Assume that Mr Kenneth Lay, the founder of Enron had provided a loan of £1 million to the company and that following the collapse of the company Mr Lay attempted to recover his money from the company but the liquidator resisted his claim on the ground that there was no difference between Mr Lay and the company since he had overall control over the company and that instead of trying to claim money from the company he should be made liable for its debts.
In the film, Mr Louis Bourget the president of Enron diverted the company’s profit into his personal account, destroyed the company’s records, and gambled the company’s money. Mr Andrew Fastow, the company’s Chief Financial Officer created a number of front companies which he uses to defraud Enron of tens of millions of dollars.
You are a legal team summoned to attend a case conference. The liquidator of the company has asked your team to prepare a legal analyses of the company law issues raised in the film and advise on:
a) The merits of the liquidator’s arguments, in British company law, that Mr Lay cannot recover his loan from the company and that he should instead be made to contribute to the company’s debt on the ground that there is no difference between him and the company. Do not deal with any criminal element involved, (40 marks).
b) Mr Louis Bourget’s and Mr Andrew Fastow’s duties as directors of Enron, explaining which duty, if any, they breached under the Companies Act 2006, (60 marks).