BUSINESS LAW - DIRECTORS LIABILITY

Order Description Fashionmart Ltd is a high street clothes retailer. The directors of Fashionmart Ltd are Belinda, Sally and Helen. Belinda and Sally have between themselves ten years’ experience in the retail industry. Helen is inexperienced. She has no professional qualifications. Most of Fashionmart Ltd clothing is sourced from countries where the cost of labour is cheap. The company has for the last ten years enjoyed unrivalled success as it has won over both the high street shopper and the diehard fashionista with its simple philosophy: high style, low prices. Recently, Fashiomart hit the headlines when the ABCPanorama programme reported that two of the Chinese suppliers which Fashionmart had been sub- contracting work to employed children that were forced to work in squalid conditions. . Belinda and Sally were overseas on business when the scandal erupted. Helen, who was in charge of marketing and publicity failed to take immediate steps to lessen the shock of this international expose. The board of Fashionmart Ltd only sacked the two suppliers concerned after Belinda and Sally’s return. Although press statements were subsequently issued to assert the company’s social responsibility credentials, the negative publicity had, by this time, caused Fashionmart Ltd to suffer considerable losses. Alma is a minority shareholder of Fashionmart Ltd. She is unhappy that Belinda and Sally have decided not to take action against Helen. She is also concerned that the board is still intending to work with sub-contractors from countries where decent labour standards are far from a priority. Advise Alma whether the company has recourse against the directors and whether she can initiate derivative actions against the board.