Case Study: Lemon Limited
Individual assignment
Introduction
The case in this assignment is mainly talked about the issue of directors’ rights and duties and minority protection in the company.
The case states that Ko invests $3 million as a joint venture with the partnership formed by Ho and Lo. They formed a new company named Lemon Limited. All the three people are directors and subscribe the same amount of shares. Hence, the profits and losses are also shared equally. After running for five years, Ho and Lo decide to acquire more retail outlets to generate more profit without consulting with Ko. Later, Ko learned that she cannot receive the salary due to debt-servicing burden caused by the business expansion. Capital growth of her investment substitutes the profit …show more content…
Since all of them having shares of the company, as the directors, it is their right to exercise the voting right in general meeting for resolution. In this case, an ordinary resolution would be enough to make decisions on business expansion. That is to say, when more than 50% votes agree, the business expansion can be implemented. Since both Ho and Lo agree with the decision, it indicates that more than 50% votes are supporting the business expansion when conducting general meeting. Ko has negative control in the case. Although, whether Ko agree with this decision or not, the final result would be expanding the business. It is her right to vote for the resolution in general meeting. However, Ho and Lo just negligent Ko and they breach the fiduciary duties of directors. They cannot constraint Ko’s voting right by making a decision without consulting with …show more content…
According to the case Foss v Harbottle , it indicates the court policy that the court will not involve in the company’s internal affairs. Under majority control principles, Ko cannot bring her requirement to the court as the requirement can be ratified in the general meeting. However, to protect minority like Ko, there are exceptions to the rule in Foss v Harbottle at the same time and also the unfair prejudice action in New Companies Ordinance. Under some circumstances, single member can petition to the court to grant remedies. In the case, Ko’s situation satisfy those circumstances and she can use them to protect her
Introduction
The case in this assignment is mainly talked about the issue of directors’ rights and duties and minority protection in the company.
The case states that Ko invests $3 million as a joint venture with the partnership formed by Ho and Lo. They formed a new company named Lemon Limited. All the three people are directors and subscribe the same amount of shares. Hence, the profits and losses are also shared equally. After running for five years, Ho and Lo decide to acquire more retail outlets to generate more profit without consulting with Ko. Later, Ko learned that she cannot receive the salary due to debt-servicing burden caused by the business expansion. Capital growth of her investment substitutes the profit …show more content…
Since all of them having shares of the company, as the directors, it is their right to exercise the voting right in general meeting for resolution. In this case, an ordinary resolution would be enough to make decisions on business expansion. That is to say, when more than 50% votes agree, the business expansion can be implemented. Since both Ho and Lo agree with the decision, it indicates that more than 50% votes are supporting the business expansion when conducting general meeting. Ko has negative control in the case. Although, whether Ko agree with this decision or not, the final result would be expanding the business. It is her right to vote for the resolution in general meeting. However, Ho and Lo just negligent Ko and they breach the fiduciary duties of directors. They cannot constraint Ko’s voting right by making a decision without consulting with …show more content…
According to the case Foss v Harbottle , it indicates the court policy that the court will not involve in the company’s internal affairs. Under majority control principles, Ko cannot bring her requirement to the court as the requirement can be ratified in the general meeting. However, to protect minority like Ko, there are exceptions to the rule in Foss v Harbottle at the same time and also the unfair prejudice action in New Companies Ordinance. Under some circumstances, single member can petition to the court to grant remedies. In the case, Ko’s situation satisfy those circumstances and she can use them to protect her