CORPORATE GOVERNANCE CASE STUDY COMPANY LAW

CORPORATE GOVERNANCE CASE STUDY COMPANY LAW ANSWER PLAN Important Disclaimer The purpose of this answer plan is to provide you with a checklist of potential legal; regulatory or business ethic issues which may be relevant to this case study. It should not be a substitute for hard working research and brainstorming with your fellow classmates. Since some case study questions are based on past examination papers, I am therefore not permitted by PolyU to disclose the Marking Scheme of the respective past examination paper. Hence I can only provide you with a good outline of what I consider are relevant issues. It is your duty to explain your arguments, to identify the relevant facts to support your case and where appropriate the relevant case law or provisions under the relevant ordinances. C.K CHO Professor of Practice (Law) February 2018  In the present case, Ian is not officially a director but is regarded in law as a “shadow” director who has been able to influence and control his children who are officially appointed as directors. Hence if Ian has committed any breach of fiduciary duties or duty to act with due care skills and diligence, he can be sued and may be liable for loss or damage. Students are required to identify if any party had committed any specific conduct which are considered as breach of fiduciary duties e.g. non-disclosure of interest, accepting secret profit, diverting maturing business opportunities or anything against the best interests of the company such as “lending a loan to Yvonne without sound commercial reasons and not in commercial terms.” The transaction has nothing to do with the company and therefore not in the best interests of the company. Any loss suffered by the company should be made good by Ian and Lam. Ian also caused the sale of his hotel to the company without disclosure of his interest. Hence he has committed a breach of the rule against self-dealing. Since the hotel was purchased at above market price, it means company suffered from the unlawful action by Ian. The company can sue Ian for damage or cancellation of the contract if the contract has not yet been performed. In both instances Ian and Lam have been acting against the interests of the company and should be sued by the company to recover any loss or damage caused. In addition, Lam had also committed acts of incompetence in respect of: Loan made to Yvonne – no due diligence, putting company’s money at great risks Failure to comply with the Listing Rules to disclose the purchase of hotel from Ian and his failure to comply with disclosure under Cap 14A on connected transactions. 2