Reference no: EM132050828

Florentia (F) is the managing director of XO Pty Ltd, a profitable company that runs a dance school (mainly ballroom dancing style) and that specialises in buying and selling dance clothes for women - mainly between the ages of 45-65 years. XO has a board of directors that includes 5 majority shareholders and F chairs the monthly meetings. Recently, F was having lunch with a friend (Luis) who has no connection whatsoever with XO although F would like him to join the dance school as she wants to attract more male dance partners to attend. At lunch, Luis asks F if her company would be interested in helping him to market a new organic deodorant that he has invented (made from ingredients extracted from mango skin). Luis claims his new product is primarily for young men and has the advantage of helping them think they are more attractive when they use this product. F tells Luis that her company would not be interested because it sells women's dance clothing and runs a dance studio that is mainly for mature women. However, she offers to help him by setting up a new company called Amazing Mango Products Pty Ltd (AMP). F and Luis become its directors and members. As F contributed most of the setup capital, she became its majority member. AMP is an immediate success and quickly makes considerable profit.

At a board meeting of XO nine months later, F proposes that XO enter into a long-term contract with AMP to buy supplies of organic mango-skin deodorant for re-sale. She proposes that many of the women who attend dance school might try it and then promote it on the internet. The board agrees and F negotiates with the board to receive a small commission on every sale as she found this business opportunity for them. XO then makes large profits from selling the organic deodorant. XO then learns informally that F is actually the majority member in AMP. Directors are very annoyed with F and want to know if anything can be done.

Has F breached any of her director's duties? If so, what remedies should XO seek?