Discuss about the Corporate Law and Social Norms.
Business processes are complicated and include a number of these situations. Some of these situations are so complicated that they can lead to the confusion among different people. The very first thing which comes into picture is if Bella can be appointed as the managing director of the two companies or not. The answer to the question is ‘yes’, Bella can work as the separate Managing director of both of the companies. She can work and promote both the companies efficiently and effective. In the entire case, Bella hasn’t done anything which is unlawful. She initially created a successful company with Leon. She initially refused to promote the product because it was unlawful as the company only used to sale female products by the time. Thereby, the company will refuse the acceptance of this product (Bloomenthal, 1972). Leon and Bella then create another company in which the products are successful. When Bella knew that the products made by the company are very successful, she ensured that she bring the same product to EY. Because of her initiative EY earns a huge profit. The step taken by Bella as a Managing Director of EY is a positive step as EY Earns a huge profit by the overseas selling of the soap. Bella didn’t do anything which is against the law (Eisenberg, 1999). She didn’t cheat any of the company and worked as an individual for both. Her decisions were completely independent with respect to both the companies. She worked for the betterment of both the company on the individual basis. Thus the argument should be for Bella. She ensured that EY continues to be successful and earn maximum profits.
The only argument against her is that she should have told the board of directors of EY when she had opened a new company in partnership with another company. This would have created a better image of her on the personal level. It is good to inform about your professional initiatives to the company for which you are working (Blair & Stout, 1999). According to the companies act, a person who is working as a managing director of one of the company can become the MD of another company only with the unanimous resolution of the board of directors (Cary, 1974). Thus, on this part Bella may be wrong. She should have ensured that while taking this step, she do not break the trust which EY has on her. Though EY will not be taking any kind of legal action against Bella, they will not be as comfortable working with Bella as they were previously.
Being the Board of director of the company, Bella should have been present at the meeting of Board of Directors. This is important as she is the MD of the company and she has the right to be the part of each and e very important decision and the meeting which is being taken in the company. But along with the same, she should have informed about her being the director of WHS as well. It was her initiative to promote WHS amidst the board of directors. The wrong thing she did was to take commission for getting WHS deal for the EY Company (Charny, 1991). Being her own company, she never had to make any efforts for getting WHS or convincing them. This is such a point at which she must not have lied at all.
Also when the voting was required to be done regarding the business with WHS, Bella shouldn’t have been there. She was the director of WHS PVT. LTD, thus she would always be in favor of bringing the WHS Soap in order to ensure that WHS earns more and more profit (Clark, 1986). Thus, her vote is based not actually on the discussion of the board, but somehow it also reflected the personal interest which she had for the same (Kraakman, 2009). According to the companies act, Whenever a managing director of the company is working for more than one company, he can actually earn the profits from either one or both the company only under the condition that the amount of remuneration which has been drawn from one company doesn’t actually exceed the higher limit which may be permissible from any one of the companies (Easterbrook & Fischel, 1996) Therefore, it would have been a wise decision for Bella not to be the part and parcel of the voting decision.
She has the complete right to inform the board of directors regarding a good product which can help the company to earn good amounts of profits. But, on the contrary she doesn’t have the right to vote for involving that product being a part of the company. In addition to this, she shouldn’t have taken the commission from the EY Company for getting that product idea ((Easterbrook & Fischel, 1983).. This is not correct as per the law and also it can be considered as a breach of trust by the EY Company.
Therefore, it was important that Bella should have informed about the contract which she has with the WHS Company. By doing this, she would have increased her prestige in the EY Company as she wouldn’t be charged of hiding any important information nor she would have crossed the other board of directors. The contract should have been approved by the general Manager before the meeting related to the business with the WHS Soaps PVT LTD. No one would have stopped Bella to enter into contract with WHS PVT. LTD. as it was her own decision (Easterbrook, 1997). Also, the companies act clearly states that one person may be the MD of more than two companies. Therefore, it was not wrong by law. But the company with which you are working should be informed with respect to the initiatives taken by the company on the number of other perspectives (Coffee, 1989).
There can be the case against Bella by the company for using her position as the member of Board of Directors on wrong grounds. She can be charged against “Delinquent directors under the Companies Act 71 of 2008”. The company can’t charge Bella for being the director of another company as it is legally allowed by the law unless she doesn’t file an independent income tax for both the companies (Hovenkamp, 1996). This may only be an issue in case both the companies are competing with one another. Under such a condition, the company signs an agreement with every employee and the director that he/ she can’t work in the other company (Baysinger & Butler, 1985). Therefore she won’t be charged for this.
But, there can be a case on the basis of hiding the important information which was required to be told. It was very important for her to tell this information and not to hide from the other team members. By hiding the important information from the board of directors, she is done wrong. More than this, she did wrong by asking for the commission for getting the product. Being the director of another company it was her decision whether to bring the product of WHS PVT. LTD to EY Company or not. Thus, she didn’t make any special efforts for which she earns a commission (Hansmann & Kraakman, 2000).
Bella will be charged against the law as she fail on the following grounds:
“While a director, contrary to s 76(2)(a) of the Act, took personal advantage of information or an opportunity, or intentionally or by gross negligence inflicted harm on the company or a subsidiary of the company”
She earned profits from the company on the wrong grounds therefore the company may be charged against her under this act. She took personal advantage from the information which she already had.
There can be penalties against her if the wrong done by her is proven in the court. The impact of the order of delinquency is that the person who is the member of the board of directors may be disqualified from being the director of the company. This is such an order which may be unconditional and may also subsist for the entire lifetime of the director. But if the other board of directors forgives her, the probation order may end up in the time period of five year. In addition to this, the court may also ask her to pay the compensation to a person who has been adversely impacted because of his or her conduct. Therefore, if the courts decide that Bella have to pay the compensation, she would have to return the entire amount that has been earned by her as a commission for getting the product of WHS PVT. LTD. In addition to this, she also has to pay the fine to EY Company for being involved in the misconduct (Grossman & Hart, 1988). The court will charge her because she fell short of the standards which are expected from the director of EY to such an Extent that it has led to the willful misconduct, breach of the trust with EY Company and the wrong use of her position as the director of the company.
After the impact of her act in the company, Bella is planning to get his son Max into the company. At present, he is studying business degree in the New Zealand. Also he is 25 years of age. In order to bring her into the company, the first thing she needs to do is to speak with the other board of directors and convince them that she won’t work for personal benefits of the company (Roe, 1991). She should not remove ‘Renna’ as this will lead to the creation of a negative environment in the court and all the new directors will not be able to put up their decisions in an independent manner. She shouldn’t have the complete control on the company as she is the board of directors. She should respect the views of other board of directors as well and should give due respect to everyone (Sklar, 1988). By doing this, she will be respected in the board and everyone would work for the companies’ interest. If the other board of directors will believe that she is doing everything for her personal and individual benefit, they will not respect her and the company. Instead she must accept her mistake and should request the other board of directors to forgive her. She should speak of Renna instead of removing her from the board of directors. This is the time when Bella need to make the wise decisions. Also, she needs to inform other members that she wants to bring in his son at a managerial role in the company. Also, she must convince every board of director to understand that how his son is capable of working for the company on the role assigned. It is important to have a discussion if her son Max is capable of working in such a role for which he is designated (Romano, 1993).
Renny can be removed from the board of directors if and only if it is proved that she is doing something unlawful. What she is doing now is completely justified and within the laws. Therefore, at this point of time it may not be suitable to remove her. She is being a responsible board of director and is thinking for the overall growth of the company rather than thinking for her own self (Roe, 1996). But if Renny does something which is against the company, she can be removed from the board of directors. In case, Renny will be removed from her position in the present times, it may be unlawful for her. Also she may do a case against the company. This would hamper the image of the company and the conflict going within the company will be reflecting to the outsiders as well (Bebchuk, 1989). This will further distort the company and will impact its brand value.
In the present scenario it is not worth for the company to accept the new constitution proposed by Bella. This will lead to the creation of the situation of crises within the company and will also impact their brand image. Thus, the proposal related to the company should be need to given a thought before consideration of the same.
References
Bloomenthal, H.S., 1972. Securities and Federal Corporate Law (Vol. 1). Clark Boardman Co..
Blair, M.M. and Stout, L.A., 1999. A team production theory of corporate law.Virginia Law Review, pp.247-328.
Bebchuk, L.A., 1989. Limiting contractual freedom in corporate law: The desirable constraints on charter amendments. Harvard Law Review, pp.1820-1860.
Baysinger, B.D. and Butler, H.N., 1985. Corporate governance and the board of directors: Performance effects of changes in board composition. Journal of Law, Economics, & Organization, 1(1), pp.101-124.
Coffee, J.C., 1989. The mandatory/enabling balance in corporate law: An essay on the judicial role. Columbia Law Review, 89(7), pp.1618-1691
Cary, W.L., 1974. Federalism and corporate law: reflections upon Delaware.The Yale Law Journal, 83(4), pp.663-705.
Charny, D., 1991. Competition among jurisdictions in formulating corporate law rules: An American perspective on the race to the bottom in the European communities. Harv. Int’l. LJ, 32, p.423.
Clark, R.C., 1986. Corporate law. Little, Brown.
Easterbrook, F.H. and Fischel, D.R., 1996. The economic structure of corporate law. Harvard University Press.
Eisenberg, M.A., 1999. Corporate law and social norms. Columbia Law Review, pp.1253-1292.
Easterbrook, F.H. and Fischel, D.R., 1983. Voting in corporate law. The Journal of Law & Economics, 26(2), pp.395-427.
Easterbrook, F.H., 1997. International corporate differences: Markets or law?. Journal of Applied Corporate Finance, 9(4), pp.23-30.
Grossman, S.J. and Hart, O.D., 1988. One share-one vote and the market for corporate control. Journal of financial economics, 20, pp.175-202.
Hovenkamp, H., 1991. Enterprise and American law, 1836-1937. Cambridge (Mass.)/London.
Hansmann, H. and Kraakman, R., 2000. End of History for Corporate Law, The. Geo. LJ, 89, p.439.
Kraakman, R.H., 2009. The anatomy of corporate law: A comparative and functional approach. Oxford University Press on Deman
Roe, M.J., 1991. A political theory of American corporate finance. Columbia Law Review, 91(1), pp.10-67.
Roe, M.J., 1996. Strong managers, weak owners: The political roots of American corporate finance. Princeton University Press.
Romano, R., 1993. The genius of American corporate law. American Enterprise Institute.
Sklar, M.J., 1988. The corporate reconstruction of American capitalism, 1890-1916: the market, the law, and politics. Cambridge University Press.
Essay Writing Service Features
Our Experience
No matter how complex your assignment is, we can find the right professional for your specific task. Contact Essay is an essay writing company that hires only the smartest minds to help you with your projects. Our expertise allows us to provide students with high-quality academic writing, editing & proofreading services.
Free Features
Free revision policy
$10Free bibliography & reference
$8Free title page
$8Free formatting
$8How Our Essay Writing Service Works
First, you will need to complete an order form. It's not difficult but, in case there is anything you find not to be clear, you may always call us so that we can guide you through it. On the order form, you will need to include some basic information concerning your order: subject, topic, number of pages, etc. We also encourage our clients to upload any relevant information or sources that will help.
Complete the order form
Once we have all the information and instructions that we need, we select the most suitable writer for your assignment. While everything seems to be clear, the writer, who has complete knowledge of the subject, may need clarification from you. It is at that point that you would receive a call or email from us.
Writer’s assignment
As soon as the writer has finished, it will be delivered both to the website and to your email address so that you will not miss it. If your deadline is close at hand, we will place a call to you to make sure that you receive the paper on time.
Completing the order and download