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Questions and Answers
What was the main legal question addressed in the case of Criterion Properties v. Stratford UK Properties?
What was the main legal question addressed in the case of Criterion Properties v. Stratford UK Properties?
What is the significance of the 'poison pill' provision in this case?
What is the significance of the 'poison pill' provision in this case?
What must directors demonstrate to fulfill their fiduciary duties effectively?
What must directors demonstrate to fulfill their fiduciary duties effectively?
What constitutes an 'abuse of authority' according to the House of Lords ruling?
What constitutes an 'abuse of authority' according to the House of Lords ruling?
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In the context of this case, what is the primary distinction between company law and fiduciary law?
In the context of this case, what is the primary distinction between company law and fiduciary law?
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What did the House of Lords rule regarding the enforceability of the 'poison pill' agreement?
What did the House of Lords rule regarding the enforceability of the 'poison pill' agreement?
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What is meant by 'excess of authority' in the context of this case?
What is meant by 'excess of authority' in the context of this case?
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How does this case illustrate the balance between director authority and company interests?
How does this case illustrate the balance between director authority and company interests?
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What aspect of a board meeting did the court consider crucial in the case of Smith v. Henniker-Major?
What aspect of a board meeting did the court consider crucial in the case of Smith v. Henniker-Major?
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Why was Section 35A of the Companies Act not applicable in Smith v. Henniker-Major?
Why was Section 35A of the Companies Act not applicable in Smith v. Henniker-Major?
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In the legal outcome of Smith v. Henniker-Major, what was concluded about Smith's actions during the board meeting?
In the legal outcome of Smith v. Henniker-Major, what was concluded about Smith's actions during the board meeting?
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What critical point was established about internal procedural errors in the context of Section 35A?
What critical point was established about internal procedural errors in the context of Section 35A?
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What procedural requirement was not followed by EIC Services when issuing bonus shares?
What procedural requirement was not followed by EIC Services when issuing bonus shares?
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What is the significance of ensuring a quorum in board meetings, as highlighted by Smith v. Henniker-Major?
What is the significance of ensuring a quorum in board meetings, as highlighted by Smith v. Henniker-Major?
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What was the court's ruling regarding the validity of decisions made by an inquorate board in Smith v. Henniker-Major?
What was the court's ruling regarding the validity of decisions made by an inquorate board in Smith v. Henniker-Major?
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Which other party's protection under Section 35A was specifically noted during the court's decision?
Which other party's protection under Section 35A was specifically noted during the court's decision?
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Study Notes
Criterion Properties v. Stratford UK Properties
- A "poison pill" provision was introduced by Criterion's directors, which allowed Stratford to buy out Criterion at a premium if there was a change in control.
- The court had to decide whether the directors' actions should be judged under company law (their authority to bind the company) or under fiduciary law (breach of their duties as trustees).
- The House of Lords ruled that company law governed the situation, focusing on whether the directors had the authority to act.
- Directors are not "trustees" in the strict legal sense, though they have fiduciary duties. Fiduciary law principles were less relevant.
- The directors abused their authority when they made a decision that was not in the company's best interest but primarily protected their own interests.
- This case highlights the distinction between actions that are simply not in the company's interest (potentially valid) and actions that are against the company's interest (invalidating the transaction).
Smith v. Henniker-Major
- A director, Smith, held a board meeting alone and authorized the transfer of the company's main asset to himself.
- The company's articles required a minimum quorum of two directors for board meetings.
- A decision made by a board without the required quorum is considered a nullity, rendering it legally non-existent.
- Smith argued that he was protected by s 35A of the Companies Act, which protects third parties who act in good faith with companies.
- This argument failed because s 35A aims to protect third parties, not directors themselves. Smith was responsible for the procedural irregularity and could not benefit from the protection.
EIC Services v. Phipps
- EIC Services issued bonus shares without following the proper procedure, which required shareholder approval and ensuring the shares were paid up.
- The company argued that s 35A should validate the issue, but the court ruled that the directors' action was invalid.
- The company had a valid concern about the share issue but failed to provide adequate evidence of the market value at the time.
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Description
This quiz examines the landmark case of Criterion Properties and Stratford UK Properties, focusing on the legal implications of director authority under company law versus fiduciary law. Participants will explore the distinction between company interests and directors’ personal interests while understanding the rulings by the House of Lords.
