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Create a 8 page essay paper that discusses Company Law case.In addition, a promoter is also expected to disclose any secret profits that he may have made in the process of promoting the company. This
Create a 8 page essay paper that discusses Company Law case.
In addition, a promoter is also expected to disclose any secret profits that he may have made in the process of promoting the company. This is illustrated in the case of Erlanger V New Sombrero Phosphates company limited (1878)2.
In this case,Syndicate Erlanger purchased an island that was rich in phosphates at a price of 55,000 pounds. he later promoted a company and sold the sand island to the company he formed at 110,000 pounds which later failed. During the formation of the company, two of the directors were abroad while the rest had been nominated by Erlanger himself. When new directors took over the company, they filed a motion to rescind Erlanger. The court held that no proper disclosure on the sale was made and for this reason the company had a right to rescind the contract.
Ricky is the individual who put everything together and saw to Ricky`s footwear becoming a legal company and is therefore the promoter of the company. He sold premises and stock and assets from his former business and made huge profits from the sales. The fiduciary duties that he owes the company would dictate that he discloses these profits. He however did not disclose them to either the members of an independent board or to all the new owners of the company as per the prospectus as was expected of him. For this reason, Ricky`s footwear limited has a legal claim against its promoter for making secret profits which is a breach of his obligations and it is therefore advisable that they pursue the matter in the relevant court of law. However, the company would not have had a case against Ricky had he disclosed the profits.
In the event that Ricky`s footwear limited decides to file a motion against Ricky there are certain possible remedies that are available to the company at law should the court rule in their favor. These are:
Under this remedy, the contract in question is reverted and relevant efforts are made