Advise Adam on the strength of the claim by ‘Elite Computers Ltd’, with detailed explanation of the relevant legal principles.
Company Law Coursework [MAIN] 2022
Adam has worked for 10 years for ‘Elite Computers Ltd’, a company which installs and manages complex IT networks for large companies. During his time with the firm, Adam has gained access to both the company’s client list and also many of the confidential processes which give the company an advantage over its competitors. For this reason, as part of his contract of employment, Adam has agreed not to set up in competition with ‘Elite Computers Ltd’ for a period of five years should he leave the company. After a row with his manager, Adam resigns and works out that he could make a good living if he could take 10% of the clients of ‘Elite Computers Ltd’ with him. To this end he has incorporated a company, ‘Adam IT Ltd’ and sent a mailshot to all of his former clients offering to undercut their existing contracts with ‘Elite Computers Ltd’. Solicitors for his former employers have contacted him to remind him of his agreement not to compete, but Adam has argue that it is the new company ‘Adam IT Ltd’, not him personally, which is competing with ‘Elite Computers Ltd’.
Together with Adam, there are two other shareholders in ‘Adam IT Ltd’. They are Adam’s brothers, Tim and Donald. Each owns 33% of the shares and all act as directors of the company. Donald has found himself increasingly isolated from decision making within the company. Adam and Tim make the decisions and, because they each own a third of the shares, they are able to outvote Donald, whom they generally ignore. Donald has decided that he has had enough and wants to leave the company, taking advantage of a provision in the articles of association which requires the remaining shareholders to purchase the shares of any member who wishes to sell. Donald has approached Adam and Tim to buy his shares, but they have told him to ‘get lost’.
The company has failed to make much profit over the past year and, in January, the accountant warns Adam that the business will be technically insolvent by June if it has not secured orders worth £100,000. When June comes, Adam realises that he has only made £25,000.Without telling Tim and Donald, Adam decides to ‘soldier on’.
Questions (NB all questions carry equal marks)
Advise Adam on the strength of the claim by ‘Elite Computers Ltd’, with detailed explanation of the relevant legal principles.
Advise Donald as to the remedies available to him if he still wishes to leave the company, with detailed explanation of the relevant legal principles.
Advise Adam, Tim and Donald of the significance of Adam’s decision to ‘soldier on’, with detailed explanation of the relevant legal principles.
Note that your answers should set out the relevant legal principles SUPPORTED BY RELEVANT PROVISIONS AND CASES and offer advice to the parties.
