6LAW1039: Ryde Training Resources Limited RTR is a private limited company registered in England and Wales: Company Law Coursework, UOL, UK

Question

Ryde Training Resources Limited (‘RTR’) is a private limited company registered in England and Wales. RTR was incorporated on 1 June 2015 with unamended Model Articles as its articles of association.

RTR has four directors, who are also currently the only four shareholders of the company.  They own 25 ordinary shares each in RTR. Ralf is the CEO and is also a qualified solicitor. Anya is the finance director and is also a qualified accountant. Shay is the director of sales and marketing and has a background in recruitment.  Clem is a non-executive director who attends the monthly board meetings but otherwise is not involved in the day-to-day management of the company.

As part of RTR’s business strategy, it has developed a suite of online training products for businesses in the recruitment industry. RTR has 20 major clients to which it supplies its training products. The clients pay an annual fee for a package of training products and can pay extra for additional tailored products which will be created by RTR’s staff. Due to a recent decrease in orders, RTR is currently experiencing financial difficulties, and Anya has told the Board that she thinks rescue action needs to be taken to help the company try to trade through these difficulties.

Shay is the main point of contact for each of the 20 major clients. Shay recently met with the CEO of RTR’s largest client, Gadebury Limited (‘Gadebury’). Gadbury’s CEO wanted to discuss the possibility of RTR becoming involved in developing tailored leadership and management training products for its employees. Shay incorrectly informed Gadebury’s CEO that such training was not part of RTR’s business strategy but said he would be happy to recommend an alternative company, Coll Solutions Limited (‘Coll’), who would be able to develop such products. Coll is a newly formed private company managed by Melanie Coll (Shay’s wife). Shay owns all of the shares in Coll. Shay has not mentioned this situation to the other directors of RTR, including the fact that a contract has now been entered into between Gadebury and Coll.

Separately, RTR has been approached by Jas, a potential investor who is considering investing £5 million in the company’s business. Jas is a close friend of Ralf. Jas does not wish to become a director but would like to acquire ordinary and preference shares in RTR. Jas also wants to be consulted on any changes to business strategy and management decisions, including the expenditure of over £1,000, new borrowing of over £5,000 and any appointment of new directors.

Ralf has recommended to Shay and Anya that RTR allots 25 ordinary shares to Jas, and that it creates and allots 10 non-voting preference shares with a guaranteed annual dividend of 10% of the amount invested by Jas. Ralf has suggested that a Board Resolution to approve the allotment of new shares is passed as quickly as possible because of RTR’s current financial difficulties. Ralf has decided that Clem does not need to be consulted on the allotment of new shares to Jas. Shay and Anya are also happy for the Board to proceed to allot the shares to Jas without informing Clem or calling a General Meeting.