Muntaka Property Investments Ltd (MPI) owns a variety of shopping centres and retail units throughout Ghana. Last year, it decided to build a new outlet shopping centre in Adenta, Accra City, in the belief that the opening of the new light-rail line in this area would facilitate customer access to this centre and could attract customers from all parts of the country. To finance this development, MPI decided to sell some of its other properties. One of these properties was a small retail park located within three kilometres off Weija (a large provincial town). Gyeabour, a director of MPI was tasked with overseeing this sale. Within three weeks of the Weija property being advertised for sale, Gyeabour reported that he had received an offer on the property for the full asking price. Delighted with this, the Board of MPI authorised Gyeabour to effect the sale of this property.
However, two months after the sale was completed, it was announced that one of the largest pharmaceutical companies in the world was establishing its global head office on the site adjacent to the former Weija property, and as a consequence of this fact, the value of the property had already increased by an excess of 60%. Upon further investigation, MPI discovered that the Weija property was purchased by Gyasco Properties Ltd., a company wholly owned by Gyeabour’s two sons, and that the mother-in-law of one of these sons is a local politician in Weija. Consequently, she would have been aware of the impending purchase of the adjacent property by the pharmaceutical company.
Required:
Describe a director’s fiduciary duty regarding conflict of interest and determine whether this duty has been breached by Gyeabour in this situation. (10 marks)
View Solution
Director’s fiduciary duty regarding Conflicts of Interest:
Directors must not put themselves in a position whereby their personal interests and those of the company are in conflict. This duty is judged objectively and therefore the motives of the directors are immaterial – within the ambit of this duty.
The following actions by directors are also considered a breach of this duty:
- where directors fail to disclose their interests in company contracts or make a secret profit from company transactions,
- where directors divert business opportunities from the company, or where
- directors act in competition to the company and use confidential information from one business to benefit another business,–
In this situation the actions of Gyeabour are in breach, as he had a substantial conflict that he failed to disclose.