Eclair Group Plc Case Study

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The case of Howard Smith LTD gave rise to the “proper purpose rule.” The court found that in the event of a complication arising from a director’s decision that fulfils several purposes, where the dominant purpose is proper, this can justify any improper subservient purposes, vice-versa. In regards to a balance of power, the case of Eclair Group Plc which cited Howard Smith LTD, serves to show that where a director exercises power for the purpose of disenfranchising a member, this is determinably an improper purpose. S.173 Ca 2006 Imposed the duty to act in the way [the director] considers in good faith, to promote the success of the company for the benefit of it’s members as a whole. The subjectivity provided in this provision presents a problem since the court determined that an unreasonable decision can be excused provided that it was “honest and made in good faith.”

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