Chapter 6Companies5 As Secretary of Ouse Ltd write a memorandum for
the Board explaining the differences between raising
finance:
(a)by an issue of shares;
(b)by an issue of unsecured loan stock;
(c)by an issue of debentures secured by a floating
charge over the company’s asets; and
(d)by an issue of preference shares.
6 (a)How is the voluntary winding-up of a company
brought about?
(b)What decides whether a voluntary winding-up is
controlled:
(i) by the members, or
(ii) by the creditors?7 In relation to corporate insolvency distinguish
between an administrator and a liquidator.199
1 (a)How may and when must a company change
its name?
(b)Dodgy Computers Ltd is registered for the
purpose of acquiring the business of John
who has been trading under the name of
‘Supercomputers’. The company will operate the
business under that name.
What statutory rules must the company comply
with and what are the consequences in terms of its
contracts if it fails to comply with them?
2 Although the directors have the general power to
manage the company, power to carry out certain
functions is given to the shareholders either in
general meeting or by written resolution. State
and explain these shareholder powers.
3 John holds shares in Derwent Ltd and wishes to
retire and dispose of his shareholding for cash. Dick
and Harry are the other two shareholders but they
cannot afford to pay for the shares. John is thinking
of selling his shares to his brother and Dick and
Harry do not want this.
Explain to Dick and Harry how the company might
purchase John’s shares and outline the procedure to
them.
4 Corporate insolvency: a case study
Trent Ltd is a small company. John and Paul are
the shareholders and the company’s overdraft with
the Barchester Bank plc is secured by a floating
charge on the whole of the company’s
undertaking.
Problems have arisen within the company. Trent
Ltd is over-borrowed and has declining margins. The
company has started to run short of cash. It is
struggling to pay its bills and may fail in the near
future.
Nevertheless, John and Paul intend to carry on
business through the company. The bank and other
creditors are pressing for payment. John and Paul
seek your advice on resolving the present difficulties.
Matters to be addressed:
(a)The consequences for John and Paul of
continuing to trade through the company in its
present state.
(b)The suitability of a company voluntary
arrangement or administration and the steps to
be taken.
(c)The last-ditch possibility of a winding-up,
preferably without the involvement of the court.
Discuss procedures.
(d)Explain to John and Paul what steps the
Barchester Bank can take.
(e)Explain the steps that unsecured creditors can
take.Specimen examination questions