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Analysis of The Issues in the Accounting Education
Finance & Accounting
Pages 10 (2510 words)
Company Law for Accounts Name Institution Question 1- This question focuses on whether any action should be taken against Candy about the gift of Rex 2010. Candy, a promoter accepted a gift from a client without Asif and Becky (other promoters) awareness and this caused a conflict of interest which made the company not to be compensated after the client decided not to honour his contractual obligations.
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 for 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 many 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 to its articles or the pertinent law provisions. Furthermore, a company enjoys an independent existence and is used by shareholders to achieve the shareholders economic purposes. ...
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