Therefore the question “who does what” or rather “who is entitled to do what” inevitably arises in the context of the company. This in turn raises the issue of external relations within the company. This shows that the relations between the organs themselves also have legal consequences. These are the internal relations of the company.
Internal Relations
To what extent must those who act for the company take account of the other organs’ interests. More particularly to what extent must the directors take account for shareholders interest? The answer is that the directors must act exclusively in the interests if the company. The interests of individual shareholders must not take precedence over his obligations.
If the directors are thought to have failed in this duty, it will be the company as a person, and not individual shareholders, who can take action against them. If the company fails to take any action that decision is FINAL.
This was ruled by the court in the landmark decision in the case of :
‘Foss v Harbottle’
However, this rule is qualified by certain exemptions. Thus if a particular decision constitute “fraud on the minority” it can be reversed.
The companies act also provides certain safeguards in this regard.
External Relations
Companies must act through natural persons, in most cases this are the directors. Directors must perform their duties within the limits of the powers conferred on them In most cases they do this only because if they do not they can be found out at the Annual General Meetings. However, of the outsider colluded in the unlawful action, he /she will no longer be protected by this assumption. Company executives also have certain implied powers. There’s do not require any express authorisation on behalf of the company’s decision making organs.
