Newsletter 2

Monday 18 September 2023

Dear Subscriber,

Question: David is a director of a private limited company. He receives a personal discount offer from one of the company’s suppliers (a travel company) for a holiday package to the Maldives. He accepts the offer and books the holiday using the company credit card. Which of the following is true?

A. David is not required to disclose the holiday to the other directors as it is a personal matter.

B. David can use the company credit card for personal expenses as long as he reimburses the company.

C. David is in breach of his duty to act in the best interests of the company under s.170 of the Companies Act 2006.

D. David is in breach of his duty to avoid conflicts of interest under s.175 of the Companies Act 2006.

E. David’s actions are permissible as long as the holiday does not exceed the value of £500.

Top Tip: Look for little things that seem out of place in possible answers to MCQs. Are the statutory sections used correct? If two answers seem correct is one better than the other? Are some of the facts given relevant, or just a distraction? Remember that you are looking for the best possible answer, not a single absolutely correct answer set against totally implausible options.

Relevant Reading: Watch the video linked here for a presentation of the duties of directors. For relevant sections in a text see ReviseSQE Business Law and Practice, Chapter 4. You can obtain the text by following* this link.

Answer and feedback to last week’s question: Last week’s question was as follows: Hanna and Mohamed are in the process of forming a new business venture. They have decided to form a limited company and are deciding on the company’s name. Which of the following statements about the company’s name is true? A. The company name can include a prohibited word such as “royal” or “bank” without obtaining the necessary consent. B. The company name can be identical to an existing company’s name without obtaining the necessary consent. C. The company name cannot include a sensitive word such as “international” or “group” without obtaining the necessary consent. D. The company name must include the words “limited” or “ltd” at the end of the name. E. The company name cannot include a geographic location such as “London” or “Wales” without obtaining the necessary consent.

The correct answer is C. The company name cannot include a sensitive word such as “international” or “group” without obtaining the necessary consent.  Under the Companies Act 2006, the use of certain sensitive words or expressions, including “international” or “group”, in a company name requires prior approval from the Secretary of State. This is to prevent misleading use of such words. Section 59 and Schedule 3 of the Companies Act 2006 provide the list of prohibited names and sensitive words.

Thank you for subscribing and let me know how you are getting on in your preparation through our Facebook Group. Feel free to forward this email to anyone you think will benefit.

You will hear from us again next week.

All the best

Dr Ioannis Glinavos

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