You must complete THREE questions. TWO questions from Section A and ONE question from Section B.
SECTION A
You must complete two question from Section A
- ‘Modern multinational corporations are more similar to British trading corporations like the East India Company than we would like to admit.’ Critically discuss this statement.
- Many pieces of legislation were passed in the C19th to enable the company form to facilitate investment. However, it was of little interest to industrialists until the end of the century. To what extent is this statement true? Explain why.
- The law is increasingly upending the ability of MNCs to use subsidiaries to limit their exposure to risk. To what extent is this true?
- ‘Directors are intrinsically bound to serve the interest of shareholders, and possess very little scope to serve the interest of the broader community.’ Discuss.
- ‘The separation of ownership from control in large corporations is illusory.’ Is this true?
SECTION B
You must complete this one compulsory question
Alastair, Brian and Celine, who were close friends, decided to start a publishing business in order to publish scientific divulgation books that will have broad circulation and educate the general public. To that effect, they registered Enlightened Books Publishing Ltd in 2010. The company has a share capital of £40,000 divided into 4,000 shares of £10, with Alastair and Brian each holding 1,600 shares, and Celine holding 800 shares. The company adopted the model articles of association for private companies limited by shares with the following modifications:
(i) “The object of the company is to publish high quality scientific, academic and history of art books (excluding books of fiction) that are accessible to the general public. The company has the power to enter into any transaction, hold any type of property, and engage in any arrangements that are conducive to the pursuit of its objects.”
(ii) “No director shall enter into any contract on behalf of the company with a value exceeding £10,000.”
(iii) “Any shares held by Alastair, in the case that he is a director and there is a vote to remove him from his position as director, carry two votes per share.”
Alastair and Celine are appointed directors of Enlightened Books. Alastair adopts the title of “Managing Director” and uses it in his business cards but without having been appointed as such by the board. The business does well and many of their books become best sellers. In early 2020, Alastair makes Enlightened Books enter into a publishing agreement with David, an author of books of fiction, to publish his next novel. The agreement provides for an upfront payment to David of £15,000 as an advance for royalties. David is sent a copy of Enlightened Books’ articles of association. Alastair receives a bribe of £1,000 from David’s father who was anxious to ensure that David obtains a contract to publish his next novel. Also, Alastair when approached by Erica, a very successful author of popular science books, tells her that Enlightened Books is not interested in publishing her work, but that Open Minds Publishing Ltd, another great publisher, may be interested. Indeed, Erica sings a publishing agreement with Open Minds. All the shares of Open Minds are held by Georgia, Alastair’s wife, who acts as a nominee for Alastair who has the real economic interest in the company.
When Celine becomes aware of the above matters, she asks you the following questions:
(1) Is Enlightened Books Publishing Ltd bound by the publishing agreement with David?
(2) Would it be possible to remove the special voting rights of the shares that are held by Alastair (see point iii above) without his consent?
(3) Has Alastair breached any of his duties as a director?
(4) If Brian were to agree with Celine that litigation should be brought against Alastair on the ground of his breaches of directors’ duties, how could this be achieved?
(5) If Brian were to disagree with Celine and side with Alastair, what legal options would be open to Celine, and which option would be the most advisable?
