Please be sure to read the three articles listed under the heading “Essential Reading”. It would be helpful if you could also read some of the other articles listed and we may have some volunteers reporting on some of them.
The main purpose of this seminar will be to help you identify and familiarise yourself with the different theoretical debates concerning company law, how companies should be regulated and what the purpose of Corporate Law is. The seminar will also consider the implications of those theories. At this stage this will be a fairly general discussion, but it is something to which we shall return when we consider other aspects of company law in later seminars.
1. What is Greenfield’s view of Corporate Law?
2. What are the different theories identified by Millon? Compare the views of Dodd with those of Friedman (quoted by Millon at p 227). Do you find either of these approaches to be particularly convincing or is there a different theory you prefer?
3. Discuss the following company law problems by reference to theories such as Dodd; Berle; new economic theory (nexus of contracts); Greenfield and Gordon Smith’s views etc:
a) Ratae United plc is a publicly owned football club. Its majority shareholder recently died, leaving his share to his widow, Cassandra, who unfortunately hates football. The board of Ratae has recently received an offer from Do-It-Yourself Ltd (“D-I-Y”), a chain of hardware stores. D-I-Y would like to buy Ratae’s ground in order that they can demolish it and build a store on its land. Cassandra has heard of this offer and is keen for the sale to go ahead as D-I-Y’s offer is very generous. She has been annoyed to discover that the number of people attending Ratae matches has been falling rapidly in recent years, for example only 5000 people attended the last match. The club needs an average attendance of 9000 to be financially viable. If the ground is sold the team will have to play its matches at the ground of Shepshed Dynamo which is located twenty miles from Ratae. Terry, the president of Ratae United Supporters Association, has also heard of the proposed deal and wishes to argue that the fans have a stake in the club so their interests should be considered by the board.
b) Tick Tock plc is a manufacturing company. It has a factory in Gurnley where the majority of employees are required to carry out simple manual labour tasks. Due to the minimal amount of training required of these employees the company has preferred to employ mainly 16 to 18 year old school leavers in order to take advantage of Government subsidies of youth employment. The school leavers are only employed on short term contracts in order that they can be dismissed when the Government funding runs out. The management believe that this policy is the best way to maximise profits. The policy is, however, having an adverse effect on the local community. There are few employment opportunities in the area and former employees of Tick Tock generally remain unemployed.
c) Heskey plc is a company in the unfortunate position of having an asset value which exceeds the value of a controlling interest in its shares. It has a factory which occupies a very valuable piece of land; in addition it has attempted to make the working environment more pleasant for employees by buying art works which have now increased in value to a significant extent. The company also owns a racehorse, Thunderbolt, which has won several important races and is now worth millions of pounds. Apart from these wise investments the board of Heskey have generally been doing a poor job as the goods produced in the factory are becoming obsolete and there are no plans to adapt production to make a different product. The board of Shark plc has noticed this situation and proposes a take-over of Heskey with a view to stripping the company of its assets and placing the empty shell into liquidation. If the take-over goes ahead there will be a significant impact on the local community as a large proportion of this community rely on the factory for employment.