AOA PQ

2015 B

Criterion Ltd was formed in 2011. It makes walking boots. It has two
shareholders: Geoff who owns 15% of the shares, and Joanna who owns
the remainder. The two shareholders are the company’s only directors.
Each has a three-year-service contract. No shareholder resolutions were
ever passed to approve those contracts.

Criterion’s articles of association are the same as the Model Articles for a
private company limited by shares, with the following two additional
regulations. Regulation 54 provides that if either shareholder wishes to sell
their shares, they must offer them first to the other shareholder, at a price
to be determined by independent accountants. Regulation 55 provides that
Geoff shall be entitled, at a board meeting, to veto any significant change or
expansion in the company’s business.

Predator Plc wishes to take control of Criterion. Predator has offered to

purchase Joanna’s shares at a very generous price, and Joanna has
indicated she intends to accept this offer without first offering her shares to
Geoff. Joanna has told Geoff she is going to call a shareholders’ meeting to
remove regulations 54 and 55, and to remove Geoff as a director. She will
then sell her shares to Predator, and Predator will expand Criterion’s
business to include the manufacture of all types of footwear. Geoff says he
will not attend any shareholders’ meeting.

Advise Geoff whether;

(a) he can prevent Joanna selling her shares to Predator without first
offering them to him;

(b) he can prevent his removal as a director;

(c) he can prevent the company expanding its business.

Do NOT discuss in your answer whether Geoff could rely on section 994
Companies Act 2006 or section 122(1)(g) Insolvency Act 1986.

2019 A

Fairpoint Ltd was formed in 2016. The company has model articles. On
formation, the company had three shareholders. Rita owned 60 per cent.
Thomas, Rita’s son, owned 20 per cent. Serena, Rita’s daughter, owned 20
per cent. Rita agreed that she would be a sleeping shareholder and would
not interfere in the running of the company. Thomas and Serena were
appointed the company’s only directors, and both were given five-year
employment contracts as directors.

In 2018, Rita died. Her 60 per cent shareholding in Fairpoint was inherited
by John, her close friend. John is an environmental activist. He has written
to the directors instructing them to reduce substantially the use of plastics
in the company’s operations. Serena and Thomas have refused his request,
and told him he must remain a sleeping investor, as was Rita.

Advise Serena and Thomas whether:

a) John can use his majority shareholding in the company to ensure the
company follows his wishes on reducing its usage of plastic;

b) John can remove them as directors; and

c) they can take proceedings under section 994 Companies Act 2006 to
force John to purchase their shares and, if so, at what price.

2022 B

Ateef owns 80 per cent of the shares in Farmco Ltd, which owns a number
of farms. Ateef’s nieces, Badeea and Ebrah, each own 10 per cent of the
shares. The three shareholders are the company’s only directors. The
company has adopted the Model Articles for private companies, with an
additional provision, Regulation 54. This provides that on any resolution to
remove a director from office, that director shall be entitled to 10 votes per
share. Each director also has a five-year employment contract.

At a recent board meeting, Badeea and Ebrah proposed that the company
should sell one of its farms to a neighbour, Frank, who had offered an
excellent price for it. Ateef argued against the sale but was outvoted by
Badeea and Ebrah.

Ateef now wishes to take control of the company and prevent the sale of the
farm. She wishes to circulate, and pass, two written resolutions. The first
will instruct the board not to sell the farm; the second will alter the articles
by deleting Regulation 54. She then wishes to requisition a shareholders’
meeting and remove Badeea and Ebrah as directors of the company.
Badeea and Ebrah say the board will not call a shareholders meeting, and
that they (Badeea and Ebrah) will not attend any shareholders’ meeting
that does take place.

Advise Ateef whether she is likely to be able to achieve her wishes. She is
unsure whether a contract has already been entered into with Frank to sell
him the farm. (DO NOT discuss section 994 Companies Act 2006 or section
122(1)(g) Insolvency Act 1986 in your answer.)

2021A

In 2010, Pierre formed Buildit Ltd Initially, he owned all the company’s
shares and was the company’s only director. In 2020, and then aged 65, he
decided to take life more easily. He gave 30 per cent of his shares to each of
his two daughters, Queenie and Rosalyn, and appointed them to be
directors. Two additional regulations were also added to the company’s
articles. Regulation 54 says that Pierre can veto any board decision to enter
into a contract over £50,000. Regulation 55 says each director will be paid
£80,000 per year. Pierre was also given a 10-year employment contract as a
director.

In 2021, at a board meeting, Queenie proposed the company buy a piece of

land from Simon for £200,000. Pierre objected, and vetoed the proposal.
Queenie and Rosalyn told Pierre they would ignore his veto, although
Pierre is unsure whether the company has yet entered into a contract with
Simon. Pierre’s salary as a director has not been paid to him for some
months, and his daughters are also now threatening to remove Pierre as a
director.

Advise Pierre whether:

a) he can force the company to pay him his director’s salary;

b) he can prevent his removal as a director; and

c) he can prevent the company buying Simon’s land. Would your answer
differ if Simon were married to Queenie?

DO NOT discuss section 994 Companies Act 2006 or section 122(1)(g)

Insolvency Act 1986 in your answer.

2021 B

Trampers Ltd makes leather hiking boots. Gordon and Irene each own 15
per cent of the company’s shares, and Joanna owns 70 per cent. The three
shareholders are the company’s only directors. Last year, Gordon was
granted a five-year-service contract. Gordon also owns Hides Ltd, which
makes leather and supplies Trampers with all the leather it uses.

Trampers’ articles include the following two regulations. Reg.54 says that if
any shareholder wishes to sell any shares, they must offer those shares first
to the other shareholders. Reg.55 says that Trampers will buy all its leather
from Hides.

Gordon and Joanna have recently fallen out. Predator plc has offered to
buy all Joanna’s shares in Trampers. Joanna says she will accept
Predator’s offer, and without first offering those shares to Gordon or
Irene. Joanna also says that Trampers is going to stop buying leather from
Hides because it is too expensive.

Joanna has called a shareholders’ meeting to remove Gordon as a director

and to alter the articles by removing Regs 54 and 55. It is not known
whether Irene will vote in favour of, or against, altering the articles.

Advise Gordon whether:

a) he can prevent his removal as a director;

b) he can make Trampers continue to buy leather only from Hides; and

c) he can prevent Joanna selling her shares to Predator without first

offering them to himself and Irene. Would your answer differ if the
shareholders agreed informally between themselves that Reg.54 could only
be altered if all shareholders agreed?

DO NOT discuss section 994 Companies Act 2006 or section 122(1)(g)

Insolvency Act 1986 in your answer.