A promoter main duty is to offer sufficient funding or capital for the company and to ensure that all the formalities required by the statute of incorporation are met. The promoters have a fiduciary duty to the company and its shareholders. The promoters cannot use secret corporate information for their personal gain or advantage. Becky and Asif can sue Candy to reclaim the gift of Rex 2010 for breach of fiduciary duties. Promoters normally owe fiduciary duties to the company that they are forming. They should thus disclose any profit they are making from the promotion either to the company shareholders or to an independent board. The company may sue a promoter for disgorgement of the profit and for rescission in case there is a breach of duty. Becky and Asif can also replace Candy as a shareholder because the gift of Rex 2010 created a conflict of interest between Candy and the company. When shareholders have a conflict with the decision taken by one of the employees, he or she can be changed or replaced in accordance with its articles or the pertinent law provisions. Furthermore, a company enjoys an independent existence and is used by shareholders to achieve the shareholder's economic purposes. The company can thus be used as a means of replacing or seeking compensation from Candy because she created a risk of loss of compensation for the company. The gift was a business courtesy- it was a gift from a client. Before accepting the gift, Candy should have informed the other partners and not kept the gift for personal use, instead, she created a conflict of interest by having a business relationship with Yienshiu. The most imperative character of Candy’s job was not to acquire a secret gain at the expense of the company. Candy-a promoter- had a legal obligation not to make secret proceeds from promoting the company without the consent of the other promoters (Tengku Abdullah v Mohd Latiff bin Shah Mohd, 2 MLJ 265). She also had the legal duty of disclosing to the Company about the gift by Yienshiu. She was not transparent in her dealings with the other shareholders and thus did not remain true to her fiduciary duties (Fairview Schools Sdn. Bhd v Indrani a/p Rajaratnam (No1) 1 MLJ 110). The rights of the two shareholders-Becky & Asif- were harmed by an act done to the company, it is to the company that they should look to institute appropriate action because though the company and shareholders suffered the same wrong, it is only the two shareholders right that was infringed. Candy was seen by Becky and Asif as a fiduciary of the company because her relationship with the other shareholders was supposed to be one of confidence and trust. Candy owed legal and ethical duties to the company as well as to Becky & Asif which she did not honor. She did not exercise due care while carrying out her duty and did not subordinate her personal interests to the organization of the company. Candy abused her position of reliance at the company in spite of the fact that Becky & Asif expected her to devote her full working efforts and time to the interests of the company and to stay away from any doings that would conflict or distract the company interests.
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“Company Law and Virtue Ethics Essay Example | Topics and Well Written Essays - 3000 Words”, n.d. https://studentshare.net/finance-accounting/2639-company-law-for-accounts.
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