The Raffles Town Club is in the news again today with reports of the trial of its lawsuit just being concluded. The Club which is actually a company, is suing its past directors for breach of directors' duties. This echoes the famous (to company law students and corporate lawyers) case of Regal (Hastings) v Gulliver.
This case involved some directors who had taken an opportunity belonging to their company, being sued by the company after ownership of the company had been sold to new owners. The new board then used the company to successfully sue the former directors. The end result was that the new owners received a windfall since some of the price of buying control of the company was offset by damages recovered for breaches of directors duties.
The moral of the story is that if you are a director, before you sell control of your company to new owners, make sure that all previous actual and potential breaches of directors duties are regularised. Some of the steps might include making full and frank disclosure to the general meeting and then passing resolutions to approve past acts and to waive any breaches. Indemnities against future lawsuits might be also obtained from new owners although these indemnities may not always be effective. Legal advice should be sought to avoid problems.
It is unclear what steps the former directors of Raffles Town Club had taken to avoid a Regal Hasting situation. We eagerly await the court's written judgment for more details.
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment