The objective of this report is to evaluate law related to business organisation that can assist in building suitability and legality within the business environment. These practices will be more suitable in the context of a firm by considering:
- Evaluate legislation related to breached any of administrative or fiduciary duties as directors of Jupiter Publications Ltd.
- Provide suggestions of possible action against the directors.
Law is a cluster of distinct norms, acts, legitimate orders, amendments, rules and regulations which is framed by legal bodies in order to facilitate society as well as corporate world with best services (Allen and Kraakman, 2016). Basically, their main objective is to prevent community from getting misused and trying to recognize significant people about their indispensable rights or duties. However, number of sections falls under the company's act of UK law which helps an enterprise while handling distinct complicated situations by imposing suitable act. Thus, assignment is going to highlight the case study of Jupiter Publication Ltd. In which company is gone through a major financial crisis because of various reasons. Moreover, main motive of this project is to outline the fiduciary and administrative duty of board of directors towards company success and development. Furthermore, throw some lights on giving suggestion to shareholders for taking action against directors for showing their roles towards company.
Part (a) Breaching of any fiduciary and administrative duties as directors of Jupiter publication Ltd.
In given case study Jupiter publication Ltd. Is an organization which was established in around 1998 in order to facilitate consumers with publication facilities. Their main objective is to engaged in publishing novels, reports, stories and so on. Thus, four of directors are handling this organization in proper manner and holding almost 15% of company shares. It means, shares of enterprise is equally distributed between four directors named as May, Belinda, Harry and Tim. On the other hand rest of the shares are belongs to some other investors which are not having much more connected with company (Matsushita and et. al., 2015). Furthermore, Peter Higgins is one of the successful writer and offering best opportunity to all the four directors but they are rejecting the proposal. But at the same time May is believing in decision of Peter and engaging with him silently without sharing it with any of her partners. As a result, Peter get succeeded in generating maximum revenue with his outstanding stories and attract high range of clients in minimum time frame.
Twist came in the story when Harry is going through a major financial problem due to which company get ready for paying loan to Harry for overcoming this issue. After that, few days ago printing press of Jupiter Publication Ltd. Get burgled due to which they are facing major problem because Tim who is in charge of insuring the assets of an organization. Unfortunately, he wasn’t checked the overall paper of insurance company while signing contract with them in which it is clearly mentioned that insurance organization is not liable for burglary and did not pay in this case. Thus, claim is useless because Tim was not done his work in proper manner due to which they get involved in a serious financial problem. As a result company is encountering a major trauma all because board of directors get failed in fulfilling their job role in proper manner.
Throughout the study it has been understood that all the four directors are liable for this loss because they are not fulfilling their job in proper manner neither performing any of business activities due to which company is going through this issue. According to law, board of directors are liable for all the major decision because they are having some major responsibilities and liable for administrative in order to run all the organization in proper manner. Fiduciary duties of directors highlights the major relationship of trust or loyalty between company and its members as well as other stakeholder (LAW and COOPER, 2015). Top most expectation is that person who is liable for directing an organization must perform all the activities in a faithful way without doing any discrimination amongst staff members. Along with this, they need to keen interested in management of an association as all the responsibilities are depend upon them only. Mainly, all the duties are interconnected with each other with common one as well as statutory which is laid down in companies act 2006. Apart from this, new concept emerges for clarifying the wide ranging duties of director that is named as “Enlightened Shareholder value”. Main motive of this term is to show the consideration of employees and other shareholders opinions while decision making process of directors as well as all the other staff members. Hence, some of the major duties of directors are discussed as follows:-
Duty to act within powers:- According to this element, some of the main or foremost powers are described in organization “articles of association” and these authorities are only use for some special purposes. For instance; betterment of an enterprise instead of director benefits (Aghion, Bloom and Van Reenen, 2013).
Liability to promote success of an enterprise:- It means, directors needs to consider some of the major factors while making final judgment such as; initially forecast potential long term outcomes of an association; secondly, interest of entire staff members; need to maintain company goodwill or reputation at marketplace. Thirdly, requisite to promote positive connection with employees and suppliers. Last but the not least, directors needs top treat all the members equally either having minimum shares or maximum without discriminating amongst them. It means, all these elements must be consider by director of company while promoting company as whole.
Authority to exercise independent decision:- It means, ethics says that high authority of an association needs to consider opinion and viewpoints of all the members connected with company in order to make collective decision. It shows the unity as well as aids in making correct judgement and supports in maintaining a healthy relationship with employees or employers (Teubner, 2018).
Duty not to acquire advantages from third party:- It shows the loyalty of director towards company and all the other members. For example; in given scenario May is not following this duty as she get engaged with contract of Peter in silently. Hence, it means directors of Jupiter Publication Ltd. Are not following necessary obligation due to which the get involved in a major problematic phase.
After analysing all the necessary duties and obligation of director it has been identified that success and development is totally depend upon them only because overall control is under them. Hence, if they get failed in fulfilling the necessary obligation them company might go through major trauma and consequences are really dangerous. Some of them are described as follows:-
Removal as director:- It means, if firm is not attaining their set objectives as per company terms and conditions then other members have the authority to removed person from the post of director. For example; if around 50% of shareholders are voting in against the appointed director then he/she get removed from his/her position. Hence, as per company constitution whole process is going to carried out but removal might be temporarily pending in order to conduct further investigation for accomplishing it on a permanent basis (Serra, 2011).
Interim injunction:- This procedure is conducted by tribunal of UK with the motive of halting any continuing action in breach of director obligation. It is conducted for reducing the potentiality of any upcoming financial loss as well as trying to protect any damage of an association. In fact, director is involving in a major questioning process such as; asking question for harming goodwill of company and so on.
Shareholder proceedings:- Stakeholders is taking litigation initiatives on their behalf if they are scaring for their rights but it is seen as most complex process.
Recovering financial damage:- If there is any loss in terms of monetary then director is liable to fulfil it through the court which might in the form of major financial repercussions like loss of house or any personal bankruptcy.
It means companies act of English legal system says that board of directors are circulated with various types of major duties and obligations. For instance; all the above obligation are set out in various acts such as; companies 2006, insolvency act 186, insolvency act 2000 and the new bribery act 2010. According to given case study, all the four directors are liable for company losses because they are failed in fulfilling all of their assigned duties in proper manner. As a result, company is not able to claim amount for its loss to insurance company because Tim wasn’t read the agreement correctly. Thus, other shareholders of an association have the authority to take action against these directors as they are responsible for this situation of an association. Basically, it is understood that they have breached all of their fiduciary and administrative duties as well as none of the activities are fulfilled by them. Meanwhile, all of them is going to encountered issues in various terms such as; financially, legally, socially henceforth (Betts, 2011).
Instead of all these things, shareholders are also involving in taking some action against board of directors of Jupiter Publication ltd. As they get failed in accomplishing business operations due to which various losses are faced by company such as; in monetary terms, plant or machinery, might be interest of investors are also dissolved, employees are losing their interest due to minimum profit, image of an association is getting affected and so on. However, number of things are getting change at workplace because of which company is encountering various issues. Hence, number of actions must be taken by governing bodies for resolving these kind of problems in order to offer best opportunities to overcome emerging issues so that company can rebuild their enterprise. For example; fire the board of directors, remove all the powers of directors, charge fine for losses and so on. It shows that legal bodies are involving in framing number of rules and regulations for preventing staff members as well as overall company from getting misused (Garoupa, Gomez-Pomar and Grembi, 2013). Corporate companies are following all the necessary terms and conditions while running their business entity in order to attain their set objectives or targets. After analysing the situations other authority and shareholders of association needs to take necessary actions for controlling company loss in appropriate manner. It is essential to punish the directors as per companies act as well as considered various other laws and acts which is applicable on particular situations for overcoming distinct issue. Board of directors are liable for number of job role which shows that almost entire company is liable on them due to this changes is becoming mandatory at workplace for improving the circumstances.
Last but not the least one thing is determined that alteration is necessary part of an organization because time changes due to fluctuation in various other factors such as; consumer choices or preferences, exchange rate, currency rate, economic condition of nation henceforth. It means, company needs to run as per situation instead of following the previous procedures of running business. It means, don’t depend fully on directors for every business activities. In fact, it is essential for employees to make decision as per situations and demands in order to cope up with numerous complicated situations. Thus, if all the staff members are involving in managing entire institutions as well as involving in judgment process then it become easy for company while attaining their set of targets in proper manner (Schermers and Blokker, 2011). Jupiter publication Ltd. Also needs to focus on reformation by taking help from their whole staff members and other investors whomsoever are partially involved in an organization. As a result they get succeeded in overcoming business problems in a defined time frame by satisfying needs of clients.
Part (b) Suggestion given to Mark (minority shareholder) possible action against directors
In given case study Board of directors are identifies as a faulty in every situation as they get failed in accomplishing their business activities due to which company was going through major problem in various manner. All the other shareholders come closer for organizing a meeting in order to discuss each or every aspects for understanding hidden matters in effective way. Their main motive is to control loss of selected firm by taking some major initiatives which is beneficial for overall company. Mainly, shareholders are involving in distinct activities for acquiring correct information and data in order to identify the real culprit which is liable for entire loss (Leeson, 2012). After understanding that board members are responsible for all the activities as well as their careless behaviour then shareholders have the authority to take action against directors in various manner so that loss might get recover and protect company from getting dissolved. Thus, minority shareholders are having numerous of rights in case majority shareholders are conducting wrongful activities or might be failed in fulfilling their objectives. Basically, they are falls under quasi-partnership because minority shareholders are having limited number of shares which are either employees or any other trustable member of an association. Hence, it has been understood that minority shareholder of Jupiter publication ltd. Must have right to take legal action board of directors because they have done mischief which is really not acceptable due to high level of complexity. Thus, some of the necessary steps that might be took by minority shareholders are described below:-
Authority to sue:- Initial step is to involved legal bodies in organizational matters for clearing doubts in proper manner by hiring legitimate members for understanding each or every aspect in best manner. However, it helps an enterprise by highlighting all the necessary terms and conditions which is applicable on particular situations. It means, minor shareholders are also having their shares due to which they are also consider as a part of an organization. Hence, right to sue board of directors whomsoever are more liable for loss (Burley ,2017).
Conduct meeting:- As per this element, shareholders might have option to conduct a conference of all the major or minor directors for acquiring opinion of all the members in order to make correct decision at workplace. However, it helps in giving final judgment in proper manner so that chances of any partiality or mistake get controlled. Basically, meeting is also another best technique to identify the matter in better by asking the direct questions to board of directors.
Investigation programme:- it means company needs to identify the hidden matters for understanding the reason behind careless behaviour of directors in order to make sure that it will not repeat again. Along with this, supports in clarifying each or every aspects in best way so that confusion will not present between any staff members.
Remove the power of directors:- It means snatching of authority of higher level in order to make them realise about their big mistakes as well as transfer all the shares to other member. It means, punish them by recovering amount by sealing their house, personal properties and so on.
However, as per companies act 2013 minority shareholders are not having that much of power because they are having limited shares as they are not able to control overall company. But still around 10 to 15% authorities are still under minor shareholders. Thus, as per that authority they are having right to take action against major shareholders if they are not performing their assigned job role in appropriate manner. Along with this, must demand recovery by them in order to minimize organizational losses which is influencing overall turnover of the firm. Jupiter publication ltd. Needs to take actions for improving their current situations by managing things in best manner. It has been understood that legal bodies are indispensable for success of every enterprise because they are coming with unique norms and restriction which is applied at workplace so that every individual can accomplish their business activities in better way. Along with this, manger requisite to focus on specific elements while taking initiative against board of directors. For example; must have proof of every mistake, turnover of company, highlight the difference that is identified in between project performance and actual. Comparison process is playing eminent role in understanding the each or every aspects in order to implement changes at workplace (Stewart and Sanchez Badin, 2011).
Hence, in the entire case study companies act and law is playing crucial role because it helps an association in various situations such as; showing the major administrative duties of directors that aids in understanding their power and so on. However, these necessary information or data is helpful for company while making final decision that is taken by minor shareholders while punishing them for their major mistakes. It’s all about management so that chances of losses get controlled and managed in proper manner. As a result current situations of an association get improved in suitable manner without harming other rate of interests.
From the above report it has been concluded that running or handling of business organization by considering necessary terms and conditions is not an easy task due to the presence of maximum complexity in legal policies. Main motive of this assignment is to suggest company to how to overcome business problems with the help of legal acts by showing necessary rights and duties of specific organizational members. For example; board of directors are having full authority to control entire association and need to be very attentive by taking necessary steps. Along with this, project was showing that minor shareholders is also having numerous of rights and authority to sue major one if there is identification of any wrongful activities because they are also having some amount of shares in an enterprise. Hence, project helps in understanding the fiduciary rights of directors and responsibilities towards company success.
You may also like this: