Part 2Business organisations
198
1 Able and Ben are the promoters of Wye Ltd and
are the two subscribers to the memorandum. The
documents required to be sent to the Registrar of
Companies in order to obtain the incorporation of
Wye Ltd are ready to go. One of Wye Ltd’s objects
is to acquire the business of John Wye. John is
getting difficult and insists that a contract for the
sale of his business shall be signed now or the
deal is off.
Advise Able and Ben, who do not want to lose the
opportunity to acquire John Wye’s undertaking.
2 The articles of association of Trent Ltd state that
Cyril and David are appointed until aged 60 as
Company Secretary and Chief Accountant
respectively at salaries of £30,000 per annum.
Cyril and David took up their posts five years ago,
when they were 35 and 40 respectively.
(a)Cyril has received a letter from the Chairman
of Trent Ltd discharging him from the post of
Company Secretary. Cyril would like to retain the
job;
(b)David has given his resignation to the Board of
Trent Ltd but the Board will not accept it.
Advise Cyril and David.3 Derwent Ltd has suffered declining profits for four
years. The directors have not declared a dividend for
three years and in order to avoid facing the
shareholders did not call an AGM last year.
Eric, who holds shares in Derwent, has got
together with some of his fellow shareholders to
form a group to see what can be done to get the
company better managed.
Write a letter to Eric advising him and telling him
how the group should proceed in practical terms.4 Severn Ltd runs a very successful business and makes
a good profit. However, over the past few years the
controlling directors have increased their remuneration
so that it absorbs all the profits. Jane, who is a minority
shareholder not on the board, gets no dividends and
wishes to do something about this state of affairs.
Explain to Jane what action she should take.Self-test questions/activities
charged property and any goods in its possession under
a hire-purchase agreement provided the holder of the
security or owner of the goods or the court agrees. The
holder of a fixed charge and the owner of goods on
hire-purchase are entitled to have the proceeds of sale
applied to the repayment of the loan or debt but the
holder of a floating charge is not but retains a charge of
equal priority to his original charge over the proceeds of
the sale or disposal of the charged property.
10 Moratorium committee. In a case where the mora-
torium is extended there is provision for the setting
up of a moratorium committee to exercise functions
conferred upon it by the meetings of members and of
creditors. The meetings must approve an estimate of the
committee’s expenses.
11 Effect of CVA.The CVA when approved binds all
creditors including unknown creditors, which includes
those creditors who were not, having followed the
procedures in the insolvency rules, served with notice of
the relevant meetings. The provision would not cover
deliberate exclusion of creditors, which would lead to
the invalidity of the relevant meeting and any CVA
approved at it. Creditors not receiving notice can apply
to the court on the grounds of unfair prejudice and the
court may revoke or suspend the approval of the CVA.
Otherwise, these creditors are entitled to dividends payable
under the arrangement only. On the approval of the
CVA the nominee becomes the supervisor.
12 Offences by officers of the company. The Act
provides that during the 12 months prior to the start
of the moratorium any officer of the company who has
committed certain acts, e.g. fraudulently removed the
company’s property worth £500 or more or falsified the
company’s records in relation to its property, commits
an offence, as does an officer who acts in a similar way
during the moratorium.
It is also an offence for an officer of the company to
try to obtain a moratorium or an extension of it by mak-
ing false statements or fraudulently doing or not doing
any act.