- This problem is based on abuse of power by directors.
- By issuing shares to themselves and nominees, the directors are exercising the power to issue shares for a purpose other than that for which the power is conferred. As was the case in Piercy v Mills and Punt v Symons.
- The directors are therefore guilty of breach of duty to the company.
- Since directors owe their duty to the company as opposed to individual shareholders (Percival V. Wright) Mwananchi has no action against them.
-My advise to him is to instigate the convention of an extra ordinary general meeting of the company to resolve the matter. The meeting may resolve that the company sue the directors for breach of duty or ratify the transaction, whereupon it becomes a valid act of the company. As was the case in Bamford and Another v Bamfordand Others.
marto answered the question on February 6, 2019 at 08:16
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