Little Cars Ltd carries on business as a second-hand car

Little Cars Ltd carries on business as a second-hand car dealer specialising in small cars. There are two shareholders, who are also the directors of the company, Mr and Mrs Deal. The company is very successful and it soon is operating out of four car yards. With expansion the directors of Little Cars Ltd decide to appoint Fred as a director. They are attracted by his finance skills. Fred himself is also on the board of directors of another car dealing company, Big Motors Ltd. Mr and Mrs Deal are unaware of Fred’s connection with Big Motors Ltd. In one of the meetings of its board of directors, Little Cars Ltd makes a resolution to sell one of its car yards. Fred alerts Big Motors Ltd to this opportunity to acquire a new car yard. Big Motors Ltd successfully negotiates to buy one of the four car yards from Little Cars Ltd. After some time has passed Mr and Mrs Deal become uneasy about Fred. They decide to sell all the assets of Little Cars Ltd to a new company called Best Micro Cars Ltd. Mr and Mrs Deal are the only shareholders and directors of Best Micro Cars Ltd. The sale price is about one quarter of the value of the assets transferred

What directors’ duties have been broken by Mr and Mrs Deal?

What potential legal consequences could they face?


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