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Jupiter Publications Ltd was formed in 1998. The directors are May, Belinda, Harry and Tim. Each director holds 15% of the shares of the Company. The rest of the shares belong to five other investors who have largely remained passive.
Tim, who had inherited all his shares in the Company, was recently appointed to the Board of Directors. Being young and inexperienced, Tim finds himself unable to cope with the pressure of running the company and is extremely stressed.
In February 2016, Peter Higgins approached the Board. He wanted to sign a publishing agreement with Jupiter Publications Ltd for a political thriller which he was writing. Peter’s book featured interns in the White House being brain washed into becoming political assassins. Peter wanted an advance fee for the book.
The Board rejected Peter’s proposal as they mistakenly believed that Peter had no track record in publishing saleable stories. Belinda honestly felt that the market was saturated with such novels and this would be an unprofitable move for the company.
May, however, knew that Peter had successfully published a few stories using different pen names. She was convinced that Peter’s book would be a big hit but kept all these facts to herself. Tim was simply happy to follow May’s advice.
May subsequently contacted Peter and persuaded him to sign a publishing agreement with her instead. Peter’s book is now a major best seller resulting in massive profits for Peter and May.
Harry, in the meantime, faced financial difficulties and was close to having to declare himself bankrupt. To avoid potential problems for the company, the Board unanimously agreed for the company to loan Harry £20,000. Harry was present but did not vote when this Board resolution was approved.
Last week the printing press belonging to Jupiter Publications Ltd was burgled. Six months earlier, Tim had been put in charge of insuring the Company’s assets. Unfortunately, he had signed the insurance form without checking the content of the policy. The insurance company claimed that the insurance policy did not cover burglary and therefore refused to pay. As a result, the company suffered a loss of £30,000.
Harry and Tim have now found out about May’s involvement with Peter. They nonetheless decided against legal action after May produced evidence to show that Peter would not have signed the publishing agreement with Jupiter Publications Ltd once he discovered that Jupiter Publications Ltd had ending lawsuits over copyright infringements. At the same time, the Board passed a resolution that no proceedings should be taken against Tim. They also called a shareholders’ meeting, which passed a resolution ratifying any breaches of duty on May and Tim’s part. May and
Tim voted in favour of the resolution.
In the context of UK company law, advise May, Tim, Belinda and Harry whether they have breached any of their administrative or fiduciary duties as directors of Jupiter Publications Ltd.
Advise Mark, a minority shareholder, of possible action against the directors.
Knowledge and understanding.
Application of the law to the relevant facts.
Ability to articulate a convincing argument.
Depth of research and ability to source for appropriate materials.
Grammar, presentation and referencing
Do not treat a problem question as an invitation to write an abstract essay about the legal issues involved in the problem.
Ensure that you have a precise understanding of the facts, since facts determine the relevance of any legal points.
Deal with one issue at a time. In part (a) each director should be advised one at a time.
Discuss the law (statutory and case law) relevant to the issue.
Cite the relevant leading authority and apply the law to the facts.
You must assess what the likely decision would be on every issue.
Please use ONLY UK CASES and examples ; essay needs to be based on company act 2006 (all possible sections- breach of sec.172; 173;174(a)(b);175; sec.260.breach of each director must be discussed individually in different paragraph!!!; to mention old common law and new statutory law; to advice Mark on how he can use derivative claim as a minority action against directors; discuss if the breach was ratified(sec 239 CA 2006) or not; to use cases such as - IDC v Cooley; Bhullah v Bhullah; O Donnell v Shanahan; Peso Silver Mines Ltd v Cropper (1966); Plus Group v Pyke; Foster v Bryant; Re Barring; Re D Jan; Norman Theodor Goddard; Lexi Holdings plc v Luqman; Bray v Ford (1896);
Rule of Foss v Harbottle !!!! Percival v Wright; Johnson v Gore Wood; discuss derivative action section - 260 (3) that its 2 stage process; etc