THIS PAPER IS NOT TO BE REMOVED FROM THE EXAMINATION HALLS

UNIVERSITY OF LONDON LA3021 October

DIPLOMA IN THE COMMON LAW

LLB

ALL SCHEMES AND ROUTES

BSc DEGREES WITH LAW

Company Law

Friday 23 October 2015: 10.00 – 13.15

Candidates will have fifteen minutes during which they may read the paper
and make rough notes ONLY in their answer books. They then have the
remaining THREE HOURS in which to answer the questions.

Candidates should answer FOUR of the following EIGHT questions, including

at least ONE from Part A and at least TWO from Part B.

Candidates should answer all parts of a question unless otherwise stated.

Permitted materials
A student is permitted to bring into the examination room two of the following
(this could include two editions of the same publication): either Blackstone’s
Statutes on Company Law (OUP) or British Companies Legislation (Sweet &
Maxwell, previously published by CCH editions) or Core Statutes on
Company Law (Palgrave Macmillan) and one copy of each of the following:
Companies Act 1985; Business Names Act 1985; Companies Consolidation
(Consequential Provisions) Act 1985; Companies (Tables A to F) Regulations
1985 (S.I. 1985 No. 805); Insolvency Act 1986; Company Directors
Disqualification Act 1986; Financial Services Act 1986; Companies Act 1989;
Companies (Single Member Private Limited Companies) Regulations 1992
(S.I. 1992 No. 1699); Financial Services and Markets Act 2000; Criminal
Justice Act 1993; Insolvency Act 1994; Insolvency (No 2) Act 1994.; Public
Offers Of Securities Regulations 1995 (S.I. 1995 No. 1537); Companies Act
2006.

© University of London 2015

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PART A

1. “Any creditor wishing to have the separate legal personality of a

company disregarded must rely on insolvency legislation, as they will
find no support for their case within company law today.”

Discuss.

2. “It is clearly established today that the majority of a company’s

members may freely and legitimately impose their collective will on the
minority in determining alterations to the articles of association.”

Discuss.

3. “The statutory procedure for derivative claims under Part 11 of the

Companies Act 2006 has increased the complexity and uncertainty of
minority shareholders’ litigation, while effecting little increase in the
chances of claimants actually succeeding in such actions.”

Discuss.

4. “It is fair to say that, over recent decades, the ‘comply or explain’
principle has proven itself to be the true ‘genius’ of UK corporate
governance.”

Discuss.

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PART B

5. Maltings Ltd is a company that specialises in whisky blending and

marketing. The company was formed by Hamish and Ian, two whisky
enthusiasts who met while at university together. The company’s initial
share capital was £10,000, divided into 10,000 ordinary shares each
with a par value of £1, and carrying one vote each. Hamish and Ian
were originally the only directors and members of Maltings Ltd, each
subscribing for 5,000 shares. On formation, a special provision was
added to the company’s articles of association providing that, on a
resolution to remove any of the company’s members as a director, that
person’s shares should carry five votes each.

After two decades of moderately successful trading, Hamish and Ian

felt that the business would benefit from some fresh ideas. To this end,
they agreed to appoint Hamish’s daughter Janet, a recent MBA
graduate, as an additional director of Maltings Ltd. Janet was also
allotted a further 5,000 shares in the company. On being appointed to
the board, Janet took an instant dislike to Ian, who she thought was out
of touch with modern business thinking. She therefore convinced
Hamish that it would be a good idea to propose and pass a resolution
to dismiss Ian from his position as a director of the company, in order
to give Hamish and Janet sole management control over the business.

Ian strongly protests his removal from the board, which he claims is
legally invalid. He is also furious about the decision made by Hamish
and Janet to invest all of Maltings Ltd’s recent profits in expanding its
business instead of paying dividends, which he claims has left him
without any source of income from the company.

Advise Ian.

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6. Katie, Laura and Max are the directors of Air-Limo Ltd, which operates
a private jet service. The company’s sole shareholder is Naileen, a
wealthy financier who takes no part in Air-Limo’s day-to-day business
affairs.

While chatting over lunch last year, Katie, Laura and Max agreed that
they would avoid expanding Air-Limo’s business for the foreseeable
future, and therefore would only spend the company’s revenues on
maintaining the cost of its existing operations. The following week,
while attending an aviation trade fair, Max met a group of investors who
were forming a consortium to purchase a new state-of-the-art
passenger helicopter. Max accepted an invitation to purchase an
interest in the helicopter via the consortium. The passenger helicopter
business has been a huge success, and Max has already made a
significant profit on his investment in it.

Air-Limo has recently made significant losses due to penalties incurred

for a succession of late take-offs from the company’s host airport, as a
result of overworked ground staff. Max had previously voiced concern
about Air-Limo’s ground staffing policy to his fellow directors, but Katie
and Laura were adamant that keeping ground staff levels minimal was
essential for maintaining the company’s annual profit margins.

Naileen has recently found out about the above matters, and seeks
your advice whether Air-Limo would have any grounds for legal action
against any of its directors.

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7. Equine Ltd operates a horse racing business. To this end, the company
is always on the lookout for prospective new horses to add to its racing
stable. Equine Ltd’s directors are Rob and Steve, who each also has
a small shareholding in the company. The remainder of Equine’s
shares are owned by a fragmented body of small investors, who rarely
communicate with each other. Under Equine’s articles (which are
otherwise in the form of the Model Articles for Private Companies
Limited by Shares), any asset purchase of £10,000 or more, in value,
must be approved by a resolution of the company’s members in
General Meeting.

Equine was recently offered the opportunity to purchase two new

horses, Black and Grey, under two separate transactions with
independent horse breeders. The purchase of Black was negotiated
and completed by Rob, while Steve was away at a race meeting.
Purporting to act on Equine’s behalf, Rob agreed to purchase Black for
£10,000. The purchase of Grey, meanwhile, was negotiated and
completed by Tom, the company’s chief stable-hand, who occasionally
dealt with breeders when Rob and Steve were otherwise engaged.
Purporting to act on Equine’s behalf, Tom agreed to purchase Grey for
£5,000.

When Steve returns from his race meeting and finds out about these
transactions he is extremely unhappy, claiming that the horses are of
poor quality and a waste of the company’s money.

Advise Steve as to whether Equine Ltd is bound under the two

transactions.

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8. Auto Ltd is a company which specialises in the restoration and sale of
second-hand cars. The company has a share capital of £30,000, which
is divided into 30,000 x £1 ordinary shares carrying 1 vote each. Each
of the company’s three members – Brian, Claire and Dan – owns
10,000 ordinary shares. Brian is the company’s sole director. There are
originally no other classes of share in the company.

Brian, on first becoming a director of Auto Ltd, entered into a

contractual agreement with Auto Ltd which provided that in the event
of: (a) any one person acquiring 50% or more of the company’s
ordinary share capital; or (b) any change in the composition of the
company’s board of directors, Brian would have the opportunity to
subscribe for 1,000 new ‘special’ shares, each of which has a nominal
value of 1p and carries 100 votes. Brian executed the agreement on
behalf of the company, and afterwards sent copies of the agreement to
the other members. Since then, no concerns have ever been raised
about the agreement.

Brian, Claire and Dan have recently been approached by Emily, who
wishes to purchase a controlling shareholding in Auto Ltd, and is willing
to offer “very attractive terms”. Claire and Dan are both keen to sell to
Emily, but Brian is strongly opposed on the ground that, in his opinion,
a change of control will disturb the running of Auto Ltd’s business.
Brian has said that he is prepared to oppose Emily’s planned takeover
bid “at all costs”.

Advise Brian.

END OF PAPER

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