Flashcards in Not in statute book - must learn Deck (29):
What is unfairly prejudicial conduct?
Re Guidezone Ltd (2000) - reasonably bystander test
Re British American Corp
If a D is also a SH of another company, any transaction made with that other company will be considered one which the D has an indirect interest in for the purpose of S177
Purpose and function of Shareholder Agreements
Can agree things in SH agreement which is out of scope of articles, particularly as company cannot limit its statutory powers in its articles
Companies act will therefore prevail over a SH agreement i.e. removing Ds, but signatory can still claim for breach of contract under the shareholder agreement
If a company is a party to the SH agreement, can only sign up to the non-restrictive provisions
SH put things in agreement that would not come under S33 (membership rights)
What is wrongful dismissal? When can it be claimed?
When employer dismisses employee in breach of employment i.e. no notice or PILON
6 year limitation period
Remedy - damages for breach of contract
What is unfair dismissal? When can it be claimed?
Employee was dismissed and reason and procedure was not fair
capability & conduct are legit reasons
Procedure in line with ACAS procedure
3 month limitation period and must have been employed for two years
Remedies - reinstatement, reengagement, compensation
Basic award - age x yrs of service x pay
Compensation - actual loss suffered
Extra 25% if don't follow ACAS procedure
When are restrictive covenants enforceable?
Restraint of trade clause void not enforceable unless protecting legitimate interest of company, and goes no further than reasonable required to do so
3 types of restrictive covenant?
Non-competition, non-dealing, non-solicitor
What is the blue pencil test?
Will not rewrite a restrictive covenant to make it enforceable. Will strike out an unenforceable part but whats left must make independent sense to be enforceable
Will enforce at minimum level required to protect business legit interest
What factors are used to assess the reasonableness of a restrictive covenant?
1) Duration - usually not valid over 12 months (not confidentiality)
2) Geographical scope - not too wide
3) Needs / interests of the business i.e. global?
3) Duties of employee - i.e. client contact?
4) Interest the business is trying to protect - will a lesser restriction suffice? Is the clause wider than necessary to protect legit interests?
When happens to the enforceability of the restrictive covenants if the employer breaches the employment contract? (i.e. dismissed without following correct notice period).
Restrictive covenant will be void as employer has repudiated the contract
N.B. this is a reason why contracts have PILON clauses - prevents breach if do not give correct notice period
Settlement Agreements between employer and employee
Right for employee to bring later action after settlement agreement executed cannot be excluded unless S203 ERA is fulfilled.
S203(3) ERA 96
Employee not restricted from bringing a claim under the ERA unless settlement agreement:
1) is in writing
2) relates to a specific claim
3) employee has received independent legal advice
4) advisor is covered my indemnity insurance
5) advisor is listed and named
6) states the agreement complies with S203
What type of clause needs to be in a director's service contract which prevents the director from bringing a claim of wrongful dismissal in the event that the director is removed from position?
Needs to be a clause stating that if the exec ceases to be a director, his/her employment will still continue and the agreement shall continue to be void.
When is a restrictive covenant likely to be unenforceable?
If the term is over 12 months and if it restricts the employees employability.
What other clause is sometimes a preferable alternative to restrictive covenants in an employment / service contract?
A garden leave clause - this prevents an employee from working anywhere else for certain amount of time, but cannot access the office and confidential information etc so prevents them taking customer information, supplier information, long range plans with them
> garden leave clause may be possibly unenforceable in fast paced industry
What things should a settlement agreement include?
Should restate the restrictive covenants - as this agreement is negotiated they are more likely to be enforced
Should not restrict future claims do not now about yet i.e. P.I., pension rights etc
Include agreed reference in schedule
Usually includes clause requiring buy-back of shares - do not want angry minority SH
Pedley v Inland Waterways
Directors are not bound to be a removal of director resolution on a GM agenda if they have received notice under S312
Is S303, clear days under S360 or not? Is S312 clear days?
S303 is NOT clear days, but S312 IS.
In practice, what can a solicitor do to make removing a director under S168 as quick as possible?
Send S303 and S312 notices on the same day.
When removing a director from office, and the director is also a shareholder, must always check the articles for what type of clause, and why?
A Bushell v Faith clause - which gives a director weighted voting rights in the situation where SH's have sent notice under S168, which means that SH may actually be unable to pass OR with required majority.
Can a written resolution be used to remove a director?
No. (But special notice can!)
What does convening a GM refer to?
Convene means to call the meeting, rather than to hold.
Applying rule in Clayton's case, payments into bank always discharge the oldest payments first
Overtime take money out of overdraft, are advancing new money
Re MC Bacon Ltd
Preferences - desire to prefer is subjective test - must want to put creditor in a better position
Undervalue transaction - security isn't as doesn't deplete assets (unless no consideration - Hill v Spread Trustee)
Re Produce Marketing Consortium
Wrongful trading cannot be relieved by the court under S1157
Under wrongful trading and reasonably diligent person test, court will apply objective or subjective test for that standard?
Whichever is highest
Defence for fraudulent trading?
Believed things would get better - genuinely believed would trade out
Order of priority on winding up?
1) Fees for realising fixed charge assets
2) Fixed charge holder
3) L's other costs and expenses
4) Preferential debts
5) Ring fenced fund
6) Floating charges
7) Unsecured creditor
8) Interest on preferential