Company law tutorial question
year 3 Semester1.
1."Under the ordinary rules of law, a present company and a subsidiary company, even a 100 per cent subsidiary company, are distinct legal entities and in the absence of an agency contract between the two companies, one cannot be said to be the agent of the other. This seems to be clearly established by the rule in Salomon v. A. Salomon & Co. Ltd."
2."The principle laid down in Foss v. Harbottle continues to create a significant obstacle to minority shareholder action."
3. Layton Co. Ltd., private company with Articles in the form of Table A, has in its memorandum, the following clauses: "The objects for which the company is established are:
(i) to manufacture, process and distribute computer software and CD Roms; (ii) to purchase and hold property, to borrow or to lend money, and to dispose of funds or property owned by the company; and (iii) to do anything that is in the opinion of the directors necessary to make profits from the use of the assets of the company." Geoff and Marcia, two of the directors of Layton Co. Ltd., own approximately 20 percent of the shares in Layton Co. Ltd.
Stacy, a director, unbeknown to the board of directors, purports to enter into a contract with High State Developers Ltd., "on behalf of Layton Co. Ltd.," for the construction of a health spa for stressed executives. In order to secure machinery, Stacy writes to Health Fanatic Inc., on Layton Co. Ltd.'s stationery, offering Health Fanatic Inc. the contract to provide technical training for any staff employed by the spa. Health Fanatic Inc. accepts the offer. Layton Co. Ltd., now refuses to build the health spa due to a depression in the market and is consequently not in need of Health Fanatic Inc.'s services.
4. Tamara and Kathy have been conducting...
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