COMPANY LAW

CAT II

Kindly make sure your work adheres to academic standards and shows evidence of research.
Copy pasting will strictly be penalized.

John and Jane are directors of Mugumo Limited and each holds forty per cent of the ordinary
shares. The remainder is held by Mark.

In addition to the shares, John also holds debentures issued by Mugumo Limited, redeemable on
5th January 2020. John wishes to dispose of her shares and debentures.

On the other hand, Jane and Mark do not wish John’s substantial interest in the company to pass
to other people upon the sale of the shares and debentures.

Advise Mugumo Limited on the legality of each of the courses of action listed below:

(a) Mugumo Limited will raise the necessary funds and purchase the shares and debentures.(6
marks)

(b) Mugumo Limited will raise funds and lend them to Mark so that he may purchase John’s
debentures. Mark will also arrange for a private loan guaranteed by Mugumo Limited so that he
may purchase John’s shares.
(6marks)

(c) A new company, Pendo Limited, will be formed and eighty per cent of its ordinary shares
will be held by Mugumo Limited. Jane and Mark to hold ten per cent each. Pendo limited will
borrow money to buy John’s shares and debentures. (4 marks)

You have been appointed a liquidator of General merchants limited. Wright a report of your roles
highlighting your powers with and without court sanctions.(14mks)