Ms. Mutinta Chambe was a reporter for a company called Clay Colours Ltd. which is in the business of internal decorations. A few months before registration of the company, Ms. Cham... Ms. Mutinta Chambe was a reporter for a company called Clay Colours Ltd. which is in the business of internal decorations. A few months before registration of the company, Ms. Chambe signed a contract on behalf of Clay Colours Ltd. for the purchase of several pieces of furniture from Chambe Furniture Limited, where she is a shareholder and a director. Following the appointment of directors of Clay Colours Ltd., questions arose regarding the propriety of the transaction. You are in the administrative board of Clay Colours Ltd. and have been requested to advise the directors correctly before the matter becomes a potential litigation risk. Prepare the legal opinion.
Understand the Problem
The question is asking for legal advice regarding a potential conflict of interest involving director actions in a company. It requires an analysis of the situation with references to legal principles and relevant provisions of the company act of 2017.
Answer
The contract may not bind Clay Colours Ltd. due to pre-incorporation and conflict of interest issues. Ratification and conflict compliance recommended.
The final answer is that the contract signed by Ms. Chambe may not bind Clay Colours Ltd. since it was signed before incorporation, and Ms. Chambe may have had a conflict of interest. The board should seek ratification of the contract post-incorporation and ensure compliance with conflict of interest regulations.
Answer for screen readers
The final answer is that the contract signed by Ms. Chambe may not bind Clay Colours Ltd. since it was signed before incorporation, and Ms. Chambe may have had a conflict of interest. The board should seek ratification of the contract post-incorporation and ensure compliance with conflict of interest regulations.
More Information
Pre-registration contracts require ratification by a duly incorporated company. Conflict of interest requires Ms. Chambe to disclose her interests.
Tips
A common mistake is not considering if the company ratified the contract after incorporation. Ensure conflict of interest disclosures are in place.
Sources
- Companies Act 2017 - legislation.gov.example.com
- Kelner v Baxter Case Summary - casebook.onlinelibrary.com
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