeting?