(A) The business of a company must be managed by the directors of the company, and the same applies to the respective businesses of companies comprised within a multinational corporate group. However, the unanimous or majority decision of the shareholders of a company are binding on the directors of the company, even though the shareholders are not agents of the company; but shareholders of other companies within a corporate group are to be ignored. Please discuss this proposition, supporting your response by reference to appropriate published sources.
(B) Achebe and Zeleza Ltd (AZL – a company incorporated and managed in England and Wales) is the wholly owned subsidiary of Tavakolian & Alkiri BV. (TAB – a company incorporated, managed and controlled in the Netherlands). In June 2014, TAB reached agreement with the government of Bangladesh to carry out some land reclamation work so as to provide new land for agriculture. The agreement between (1) the Government of Bangladesh and (2) TAB (the Agreement) provided, inter alia, that: (i) the reclamation work would be carried out by a Bangladeshi company which would employ Bangladeshi citizens wherever possible; (ii) the necessary know-how, intellectual property rights, and equipment would be made available by AZL; (iii) TAB would provide the necessary US$ loans to the Bangladeshi company; and (iv) TAB would act as supervisor of the project up to the time of handover to the Bangladeshi Government.
Once the Agreement came into force, AZL incorporated a company called Kabir & Alkiri Inc. (KAI – a company incorporated in Bangladesh), which issued a debenture to TAB for a loan of US$ 15million. At the same time, KAI paid US$ 5million to AZL for equipment and intellectual property rights relevant to the reclamation project. KAI then employed technicians and other individuals to carry out the day-to-day work of the project. AZL also provided personnel to provide the know-how for the project, and TAB’s experts were always present to supervise the work.
Unfortunately, the project ran into difficulties, and the Bangladeshi Government alleges that TAB and AZL are liable for the failure of the project. The Bangladeshi Government has commenced proceedings in the courts of New York State against TAB, AZL, and KAI, pursuant to a jurisdiction clause in the Agreement. The applicable law is stated in the Agreement to be the law of England and Wales. The facts revealed so far show that the directors of KAI are two directors of TAB, two directors of AZL, and the senior technician for the project, who is a Bangladeshi citizen. The Agreement provides, inter alia, that KAI is to follow instructions received by KAI from both TAB and AZL, so that the reclamation project conforms to the health and safety and environmental requirements of TAB and AZL.
The Government will allege that the Board of Directors of KAI (the KAI Board) is following orders given by the Boards of Directors of AZL and TAB, and that the KAI Board is not making its own decisions for KAI. The Government will also allege that any compensation ordered by the New York State court which KAI cannot pay will be payable by TAB and AZL.
Please analyse the circumstances of the dispute, and provide an advice to the Government on the viability of its allegations at this early stage of the litigation proceedings. Please support your response by reference to appropriate published legal sources.
(C) Please analyse, compare and contrast the relationship between the issues raised in Part A and the issues raised in Part B: identifying the similarities and differences between the issues in Part A and the issues in Part B, and commenting on what those similarities and differences are between Part A and Part B. For example, does the Part A question raise exactly the same issues as the Part B question, or entirely different issues, or a mixture of similar and dissimilar issues? Please give your reasons. (This comparison is to be made on the basis of the content of the Question, and not only on the basis of the content of your essay.)