Two
cousins, Sean and Rochelle, decided to transfer their partnership
business, which supplies commercial cookware to restaurants, to a
newly formed company. They registered Cookwell Ltd as a limited
liability company and arranged for it to purchase the partnership
business. Shares in Cookwell Ltd were allotted equally to Sean and
Rochelle. Both were also appointed as the company’s
directors. Neither was appointed managing director although in
practice, day-to-day decisions on running the business are left to
Sean. Sean’s ex-wife, Delilah, was appointed as the
company’s accountant.
Recently,
Sean saw an acrylic painting by a well-known New Zealand artist for
sale for $150,000. He thought the painting was particularly suitable
for the board room and that the price being asked was a bargain.
There was no time to contact Rochelle so Sean decided to go ahead
with the purchase without informing him. The vendor insisted that
Sean sign a written agreement. Rochelle, on learning of the purchase,
is upset and seeks your legal advice.
a)
Advise Rochelle whether Cookwell Ltd can refuse go ahead with the
purchase IF
–
Sean signed the agreement as ‘director of Cookwell Ltd’
with Cookwell Ltd stated to be the purchaser; and
–
CookwellLtd’s constitution contains no special provisions
dealing with corporate capacity.
b)
Now assume that CookwellLtd’s constitution has a provision in
it requiring all contracts over $100,000 to have board approval and
to be executed by both directors. If Sean and Delilah both signed the
purchase agreement, as directors of Cookwell Ltd, but did not tell
Rochelle of the purchase, would the company be bound by the
agreement? Explain why or why not.
c)
What difference, if any, would it make to your answer to (b) if,
prior to entering into the contract, the vendor overheard Sean
telling Delilah that Rochelle was unaware of the purchase?
The post transfer their partnership business appeared first on My Assignment Online.