Jane Wangokho is a minority shareholder of Tuzo Company Limited. John Daudi is the managing director and majority shareholder of Tuzo Company Limited. Jane Wangokho has discovered that John Daudi has breached his duties as a director by purchasing goods from the company at a gross undervalue. A general meeting of the company at which John Daudi attended and voted has ratified the sale. Advise Jane Wangokho on the courses of action she may take.

• This problem is based on breach of duty by directors. In this case it is apparent that Daudi is guilty of breach of duty to the company. His conduct is fraudulent in character and the company is entitled to damages since the general meeting of the company has ratified the abuse of power Jane Wangokho and other aggrieved members have the right to institute a derivative action against Daudi for the misfeasance. The action is representative in character. My advise is based on the exceptions to the rule in Foss V.Harbottle which facilitate a derivative action against fraudsters if the company cannot itself institute proceedings.

Leave a Reply

Your email address will not be published. Required fields are marked *