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LPC: PLR AND WRITING

SGS 2 ACTIVITY 2 SOLUTION

WRITING SGS 2: ATTENDANCE NOTES, LETTERS AND E-MAILS Legal Practice Course

ACTIVITY 2 SOLUTION

PRICE PRIOR ATTENDANCE NOTE Client: Ampnet PLC

[Date]

Fee Earner: James Sterling Ref: JS/413121 Matter: Ampnet Media Ltd _____________________________________________________________________ James Sterling (‘JS’) and [Trainee] attending Emmanuel Cross (‘EC’). Background EC is the director and company secretary of Ampnet PLC ('Ampnet'). Contact details: Ampnet PLC, Ampnet House, Hayward Square, York YO1 7HQ. Telephone: 01904 673293. Email: [email protected] Free consultation explained to EC. Ampnet is a provider of internet broadband and telephone services across the UK and is developing a cable TV business. It recently incorporated a subsidiary company called Ampnet Media Ltd ('Media') to expand its business. Problem EC sought advice on proposed changes to Media's articles of association and management processes. EC explained that Media's board comprises two directors: Greg Midyear (‘GM’), who was appointed as director and chairman, and Sue Scott ( ‘SS’). GM has a proven record in product development and he comes from Ampnet's broadband division. SS previously ‘headed up’ the cable network, Ciel TV. EC is keen to retain both directors but their highly marketable skills make them attractive to competitors. Ampnet is the only shareholder of Media. EC wants Ampnet to keep 'tight control' over Media and to be able to remove the directors very quickly if need be, preferably by writ-

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SGS 2 ACTIVITY 2 SOLUTION

LPC: PLR AND WRITING

ten resolution. Media has unamended model articles. JS viewed SS's service contract, which provides a six month notice period and EC confirmed that the reason sought to remove directors at short notice was in response to commercial realities. GM's notice period is the same. EC was also concerned about decision-making. He indicated that whilst both directors are used to conducting a leading role, he did not want SS to feel that she would always be overruled by GM because he is the chairman. SS must be allowed to bring in her ideas and develop the businesses of both Ampnet and Media, otherwise SS may become demotivated or leave. EC's concerns are: 1.

whether all shareholder resolutions, including resolutions to remove directors, can be passed as written resolutions;

2.

how GM can be prevented from overruling SS on every decision where there is disagreement; and what could happen if SS and GM do not agree on any particular decision? Media must be able to reach definitive decisions.

3.

Advice JS advised that:  

a director cannot be removed by written resolution; and amending Media’s articles to remove the chairman’s casting vote will ensure GM cannot overrule SS, but there is then a possibility of deadlock which could be partially avoided by appointing a third director.

Media has three options: Option one – Appoint a third director. Deadlock is less likely. However, if only two directors attend for the quorum of a board meeting, deadlock is still possible (assuming GM’s casting vote is removed - see below). Recruiters’ fees could be expensive and it could take a long time to appoint a third director (client estimated 6 -12 months). However, the overall process is relatively simple and can be done by GM & SS as directors or by Ampnet as shareholder. Option two – Keep chairman’s (GM’s) casting vote. This will avoid the board being unable to reach decisions as GM can overrule SS if they disagree. However, Media and Ampnet could lose the benefit of SS’s ideas and she could become demotivated and leave. Option three – Amend Media's articles to remove the chairman's (GM's) casting vote. Deadlock is possible but this may not be a bad thing. With SS's ideas and GM's experience, both directors could be forced to work together to find a creative solution thereby developing the business. If deadlock did occur, Ampnet, as sole shareholder, could make a definitive decision. Furthermore, SS would be more likely to remain at Media therefore avoiding the time/expense of finding a replacement which would be disruptive

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LPC: PLR AND WRITING

SGS 2 ACTIVITY 2 SOLUTION

to Media's business. JS advised that this option would appear to be a reasonable business decision. Fee structure & complaints procedures were explained to EC. Charging rates: £150/hr plus VAT for JS, as assistant solicitor, and £250/hr plus VAT for supervising partner, Peter Price, plus disbursements. JS or Peter Price to be contacted in the event of a complaint. Action to be taken EC: to speak to the board regarding which course of action is to be followed and to inform JS by the end of the week. EC to forward GM’s contract to JS. JS: agreed to send EC a letter confirming advice plus client care information by email this afternoon. Time engaged: 24 minutes

Price Prior is a fictitious law firm for teaching purposes only

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