THIS PAPER IS NOT TO BE REMOVED FROM THE EXAMINATION HALLS

UNIVERSITY OF LONDON LA3021 ZB

DIPLOMA IN THE COMMON LAW

LLB

ALL SCHEMES AND ROUTES

BSc DEGREES WITH LAW

Company Law

Wednesday 29 May 2013: 14.30 – 17.45

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.

© University of London 2013

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PART A

1. “The new UK Corporate governance code has been a great success.”

Discuss.

2. Does the Companies Act 2006 facilitate running a business?

3. “Stakeholders are now well served by all companies because of s.172

of the Companies Act 2006.”

Discuss.

4. Why are the articles of association so ineffective as a contract?

PART B

5. Jan is owed a substantial amount of money by Stick Ltd. Stick Ltd is

owned by Rap PLC through a complex chain of subsidiaries. Rap is
having severe financial difficulties. On the advice of its accountants
Rap removes all the assets from Stick Ltd and places it in liquidation.
Jan remains unpaid and wishes to get her money from Stick or Rap.

Advise her as to the difficulties she faces.

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6. Stephanie is the chief executive of Landholdings Plc. The company
has two other directors: Tom, a qualified land surveyor, and Gordon,
who is Stephanie’s personal fitness trainer.

The company owned a piece of land in London. Stephanie was

approached by Victoria. Victoria told Stephanie she was interested in
buying the land, in order to build a house on it. Victoria also told
Stephanie that she would be delighted if Fastbuild Ltd, a company in
which Stephanie owns 25% of the shares, submitted a bid to carry out
the work to build the house.

Stephanie called a board meeting of Landholdings, and persuaded the

board to sell the land to Victoria for £99,000. She mentioned to the
board that Victoria was buying the land to build a house, and that
Fastbuild Ltd was going to bid to carry out the building work. After two
minutes’ discussion, the other directors approved the sale of the land,
and Fastbuild subsequently won the contract to build the house.

John, a shareholder in Landholdings, has now been told that the land
was probably worth twice what Victoria paid for it, and that Fastbuild
made a profit of £150,000 on the contract with Victoria to build the
house.

Advise John whether any of the directors of Landholdings breached

their duties to the company.

7. David, Eleanor, Fiona and Gertrude are the four equal shareholders,
and only directors, of Linnet Ltd. The company was formed in 2010.
Prior to that time, the four shareholders operated the business as a
partnership. When the business was operated as a partnership, it was
understood that David would not interfere in the day-to-day
management of the business. As the partnership was very profitable,
David was happy with this arrangement. Linnet’s articles contain a
provision stating that no shareholder shall be entitled to bring
proceedings under section 994 of the Companies Act 2006.

Unfortunately, since 2012 the company’s profits have declined sharply.

David has tried to insist on having more of a say in the running of the
company. The other shareholders have responded by removing him
as a director of the company. They have also made clear that any
profits earned by the company in the future will be paid as salary to the
remaining directors. Moreover, David’s daughter Helena, who was
working for the company, has been dismissed. David claims this was
done to punish him.

Advise David whether he could successfully bring proceedings under

section 994 of the Companies Act 2006 and, if so, what remedy the
court would be likely to give him.

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8. Tess is the new managing director of Bakker Ltd, a bakery based in
London. The company incorporated many years ago with an objects
clause that states ‘The business of the company will be to manufacture
chocolates.’ The articles of association also state that decisions on
substantial property transactions must be approved by a majority of the
shareholders.

As part of Tess’s assessment of the company before she was

appointed, Tess noticed that the objects clause was incorrect and that
the business had changed substantially since incorporation. She is
concerned about this development but does not fully understand the
consequences. Her first order of business is to purchase a new
building to expand the bakery funded by a substantial loan from X
bank. She is aware of the necessity for shareholder approval but does
not have time to get it so goes ahead anyway and purchases the
building. Afterwards Tess comes to you for advice as to the objects
clause and the property transaction.

Advise her.

END OF PAPER

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