Company Law

Summative Assessment Type: Coursework (submitted on Moodle). Maximum Word Limit: 2000.
Submissions MUST NOT exceed the maximum word limit. Footnotes are NOT
included in the word count. A bibliography IS required for this assessment.

Instructions: Please answer ONE question from the two questions set.

As this is an assessment by coursework, you MUST cite your sources in the footnotes in accordance with OSCOLA, including page numbers. This includes any direct references and allusions to or close paraphrasing of sources, including the core textbook. Furthermore, any verbatim quotes from sources should be in quotation marks (‘…’). Footnotes should only be used for citing sources and are not included in the maximum word count. Failure to follow these instructions may amount to poor academic practice and potentially academic misconduct.

ANSWER ONE QUESTION ONLY

Question 1
Frank and Teresa are minority shareholders in XYZ Ltd. They are increasingly dissatisfied with the way Pedro and Jonson, the majority shareholders and directors of the company, are managing the affairs of the company. They are concerned that certain company property is being sold at an undervalue, raising suspicions about whether the transactions are being conducted in the company’s best interests. One particular transaction involves a company called ABC Ltd, in which both Pedro and Jonson hold substantial shareholdings. Despite opposition from Frank and Teresa, the transaction was approved at a company meeting after Pedro and Jonson used their majority voting power to pass the resolution.

Frank and Teresa have also recently learned that Pedro and Jonson have awarded themselves substantial salary increases, despite the company making only marginal profits.

Advise Frank and Teresa on their statutory rights, if any, as minority shareholders in respect of the above grievances. Do not discuss directors’ duties.

Question 2
Ethan, Felix, Grace, and Holly are directors of Fresh Bites Ltd, a company that specialises in producing and distributing ready-made meals to supermarkets and cafes. In May 2024, the board of Fresh Bites Ltd authorised Felix to explore potential acquisitions that could strengthen the company’s market position.

During his research, Felix identified Tasty Harvest Ltd, a niche company known for its organic and plant-based food products. Believing that acquiring Tasty Harvest Ltd would be highly profitable, he contacted its directors to express Fresh Bites Ltd’s interest in the company. Negotiations soon commenced. However, during these discussions, Felix obtained information suggesting that the value of Tasty Harvest Ltd was likely to increase significantly. Rather than acting solely in Fresh Bites Ltd’s best interests, he arranged for Green Feast Holdings Ltd, a company in which he was the majority shareholder, to purchase 6,000 shares in Tasty Harvest Ltd at £0.80 per share. This transaction took place on 15 August 2024.

Shortly thereafter, Felix formally recommended to the board of Fresh Bites Ltd that they proceed with the purchase of Tasty Harvest Ltd. Following negotiations, an agreement was reached in which the directors of Tasty Harvest Ltd advised their shareholders to sell their shares to Fresh Bites Ltd for £1.80 per share. On 10 December 2024, Green Feast Holdings Ltd sold all of its shares to Fresh Bites Ltd in accordance with this agreement. However, the board of Fresh Bites Ltd later discovered that Felix was the majority shareholder of Green Feast Holdings Ltd.

Around the same time, Fresh Bites Ltd entered into a long-term supply agreement with a meat processing plant that had a history of food safety violations. Despite multiple health warnings against the supplier, the directors failed to conduct proper due diligence. Shortly afterward, several customers fell ill after consuming Fresh Bites Ltd’s products, resulting in a product recall and significant damage to the company’s reputation.

Discuss whether any of the directors can be held accountable for their actions and address the potential consequences if they are found liable.