discovered that the company had sold building materials to another company in which
George and Tony are the only shareholders. Fred brought this matter up at a board meeting.
Since this time Tony and George have passed two ordinary resolutions. The first removed
Fred as a director. The second ratified the sale of the building materials.
Advise Fred of any rights which he might have.5 A medium-sized company which manufactures furniture wants to borrow money. To do this
it will need to issue debentures.
(a) Over what types of assets might it issue a fixed charge?
(b) Over what type of assets might it issue a floating charge?
(c) Which type of charge would give the lender the greater security?
(d) What precautions should be taken by (i) the manufacturer and (ii) the lender?6 A friend of yours runs a small company and is in need of capital. The company is prepared
to raise the capital by issuing ordinary shares, preference shares or debentures. In which way
would you be most willing to contribute if:
(a) You were sure that the company would prove to be extremely successful?
(b) You thought that the company might face severe difficulties?7 ‘The rule in FossvHarbottlecan operate very unfairly against minority shareholders. However,
there are many legal safeguards to make sure that this does not happen.’ Explain the protec-
tion given to minority shareholders to prevent the majority from abusing their positions.Task
Five friends of yours are considering going into business together as painters and decorators.
Your friends have asked you to draw up a report, dealing briefly with the following matters.
n How limited companies are controlled and managed.
n The different roles of directors, the company secretary and auditors.
n The powers which can be exercised by a company’s shareholders.
n How minority shareholders in a company are protected against abuse by the majority.
n How companies and partnerships are wound up.328 Chapter 11Companies (2): Management, control and winding up
Visit http://www.mylawchamber.co.uk /macintyreessentialsfor:Access to the accompanying Pearson eText– an eBook
version linked to all of the resources below which you can
personalise with your own notes.Multiple choice questions, flashcards and practice exam questions, to test
yourself on this chapter.Use Case Navigatorto read in full some of the key cases referenced in
each chapter.premium