QUESTION TWO (7 marks) Mei-Ling, Belinda, Chan and Tran all run a family owned c

Question

QUESTION TWO   (7 marks)

Mei-Ling, Belinda, Chan and Tran all run a family owned company called Be Mine Pte Ltd. The company is a small florist business which has two stores.

The company has 9 shareholders consisting of close friends, family members and the four directors.

Recently the directors have been offered the opportunity to purchase both premises in which the stores are run, as the current owners are now selling. Tran is asked by the board to arrange financing from the local bank.

At the next meeting Tran informs the board of the loan terms and at this meeting the following takes place;

Mei-Ling spends the entire meeting playing candy crush on her mobile phone and when asked to vote just nods.

Belinda doesn’t ask any questions and just agrees to pass the resolution allowing the loan.

Chan who understands floristry well as she has a degree in design, but struggles to understand finances in general, doesn’t object, but instead agrees to the proposal although she has some hesitation due to recent downturn in orders being placed.

Although the resolution is passed Tran comes to you with hesitations of his own in regards to the director’s behaviour at this meeting.

Required:

Advise all four directors as to whether their behaviour has breached any common law or legislation in regards to their responsibilities as directors. If they have breached their duties what defences if any do they have at both common law and statutory law?

Explanation / Answer

Advise all four directors as to whether their behavior has breached any common law or legislation in regards to their responsibilities as directors. If they have breached their duties what defenses if any do they have at both common law and statutory law?

We will first define the role and general duties of a director as per companies’ act of 2006 in reference to the above matter. The board of directors is responsible for the following activities, highlighting the relevant ones as follows:

Discussing the case of the florist business expansion, the decision to purchase 2 stores where the business is currently run has to be taken. Tran has organized finance from a local bank and wants the opinion and support of the 8 other directors to formalize the decision and discuss the matter:

Advice to Tran regarding the matter is as follows:

The behavior of Mei Ling and Belinda is definitely uncalled for and shows indifference to the purpose of the meeting.

In the case of Chan, she should have updated her information before joining the meeting; her negligence is due to lack of knowledge and preparation for the meeting.

The company itself can take enforcement action against Mei Ling and Belinda for breach of duty as follows:

To sum it up it’s the collective responsibility of the directors to keep themselves updated about business trends of the florist business and come prepared to fruitfully contribute to the decision making at the board meetings.

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