5/13/2011 Duty to act bona fide in the best interests of the company ·Who is the company? Existing shareholders? Individual shareholders? Future shareholders? ·Related companies? ·Creditors? Nicholson v Permakraft (NZ)[1985]1 NZLR 242 Kinsela v Russell Kinsela Ply Ltd (in liq)(1986)4 NSWLR 722 Chingtung Futures Ltd(in liq)v Lai Cheuk Kwan Arthur [1992]2HKC637 ·Employees? Others? Cases Chingtung Futures Ltd(in lig)v Lai Cheuk Kwan Arthur et al [1992]2 HKC 637 Bokhary J:...I do not consider Lai's conduct as being capable of ratification....such conduct jeopardized the very existence of the co. Cited Re Horsley Weight Ltd [1982]Ch 442 at 454-456:...the unanimous assent of the s/ers is not enough to justify the breach of duty to creditors "Whether negligent conduct is capable of ratification does not turn on whether the negligence was gross....What matters is the nature of the exposure brought about by the negligence." "if any creditor of the co suffers loss and is driven to proving in the liquidation for redress,the co's claim against the negligent director or directors cannot be defeated,to the ultimate detriment of any creditor,by any ratification which such director or directors may be able to procure of their own negligent acts or omission..." 45/13/2011 4 7 • Who is the company? • Existing shareholders? • Individual shareholders? • Future shareholders? • Related companies? • Creditors?  Nicholson v Permakraft (NZ) [1985] 1 NZLR 242  Kinsela v Russell Kinsela Ply Ltd (in Iiq) (1986) 4 NSWLR 722  Chingtung Futures Ltd (in Iiq) v Lai Cheuk Kwan Arthur [1992] 2 HKC 637 • Employees? • Others? Duty to act bona fide in the best interests of the company 8 Cases • Chingtung Futures Ltd (in Iiq) v Lai Cheuk Kwan Arthur et al [1992] 2 HKC 637  Bokhary J: … I do not consider Lai’s conduct as being capable of ratification. … such conduct jeopardized the very existence of the co.  Cited Re Horsley & Weight Ltd [1982] Ch 442 at 454-456: … the unanimous assent of the s/ers is not enough to justify the breach of duty to creditors  “Whether negligent conduct is capable of ratification does not turn on whether the negligence was gross. … What matters is the nature of the exposure brought about by the negligence.”  “if any creditor of the co suffers loss and is driven to proving in the liquidation for redress, the co’s claim against the negligent director or directors cannot be defeated, to the ultimate detriment of any creditor, by any ratification which such director or directors may be able to procure of their own negligent acts or omission …