Ruby Dragon Furniture Plc Company’s Cause of Action

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The situation of Ruby Dragon Furniture PLC seems complicated from the legal perspective, and its responsibility before shareholders is clearly violated by the actions of the company’s managers and directors. However, any course of action applicable to this case, which can be exercised by investors, should be underpinned by theoretical information regarding basic provisions regulating such occasions and other methods of addressing these problems. They are connected to the rights of all participants in the process and the unlawful presentation of misleading official information by the company’s directors resulting in shareholders’ financial losses. Therefore, this paper aims to examine the circumstances of the matter related to the above considerations and suggest a legal way of resolving the emerged conflict between Ruby Dragon Furniture PLC and the affected persons.

Shareholders’ Rights in the United Kingdom

The first aspect examined within the scope of this paper is the rights of shareholders in the United Kingdom, where Ruby Dragon Furniture PLC is located. They do not differ regardless of a company’s type, whether it is a public or a private entity, and depend on the shares (Watson and McKenzie, 2019). In this case, the investors cannot be responsible for the occurred financial losses (Watson and McKenzie, 2019). Meanwhile, they have a right to receive profits identified in the available official documents from specific operations and have access to comprehensive, credible information regarding the business’ position, allowing them to make crucial decisions (Watson and McKenzie, 2019). As can be seen from the description of the emerged problem, these two provisions were not respected by the company’s directors, and this fact determines the chance for investors to take legal action against them.

The Provision of Misleading Information and Directors’ Duties

The main factor, which allows characterizing the situation as a breach of obligations before shareholders, is the inclusion of misleading information in the prospectus of Ruby Dragon Furniture PLC. This decision made by the directors on the basis of their uninformed opinions regarding the possibility of receiving the license to import goods from Myanmar is a sufficient reason for lawsuits from affected persons. As follows from Section 90 of the Financial Services and Markets Act (FSMA), it is critical to “enable investors to make an informed assessment of the issuer and the rights attaching to the securities” (Edwards and Ford, 2020). Therefore, the consequent legal action of the damaged party in this respect is inevitable.

In addition, the duties of directors corresponding to the identified violation are connected to several conditions. As per the general provisions of business law, they include the necessity to “act in compliance with the company’s constitutional documents and in a way that promotes the success of the company for the benefit of its members” (“Breach of directors’ duties,” 2018). This statement is complemented by the Companies Act 2006, according to which a director’s misconduct leads to restitution of profits and compensation for damages (“Breach of directors’ duties,” 2018). Thus, the above regulations allow concluding the possibility of applying legal methods for resolving the conflict.

The Suggested Course of Action

Taking into account the examined provisions of FSMA and the Company Act 2006, it is reasonable to suggest a specific course of action for the investors of Ruby Dragon Furniture PLC. However, in this case, only proving the violation of their rights related to the presentation of misleading information is possible. This conclusion is conditional upon the fact that this event does not correspond to the principles of determining the committed act as fraudulent misrepresentation. For this, it is required to ensure that a false representation was evoked by the directors’ recklessness leading to the shareholders’ reliance on these data, and the people making statements honestly believed in their correctness (Kennedy, 2020). The first two factors are involved, but the last regulation is not met because the directors themselves relied on the opportunities to cooperate with firms from Myanmar.

Consequently, the best course of action would be the use of Sections 90 and 90A of FSMA to receive compensation for the damage. They include the measures applicable to “untrue or misleading statements or omissions” and, therefore, are suitable for this occasion (Moulding et al., 2019). The first part of the section incorporates the general requirement for addressing the problem by following the above suggestion, which is to pay for the losses (Moulding et al., 2019). In turn, the second part, Section 90A, provides for more specific regulations as it establishes the adverse outcomes in terms of profitability related to particular shares and circumstances of their acquisition (Moulding et al., 2019). In this way, the use of the mentioned legal provisions is an optimal solution for the investors.


To summarize, the shareholders’ rights as per the regulations in the United Kingdom include the necessity to have access to credible information for making informed decisions, and the incurred losses are related to this statement. Hence, the inclusion of non-existing partnerships with firms from Myanmar is subject to legal regulations, as per Section 90 of FSMA and the Company Act 2006. Thus, the best possible course of action for investors is to use these documents to claim compensation.

Reference List

Breach of directors’ duties (2018) Web.

Edwards, H. and Ford, J. (2020) The securities litigation review: United Kingdom – England & Wales. Web.

Kennedy, A. (2020) Director liability for misleading statements. Web.

Moulding, I., Yates, C., Epstein, J. and Byrne, R. (2019) Securities litigation gathers momentum in the UK. Web.

Watson, N. and McKenzie, B. (2019) Shareholders’ rights in private and public companies in the UK: overview. Web.

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