Company law

In the case of Samantha, it can be said that her right was violated. Holding 5% share to a company is something that entitles a person to several responsibilities and as well as rights and liabilities. Therefore, as a member and shareholder of the company, Samantha has the right to know what is happening inside the company, as a shareholder, especially in matters that involve decision making.

First and foremost, it is Samantha’s right to know and take part of the company’s decisions. A large amount of the company’s asset was at stake therefore, every shareholder must be well informed and consulted. In these cases, a meeting among shareholders and board should be made. However, in Samantha’s case, she was not even aware of such decision was made and if there even was a meeting done regarding the matter. She only knew about the plan after the decision was made.

The decision made by the Filo Ltd. to purchase £450,000 worth of premises from Pastry Products Ltd was solely made by two persons; Richard and Anthony who both own 22% shares in the said company. Upon being uninformed regarding the decision of the board, the board was also unable to support their decisions that the said action was necessary for the whole company.

Since Samantha was not part of the board and therefore not entitled to make such decisions, being a shareholder, she deserves an explanation on issues of which she found questionable. Samantha deserves an explanation but the board itself was unable justify their decision. Thus, it creates a notion that the decision was indeed to benefit the shareholders Richard and Anthony as well as Pastry Products Ltd rather than Filo Ltd. Thus, there is a great chance that there had been conspiracy within the company.

On the other hand, there is less that Samantha can do since she was not a member of the board like Anthony and Richard. Indeed, she has a 5% share to the company which can be considered a necessary for the company. However, the ones who are really responsible in decision making was the board of which Samantha was not included. Thus, it is only the responsibility of the board to inform Samantha about the decision and to answer her questions if she has doubt about the decision, something that the board was unable to do.

The board should be able to justify their decisions and provide proofs for the necessity of the decision otherwise, it could lead to decision that the members of the board are not capable to handle the company and thus, must be replaced.

Another factor that is to be considered is that Richard and Anthony hold 26% share to the company which totals to 52%. Although in some companies, every shareholders is entitled a single vote count in which the majority of persons are able to make the decisions in the company.

If this is the case then Samantha was also denied the right to take part in making decision however, this is not the case. Anthony and Richard would only need 50 + 1% of the company’s total share in which, adding both Anthony’s and Richard’s share, would be sufficient. Thus, the approval of both Richard and Anthony would be sufficient to make a decision in the company. Therefore, the decision may have followed the proper proceedings but the validity and necessity of the decision cannot be justified since it was evident that it was intended for the benefit of Pastry Products Ltd.

On the other, the board still has the power to alter any decision that is not in line to the goal and benefit of the company, i.e. regarding decisions that promote individual interests rather than that of the company’s like in the case of Filo Ltd.

Therefore, although Anthony and Richard are able to make a great impact on the decision of the board, all the members of the board are entitled to take part in the decision making process and thus, they can change course of actions if these were really not for the benefit of the company. One may say that the decision was valid since the board approved it but the fact that the board itself was not able to justify the decision made proves that it was indeed not for the company but rather for Anthony and Richard.

Since Samantha was not pleased with the decision considering the fact that she had talked to the board but was not given enough reasons regarding the decision and the fact that she still owns a share in the company, she may sue those who are responsible if she wanted to. This is not because Samantha’s idea was taken for granted in the decision making process but rather, because the board was not able to justify its actions that Samantha sees questionable. However, doing so would need evidence to prove that the decision was solely made for personal interest and that conspiracy was present in the approval of the decision.

On the other hand, Samantha can also just leave the things as they are. The decision is still hers on whether to sue those responsible or just go with the flow. However, letting things as they are in the company and doing nothing would be a waste of time, effort and resources since the decisions do not aim to uplift the company’s interest but that of others. Such cases will only result in losses and eventually bankruptcy.

Thus, there would be no point in maintaining your share in a company who aims to benefit other company’s rather than itself. Therefore, why have anything to do with a company that is likely to fail in the end. Samantha may also just sell her stock to those interested. Selling her share would probably be one course of action that Samantha could take because similar cases are likely to appear in the future. Thus, it is better if Samantha would just leave the company for her own sake.

Reference

Sharp, W. J. (1985). Companies Consolidation Act 1985. Retrieved August 24, 2008 from

http://www.opsi.gov.uk/acts/acts1985/pdf/ukpga_19850009_en.pdf

The UK Statute Law database. (No Date). Companies Act 1985. Retrieved August 24, 2008 from

http://www.statutelaw.gov.uk/content.aspx?LegType=All+Legislation&searchEnacted=0&extentMatchOnly=0&confersPower=0&blanketAmendment=0&sortAlpha=0&PageNumber=0&NavFrom=0&parentActiveTextDocId=2975166&ActiveTextDocId=2975808&filesize=5552