Related-party land purchase, minority information rights and an unlawful dividend

A director who has a material interest in a transaction must disclose that interest to the board and must not use the position to obtain an advantage for an associated company. Sokha had a clear conflict because the seller was his wholly owned company, and the $250,000 excess over the independent valuation is evidence of unfair dealing. Short notice also undermines the ability of the other directors to consider the transaction. The interested director should have abstained, and approval should have been given by disinterested directors or, depending on the company's constitution, by disinterested shareholders with full disclosure. The transaction is not automatically valid merely because it was passed 2-1. It may be voidable, and Sokha may be liable to account for the excess profit or to compensate the company for breach of fiduciary duty. Ratification would require full disclosure and the exclusion of the interested shareholder's votes; even then, a fraud on the minority or a misapplication of company assets may not be ratifiable.

Chenda should first invoke the company's constitution and the Law on Commercial Enterprises: shareholders are entitled to receive notice of general meetings, attend and vote, and inspect statutory registers and minutes. Refusal to provide financial statements and minutes is a governance failure and may support a court application to compel access or to convene a meeting. Chenda can challenge the related-party resolution as a director's conflict-of-interest breach, bring a derivative claim on behalf of the company against Sokha for the excess $250,000, and seek to restrain the unlawful dividend. Depending on the facts, Chenda may also petition the court on just and equitable winding-up grounds or seek a buyout, though that is a drastic remedy. A complaint to the Ministry of Commerce and careful preservation of evidence are practical steps. Visal's 30% stake may be enough to form a blocking coalition, so negotiation should be attempted before litigation.

Dividends may be paid only out of distributable profits and only if the company remains solvent after payment. The $200,000 accounting profit is the starting point, but the $300,000 revaluation surplus is an unrealised gain and is not distributable under prudent company law principles. A $250,000 dividend therefore exceeds the $200,000 realised profit by $50,000 and would be paid out of capital. That is unlawful unless there are other realised reserves sufficient to cover it, which the facts do not show. The directors must also consider the company's liabilities, cash position and the pending challenge to the land purchase, which could reduce net assets. Directors who authorise an unlawful dividend may be personally liable to repay it and may face disqualification or regulatory action. The dividend should be reduced to a lawful amount, supported by proper accounts and a solvency assessment.