LAW

Company Law

Company Law

Introduction

Kingdom Limited happens to be a leading furniture manufacturing company with Ben and Holly as its directors. After realizing that their business would not be able to grow any further without the injection of a sizeable amount of investment, they were fortunate to have Gaston come their way and wish to invest a considerable sum of money (£10,000) in their company. The investment is quickly followed by interest and investment from Holly's sister Poppy which is worth £25,000. With growing sums of money being injected into the company, and with more people coming on board, numerous problems have been created and differences amongst the directors creep up.

Discussion

It is important to come up with advice for all the stakeholders in order to address their concerns, and to ensure their continued commitment to the company.

Advice to Ben, Holly, Gaston and Poppy

Gaston, who invested a sum of £10,000 in the company, has been taken on board by Ben and Holly, and has seen his condition of using wood from environmentally sustainable sources accepted by the other two directors. However, Ben and Holly are apprehensive about the fact that Gaston, through his large investment would gain complete control over the company. The best possible legal advice would be that Ben and Holly should not worry about Gaston's large investment, simply because the rights of all the stakeholders are ensured through the Companies Act 2006; the minority shareholders can sue the directors through derivative action, on the company's behalf.

Furthermore, Gaston's concern of not applying Section 550 of the Companies Act 2006 can be addressed by Ben and Holly, since this very section holds that an article of the company may prohibit the directors from exercising any power of the company, such as to allocate shares of that particular class. Poppy, who does not want to become a shareholder, yet wants security for her money, can be accommodated by Ben and Holly, since she can invest her money and can have security for it without becoming a shareholder.

Advice to Ben and Holly on the issuance of shares to Daisy

Gaston has every right to be upset at what Ben and Holly did by issuing shares to Daisy, since it was agreed to by Ben, Holly and Gaston that Section 550 of the Companies Act 2006 would not be applied, which gives authority to the directors of the company to allot shares. In addition, since ...