ExpertMedium2 marksMultiple Choice
Management, administration and the regulation of companiesSection BSyllabus FCorporate and Business Law
ACCA · Question 56 · Management, administration and the regulation of companies
Scenario: 'Quantum Lithography PLC' manufactures microchips. The CEO, David, secretly sets up a rival consulting firm and diverts a lucrative government contract away from Quantum to his new firm. Another director, Fiona, fails to declare her 30% shareholding in a company that Quantum just signed a major supply contract with.
Question: What is the primary civil remedy Quantum Lithography PLC will seek against David to recover the money he made from the diverted contract?
Scenario: 'Quantum Lithography PLC' manufactures microchips. The CEO, David, secretly sets up a rival consulting firm and diverts a lucrative government contract away from Quantum to his new firm. Another director, Fiona, fails to declare her 30% shareholding in a company that Quantum just signed a major supply contract with.
Question: What is the primary civil remedy Quantum Lithography PLC will seek against David to recover the money he made from the diverted contract?
Answer options:
A.
Specific performance.
B.
An account of profits.
C.
A fine payable to Companies House.
D.
Rescission of David's employment contract.
How to approach this question
Identify the goal: recovering the illicit gains made by the director. The equitable remedy for this is an account of profits.
Full Answer
B.An account of profits.✓ Correct
When a director breaches their fiduciary duties (such as s.175) and makes a personal profit, the company can claim an 'account of profits'. This equitable remedy strips the director of their ill-gotten gains and transfers them to the company, regardless of whether the company itself suffered a financial loss.
Common mistakes
Confusing damages (compensating for loss) with an account of profits (stripping the wrongdoer of gains).
Practice the full ACCA LW — Corporate and Business Law Practice Exam 2
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