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00002655
14.11.2013

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Marker’s comments and second marker’s comments if appropriate Westminster International University in Tashkent
2013-2014 Academic Year, Semester 1 Written Assignment

Environment of Business BUZB400
ID #00002655

Table of Contents
Written Assignment on Happiness plc ...................................................................................................... 2
Reference List ........................................................................................................................................... 7
Appendix ................................................................................................................................................... 8
Appendix 1 Pergamon Press Ltd v Maxwell [1970] ............................................................................ 8
Appendix 2 Musselwhite v C. H. Musselwhite & Son Ltd [1962] ........................................................ 9
Appendix 3 Re Pearce Duff and Co Ltd [1960] ................................................................................. 10
Appendix 4 Teede and Bishop Ltd [1901] .......................................................................................... 11
Appendix 5 Southern Foundries Ltd v Shirlaw [1940] ...................................................................... 12
Appendix 6 Bushell v Faith [1970] AC 1099 ..................................................................................... 13
Appendix 7 George Newman & Company Ltd [1895] ....................................................................... 15
Appendix 8 Acquiescence of Short Notice (Sample) ......................................................................... 16

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Westminster International University in Tashkent
2013-2014 Academic Year, Semester 1 Written Assignment

Environment of Business BUZB400
ID #00002655

Written Assignment on Happiness plc
To start with, a public limited company which is operating in the UK with more than a thousand stockholders and six directors, Happiness plc, has been facing financial hardship over the last several years. Mr Smith, leader of this company wants to confront aforementioned pecuniary adversity with enthusiasm and therefore has formed an action plan for the upcoming business days. Furthermore, the action plan involved calling an extraordinary general meeting of shareholders in which 100 stockholders will be taking part without being awake to the agenda of the meeting so as to broach following issues:
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Making changes into the Articles of Association;

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Discharging the other six members involved in the Board of Directors;

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Extend his authority till his mortality;

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Tripling his wages considering the seriousness of the duty and heavy workload

This essay will delineate the legal issues concerned with the aforesaid possible situation by referring them to the English Law. Moreover, the scenario provided above will be bolstered later on with some interrelated legal cases in order to analyse it precisely.
As far as the legal issues involved in the case above are concerned, one can find them often from distinct lawful viewpoints. Firstly, Mr Smith, chairperson of the company decided to call general meeting under the circumstances and this situation is regarded as legal in accordance with CA
(Companies Act) 2006, s 302 where the directors of a company has a right to set up general meeting of the company (Pergamon Press Ltd v Maxwell [1970]) (see Appendix1).
Secondly, the secretary of Mr Smith was asked to dispatch the notice of general meeting only to
100 shareholders of the company. However, s 310(1) CA 2006 says that notice of a general meeting must be sent to each member of the company along with all directors of the board and company’s auditor (s 502(2)(a) CA 2006).The same situation was observed in 1962 with the company dubbed
Musselwhite & Son Ltd operated in the UK (Justis Publishing Ltd., 2013). More clearly, the case
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Westminster International University in Tashkent
2013-2014 Academic Year, Semester 1 Written Assignment

Environment of Business BUZB400
ID #00002655

concerned with a small family company and with its shareholders, two of the stockholders decided to sell their shares to another for a particular price over a period of years. The sellers transferred their shares with the company’s solicitor yet still remained on the register till payment had been deposited to the bitter end. At that relevant time a general meeting of the company was organized without sending notification to those vendors as shareholders. Eventually this legal issue was evaluated according to CA
1929 c. 23 sch. where an omission of notice to the members entitled to be aware can invalidate the proceeding of the meeting (see Appendix2).
Thirdly, the upcoming extraordinary general meeting has also been planned to carry in three days after sending the notices to shareholders. Considering how the resolution of meeting is special and in compliance with s 312(1) CA 2006 Mr Smith should have sent the notice of EGM to the shareholders not less than 28 clear days before the meeting or/else assuming the circumstance of the company the special notice of meeting must be sent at least 14 days before the meeting (s 312(3) CA
2006). Besides, under CA 2006, s 307(5), majority of the members of a company who have a right to vote and attend the meeting and holding no less than 95 % requisite, must acquiesce in the shorter notice and the acquiescence of short notice should be as the sample provided in Appendix (see
Appendix8). To take an example, all members of company who were involved in the following case,
Re Pearce Duff and Co Ltd [1960] agreed to short notice even though most of them did not attend the meeting and later on it was regarded as valid in writing (The Hindu Business Line, 2000) (see
Appendix3).
Fourthly, the time when sending memos to the members of the company the agenda of action plan was not attached to the notification which means shareholders were oblivious to the resolutions of the meeting, even though the section 311(2) in CA 2006 clearly states that notice of a general meeting must provide adequate information so that any member of the meeting determines whether he or she will attend or not. This condition of the scenario can be witnessed in the following case called Teede and Bishop Ltd [1901] in which the resolution took part in the day of meeting did not match the
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Westminster International University in Tashkent
2013-2014 Academic Year, Semester 1 Written Assignment

Environment of Business BUZB400
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agenda sent with the notice epistle (Saharay, H., 2008). As a result, chairman of the company, J. S.
Bishop was not able to pass the voluntary winding up of the company as he had sent in the notice (see
Appendix4).
As for the fifth legal matter, it is directly corresponded to the 21st section of the CA 2006 where an Articles of Association can be amended by announcing special resolution. The first reason for this is that Mr Smith wanted to enhance the Articles of Association of the company in order to enable Board of Directors to eschew languishing at such a financial hardship. If one looks back on the history of cases evaluated in accordance with the English Law, he/she will find almost the same situation,
Southern Foundries Ltd v Shirlaw [1940], connected with the alteration of the Articles of Association.
To go further, Mr Shirlaw – the director of Southern Foundries – was appointed as the managing director for this company for ten years according to the contract which was included in the articles.
Later, Federated Industries took control of Southern Foundries. By using voting power of theirs, they amended the articles and Mr Shirlaw was immediately dismissed from his position while his contract was also terminated before it expired. Consequently, The House of Lords blamed Federated Industries for breaching of a contract outside of the articles (see Appendix5).
The next issue to be dealt with in the meeting was dismissal of six other directors of the Board and by doing so Mr Smith planned to become the only director of the company. Besides, there is a section which precisely states that a company has a right to remove a director at the meeting by ordinary resolution before his or/else her expiration period of office in spite of any contract made between them and company (s 168(1), CA 2006). However, under CA 2006, s 154 (2), any public company should have at least two directors. Additionally, the resolution, planned to dismiss a director under the 168th section mentioned above, has to be sent to the intended director in compliance with s
169(1) CA 2006. In former times, namely in 1970 the Court of appeal and the House of Lords witnessed nearly similar case remained in the UK Company Law’s history with name of Bushell v
Faith [1970] AC 1099 (Alan, D. and John, L., 2009). A small family company called Bush Court
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2013-2014 Academic Year, Semester 1 Written Assignment

Environment of Business BUZB400
ID #00002655

(Southgate) Ltd had shareholders, Mr Faith and two sisters of his, Mrs Bushell and Dr Bayne.
Considering s 184 CA 1948 (now s 168 CA 2006) the two sisters tried to discharge Mr Faith from the
Board of directors. According to the Articles of Association of the company, viz. under Article #9, during removing a director by a resolution, each share of that director would be equal to three votes and
Mr Faith was able to outvote with 300 votes his sisters who held just 200 votes. As a result, The Court of Appeal and The House of Lords regarded Mr Faith as “irremovable” (see Appendix6).
Where the seventh legal matter is concerned, Mr Smith wanted to extend his authority till his mortality. Indeed, if the director of a company provides the guaranteed term of his employment with the company where he is director within the subsidiaries and group of that company longer than two years; if he gets the members’ approval this director’s long-term service contract will be valid (s 188
CA 2006), yet the company defines that the provision is breach then it will become void and company will terminate the contract at any time by providing with the concrete notice (s 189 CA 2006).
Lastly, Mr Smith wanted to triple his wages and to get approvals of the shareholders considering the seriousness of the duty and heavy workload and at the same time this legal issue creates another non-legal issue in which Mr Smith expected increased salary from the company, notwithstanding financial adversity the company has been experiencing. Conversely, if the dismissal of other directors occurs, there can be some chances for tripled salary and demanding for increased payment will be considered normal. According to s 422 (1) CA 2006, the payment report of the directors has to be approved and signed by the board of directors and/or the secretary of the company.
If the approval of the remuneration report is not compatible with the CA, it will be considered as a transgression and will be penalized. For instance, George Newman – the director of George Newman &
Company Ltd. – was blamed for bilking the money of the company in amount of £10,000 which was the difference of business he carried with lands of company (UK Parliament, 1989). As a result, he became the servile member of the company for five years without getting any payment for work-done
(see Appendix7).
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Westminster International University in Tashkent
2013-2014 Academic Year, Semester 1 Written Assignment

Environment of Business BUZB400
ID #00002655

Finally, as a conclusion, one can realize from above provided scenario that the chairperson of
Happiness plc, Mr Smith has committed both legal and illegal actions from the point of view of
Companies Act 2006. On one level those decisions were taken so as to improve economic condition of the company, on another level the meeting, in which those issues had to be tackled, may be regarded as invalid and all proceedings taken in the meeting can be abrogated later on by other directors of the board and shareholders of the company. In order to reprieve this polemical matter, Mr Smith is highly recommended to behave himself in a tractable way; make decisions deferring other members of the company; obey Companies Acts 2006 and The Model Articles of Association in SI 2008/3229.

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Westminster International University in Tashkent
2013-2014 Academic Year, Semester 1 Written Assignment

Environment of Business BUZB400
ID #00002655

Reference List
Alan, D. and John, L., (2009). Company Law. 5th ed. New York: Oxford University Press Inc., pp. 281282.
Denis, K. and Sarah, R., (1995). Business Law. 4th ed. Glasgow: Bell and Bain Ltd., p.138.
Justis Publishing Ltd., (2013). Musselwhite v C. H. Musselwhite & Son Ltd 1962. [online]. Available at: [Accessed on November 9, 2013].
Saharay, H., (2008). Company Law. 5th ed. New Delhi: Universal Law Publishing Co. Pvt. Ltd., p. 369.
The Hindu Business Line, (2000). It's a matter of agreement. [online]. Available at :< http://www.thehindubusinessline.in/2000/05/25/stories/042501ch.htm> [Accessed on November 11,
2013]
THE LONDON GAZETTE, (1901). Teede and Bishop, Limited. [online]. Available through: [Accessed on November 10,
2013].
UK Parliament, (1989).

THE CASE OF GEORGE NEWMAN.[online]. Adopted from :<

http://hansard.millbanksystems.com/commons/1895/mar/28/the-case-of-george-newman>

[Accessed

November 11, 2013].
Acts
The Companies Act 2006
The Model Articles of association in SI 2008/3229

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Environment of Business BUZB400
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Appendix
Appendix 1 Pergamon Press Ltd v Maxwell [1970]

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2013-2014 Academic Year, Semester 1 Written Assignment

Environment of Business BUZB400
ID #00002655

Appendix 2 Musselwhite v C. H. Musselwhite & Son Ltd [1962]

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2013-2014 Academic Year, Semester 1 Written Assignment

Environment of Business BUZB400
ID #00002655

Appendix 3 Re Pearce Duff and Co Ltd [1960]

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Appendix 4 Teede and Bishop Ltd [1901]

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Appendix 5 Southern Foundries Ltd v Shirlaw [1940]

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Appendix 6 Bushell v Faith [1970] AC 1099

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2013-2014 Academic Year, Semester 1 Written Assignment

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2013-2014 Academic Year, Semester 1 Written Assignment

Environment of Business BUZB400
ID #00002655

Appendix 7 George Newman & Company Ltd [1895]

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Environment of Business BUZB400
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Appendix 8 Acquiescence of Short Notice (Sample)

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2013-2014 Academic Year, Semester 1 Written Assignment

Environment of Business BUZB400
ID #00002655

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