Mr. A is the sole shareholder of X Ltd., and is also a director of Y Ltd. Y Ltd. is negotiating to buy property from X Ltd. Which of the following is false?

Question

Quizplus · Accepted Answer

While Mr. A does have a duty to act in the best interests of Y Ltd. and to avoid conflicts of interest, option B is false because disclosing his position to the board of directors of Y Ltd. is not enough. To protect himself and avoid liability, Mr. A must fully disclose his interest to the other directors and refrain from voting or influencing the decision. This is because even a potential conflict of interest can compromise Mr. A's ability to act in the best interests of Y Ltd. and could be seen as a breach of his fiduciary duty as a director. Option D is also true, as failure to disclose his interest could result in Mr. A being held liable to Y Ltd. for any profits he makes on the transaction and for any losses suffered by the company. Option E is also true - Mr. A does not owe a fiduciary duty to X Ltd. or to his fellow shareholders since he is the only shareholder.

Mr a Is the Sole Shareholder of X Ltd