Reference no: EM131453531

Company Law

The Management and Operations of a Company

Vision Ltd was incorporated in 1995 by Martha.  In 2015, when the company was worth approximately $5 million, Martha died.  She left the whole of the share capital of the company to her 16-year-old son, Steve.  Steve was appointed a director of the company.  He attended one board meeting in 2005, but found it difficult to follow the discussions there due to his lack of experience and knowledge about the company.  He has not attended any board meeting since.  Six months ago Rick Vision's managing director, approached Steve.  He told Steve that Vision needed some 'short term' finance and asked Steve to lend the company to $200,000.  Steve agreed to do so.  To secure the loan, Steve was given a floating charge over all of the company's property.  Four months ago Steve told Ted, one of the company's suppliers, that he could personally assure him that vision was perfectly solvent.  Based on that assurance, Ted supplied another $50,000 worth of stock to the company on credit.

Steve has just discovered that the company has been in severe financial difficulties for many months.  A board meeting has been called for next week at which Rick will argue that the company should mortgage its factory premises to raise more money so it can trade its way out of difficulties.

Steve seeks your advice about any personal liability he might face.

Advise steve.