[Cheryl_kurban]

Tree’s Limited is a Company incorporated in Atlantis, engaged in the Manufacture of furniture. Trees Limited is a wholly owned subsidiary of Timber Limited, Mr. Cedar is one of the Directors on the board of Timber Limited and he owns 70% of the shares in Trees Limited. Timber Limited appoints the board of directors for Trees Limited and makes all major policy decisions. In 2006, the furniture manufactured by Trees Limited was faulty due to their use of poor quality steel supplied by Timber Limited. Consequently, Alice sustained injury when the stool, which she purchased from Trees Limited, collapsed. It has been recently discovered that Mr. Cedar knew that the steel was inferior, but ignored the advice of the company’s engineer. The board of directors and the shareholders wish to remove Mr. Cedar as director and to recover the money paid to Alice for her damages.

Discuss.

Please help me answer this question

[excon]

Hello Cheryl:

In terms of your homework, we're not going to do it for you. However, if YOU did it, and posted it here, we'll tell you what we think.

excon

[Cheryl_kurban]

OK this is How I answered the Question, Am I correct, where did I go wrong?

Tree's Limited is a company engaged in the making of Furniture, a company is similar to a sole trader or partnership, except that it exists as a separate legal entity from the owners (who are called shareholders). This means that in most circumstances, personal assets of the owners cannot be touched to pay for the debts of the company. A company is at law a legal entity i.e. a “person” with the capacity to enter into contracts, sue or be sued, quite apart from the persons who constitute the company. Companies may be incorporated under the companies Act limited to shares, unlimited, by guarantee and may be either private or public, or by an Act of Parliament.
The Private Limited Company is usually, but not always a small family business. The company must be registered with the Registrar of Companies. Under the Companies Act of Trinidad and Tobago certain documents must be filed with the Registrar of Companies. The name of the company must have the word “Limited” or the abbreviation “Ltd.” At the end of its name.
Some of the advantages of a Private Limited Company include Having legal status of their own, and hence, limited liability is enjoyed by their shareholders, Limited liability of shareholders, minimum number of shareholders is one, no maximum number of shareholders therefore more people contributing capital than the sole trader or the partnership, because the company has limited liability, it is able to attract financial capital from persons who would not otherwise be prepared or willing to invest, the founding members of the business can keep control of the company by holding the majority of shares and also restricting share transfer, the shareholders can control who owns shares in the company by placing restrictions on share transfers, greater continuity of existence despite death or bankruptcy of shareholders, greater capital potential than the sole trader and partnership, able to obtain loans from banks easier, and relatively inexpensive to incorporate in Trinidad and Tobago.
Some of the disadvantages include limited growth by the amount of capital the company can raise since shares are not sold on the Stock Exchange and cannot be advertised publicly, shares must be sold privately, capital raising possibilities are further reduced if share transfer is restricted by the company's Articles of Incorporation or by a Unanimous Shareholder's Agreement, capital can only be altered in a special statutory manner e.g. by special resolution (S.214), a copy of the companies audited accounts must be filed annually with the Registrar of Companies, they are then available to anyone to view at a small fee.
The Public Limited Company is usually a business that started as a private company and then goes public some time later to raise more capital to enable its expansion. The main differences between the public and private company are that they can advertise their shares to the general public to raise capital by issuing a Prospectus; this is a printed document which gives details about the company such as its history, profit record and future plans, also the amount of capital it is raising and information about the share offer. It's shares are freely transferable i.e. they can be bought and sold on the Stock Exchange, and the company must indicate its public status by putting the words Public Limited Company or its abbreviation “PLC” after its name.
Advantages of a Public Limited Company are; easier to raise large amounts of capital and expand as the company is allowed to appeal to the public for funds, Limited Liability for shareholders, no maximum number of shareholders, easier to obtain loans from banks, shares are freely transferable on the Stock Exchange – this encourages people to purchase shares as they know they can easily sell their shares second-hand on the Stock Market, they are able to enjoy “economies of scale” such as purchasing supplies in bulk, increased profits – although output may increase, some cost of production e.g. the rent of land or factory space, may not, their size allows them to purchase special equipment which will save in labour and expense, persons are able to specialize this leads to greater efficiency and enhance profitability and they enjoy maximum continuity.
Disadvantages however do include formation involving considerable documentation and expense, the shareholders can normally exercise little or no control over the company, the company can grow so large that it becomes difficult to manage resulting in inefficiency, the company can become very large and impersonal – people feel like they don't belong to the organization and employees are detached from shareholders and each other, these companies often have to comply with many regulations – extra requirements are often put on them by government to protect the general public or shareholders, annual accounts must be published for the general public which reduces the confidentiality of the business and the ease of share transfer on the Stock Exchange can increase the risk of take-over bids by the companies.
Trees Limited is not only a private Limited Company but is also a wholly owned subsidiary of another Private Limited Company called Timber Limited. This relationship is defined by ss. 736, 736A and 736B of the act, which sets out the following regulations.
A company is a holding company of another company if it holds a majority of the voting rights, is a member of it and has the right to appoint or remove a majority of board of directors, is a member of it and controls on its own the majority of voting rights by virtue of agreements with other shareholders, is a subsidiary of a company which is itself a subsidiary of another company.
A company becomes a Wholly owned subsidiary if the holding or parent company owns the entire share by itself or through the holding company's nominees. A holding company and its subsidiaries are collectively called a “group” The importance of this classification relates to the requirement to publish group accounts i.e. consolidated accounts which reflect the performance of the both holding company and all the subsidiary companies, financial assistance in the purchase of shares – a holding company may help in the purchase of shares in its subsidiary but not vice versa, the avoidance of provisions within part X of the Act, fair dealing by directors e.g. provisions on loans to directors do not apply when the loan is to a director of subsidiary company (C.2 of the Act), the increase in limited liability- a major company law consideration favouring the use of subsidiaries is the increased level of limited liability afforded to the group as a whole. Valuable assets such as group freehold properties might, for example, be transferred to a non-trading group company, or a high risk trading activity carried on within a subsidiary, which has no other activities.
Mr. Cedar is one of the Directors on the Board of Timber Limited and he owns 70% of the share in Trees Limited. CA 1985, s. 282 states that a public company must have a minimum of two directors and a private company at least one s. 741 defines a director as any person occupying the position of director, by whatever name called.
A Director is an officer of the company and is an agent of the company. Directors are the company's most senior level of management with the right to take part in the board of management. They are also the people appointed by the shareholders to mange the company. The act does not specify any qualifications that must be held in order to qualify as a company director however; a company's Articles may require that a director hold a specified qualification. E.g. directors of a residents management company may be required to be property owners or tenants of the particular development.
In 2006 Furniture manufactured by Tree's Limited was faulty due to poor quality steel, which was supplied by Timber Limited, this caused a customer to be damaged when the Stool which she purchased from Tree's Limited collapsed. After discovering that Mr. Cedar one of the Board of Directors for Timber Limited had knowledge of that the steel was inferior, but however ignored the advise of the company's engineer.
In order for the Director to be sued by the company, the Court would have to lift the veil of incorporation; the veil of incorporation may be lifted under statutory provision or by means of judicial discretion.
Tree's Limited is not to be held liable for the accident because they had no part in the decision for the use of the inferior steel, the director is the only one other than the engineer who had had this knowledge and it was the director who gave the directive for the use of the steel, therefore the Director Mr. Cedar would be held liable as in the case of Salomon vs. Salomon

[JudyKayTee]

Once again - somebody else will answer but I did my own homework once. I'm not about to do yours now.

I hope you're not in law school!

[LisaB4657]

First: The first 6 paragraphs of your answer are absolutely meaningless with regard to answering the question.

Second: Good try but your concepts are off. I will not tell you what the answer is but I will tell you which concepts are more applicable. First look at privity of contract. Then look at fiduciary responsibility.