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Law of Business Associations - Essay Example

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Law of Business Associations [Surname, Name] [Professor,] [Course] [Institution,] [Date] Ques. 1 Overview Harris, and James are two brothers. They are directors and shareholders of the Noosa Property development Group, along with Patrick, a friend of James…
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James and Patrick also have the stakes of an accounting firm. This is the same accounting company that handles the accounts of Noosa Group. These three directors own the stakes of Noosa Company equally, each one of them owns 2000 shares, out of the total 6000 shares that the company holds. The company has not paid dividends to its shareholders. Instead they have invested their profits, back into other businesses of the company, with the aim of achieving their long term goals of the organization.

Harris’ wife gets sick, and he needs some money to take her to hospital. He is unemployed, unlike the two other directors, who run an accounting firm. He does not have the money to treat her wife, and approaches the other directors to ask them if he company could start paying dividends to its directors. The other directors refuse, and when he decides to sell his shares, they refuse to buy him out. They force him to resign on the account that he is against the long term goals of the organization.

He is forced to resign, although he does it reluctantly. Issue This case has several issues: a) Disagreement between directors. b) Interference of Personal Interests in the Company. c) Company Responsibilities to the shareholders. The directors of Noosa Group are in disagreement. They have disagreed over the conflicting interest of the company. They are divided into two major groups. One side of the group wants the company to start paying dividends to its shareholders, while the other group has refused to approve that request, on claims that it will interfere with the long term goals of the organization.

It is the responsibility of a company to declare dividends whenever they make profits. This means that the company is also in breach. The shareholders of the company should also be shown the company’s accounts, whenever they want to see them. The finance the company, and also make key decisions of the company. Therefore, they are entitled to knowing whatever is going on, and how the company is spending their money. Noosa refused to disclose its books of accounts to Harris. Later, Harris discovers that the company has been overpaying the accounting firm that is in charge of managing Noosa.

The company is directed by James and Patrick. This is another issue of personal interest interferes in the company. Rule The law gives shareholders and directors the power to make key decisions of the firm (Fu-Lai, 2007). They are the key stakeholders of the company, and hence should be given information about all the major operations of the company (Lui, 2005). They should see the audited accounts of the firm, whenever they demand to do so. Each shareholder has power to vote, in the decision making process of the company.

The voting power is decided by the weight of their shares, which is dictated by the number of shares that one owns (Hamilton, & Gray,2009). The higher the number of shares, the stronger the vote becomes. The directors of the company are also forbidden from running another business, whose interest and that of their company conflicts (Halwey, 2011). Application In this case, there is a breach of the company’s law. First, the company refused to show Harris their accounting records. Harris is an equal shareholder to the rest of the directors, and

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