Ostensible agency relationship between shareholders

Authority of individual directors to bind a company is a complex area of law yet to be One key difference between the provisions of CA and CA is that section This latter form of implied authority is also known as 'ostensible authority'. Director to suspend the Chairman who was also the majority shareholder. Shareholders appoint auditors as per the provisions of Section (1)-(6) of the Companies Act. The auditors are supposed to monitor the. This type of relationship does not bind a company through an agent acting as the An implied agency relationship; and; An ostensible agency relationship. . that any persons associated with your company (including shareholders, directors.

The theory of apparent or ostensible agency is the legal doctrine whereby a plaintiff may subject an alleged principal to liability if the plaintiff can establish 1 that the alleged principal held out another as its agent; 2 that the plaintiff justifiably relied on the care or skill of the alleged agent based upon the alleged principal's representation; and 3 that this justifiable reliance led to the injury.

The theory of joint venturers arises where two or more parties combine their property or labor, or both, in a joint undertaking for profit, with rights of mutual control provided the arrangement does not establish a partnershipso as to render all joint venturers liable for the negligence of the other.

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These three theories are closely intertwined with one another. Triple "C" Recreation Assn. See also Fidenas AG v. The general principles of agency law apply where defendants are joint venturers.

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Boatman, supra atS. However, while there may be instances where evidence to pierce the corporate veil also serves to establish an agency relationship between the corporate parties, it cannot be held as a matter of law that evidence insufficient to pierce the corporate veil automatically serves to negate the existence of an agency relationship between the corporations. The Court of Appeals has recognized that even where a parent and wholly-owned subsidiary have remained separate corporate entities so that the acts of one are not chargeable to the other under the alter ego doctrine, both corporations may nonetheless be subject to liability where one corporation acted as the agent for the other.

Accord Triple "C" Recreation Assn. Ostensible authority may also arise where a person holds a position within a company whereby it is expected that such a person would have authority to act on behalf of the company.

Beware of Dealing With Individual Directors

This is pertinent to the implied authority of executive directors. For example when a director is appointed to a particular office within a company, such as Financial Director or Sales Director, it is arguable that by virtue of their appointment to that office they have implied authority to do everything necessary to perform their role. Judgement was delivered in September The Court was asked to determine whether it was within the implied authority of the Managing Director to suspend the Chairman who was also the majority shareholder.

The Court held in favour of the Chairman and held that the Managing Director did not have implied authority for such an act. The Court reasoned that the decision to suspend the Chairman was not related to the day to day running of the Company and was not a commercial decision.

Kissun v. Humana, Inc.

The Court also held that the Managing Director could not use his position to grant himself powers properly exercisable by the board. Interestingly leave has been granted for appeal. Meckling, Theory of the Firm: An Assessment and Review, 14 1 Academy of Mgmt.

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Recently, a progress has been made by Ronald J. Gilson and Jeffrey N.

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The performance of insured and uninsured municipal debthttp: Proxy System Release Nos. SEC Concept Release], available at http: It is worth noting that while many of the outside agents mentioned above work directly for either the corporation or on behalf of corporate stakeholders, the loyalties of shareholder activists as corporate gadflies are less clear. Ostensibly, these people advocate on behalf of other stakeholders, attempting to persuade them to take certain initiatives.

However, they often act in their own interests as well, pursing personal agendas or pushing for corporate action that will benefit them disproportionately to, or even at the expense of, their fellow stakeholders. The Crisis Inquiry Report].