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University of Essex: LW225-6-FY

This document contains instructions for a 3-hour Company Law exam consisting of 6 questions. Candidates must answer 3 questions and are allowed to bring unmarked Company Law statutes into the exam. The exam instructions remind candidates to remain seated until their answer booklets have been collected and they are told they may leave. The 6 exam questions cover a range of topics in Company Law, including directors' duties, shareholders' rights, and issues that can arise between shareholders and directors in decision making.

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Roxana Milica
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31 views

University of Essex: LW225-6-FY

This document contains instructions for a 3-hour Company Law exam consisting of 6 questions. Candidates must answer 3 questions and are allowed to bring unmarked Company Law statutes into the exam. The exam instructions remind candidates to remain seated until their answer booklets have been collected and they are told they may leave. The 6 exam questions cover a range of topics in Company Law, including directors' duties, shareholders' rights, and issues that can arise between shareholders and directors in decision making.

Uploaded by

Roxana Milica
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
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LW225-6-FY

UNIVERSITY OF ESSEX
LL.B Parts I and II Examinations, 2009
____________________________________________________________________

COMPANY LAW
____________________________________________________________________
Time allowed:

3 hours + 15 minutes reading time

The paper consists of SIX questions

Candidates must answer THREE questions

Candidates are permitted to bring in unmarked Company law statutes.

Please do not leave your seat unless you are given permission by an Invigilator.
Do not communicate in anyway with any other candidate in the examination room.
Do not open the question paper until told to do so.
All answers must be written in the answer book(s) provided.
All rough work must be written in the answer book(s) provided. A line should be drawn
through any rough work to indicate to the examiner that it is not part of the work to be marked.
At the end of the examination, remain seated until your answer book(s) have been collected
and you have been told you may leave.

LW225-6-FY
1. Imagine that your client is a member of the board of directors of a large company that owns
a subsidiary which imports and sells computers. He has heard that the computers might
have a defect which causes keyboard strain in users. The subsidiary has already purchased
1000 of the machines but has not yet paid for them. The payment is due in three months.
Concerned about possible future litigation arising from the defects, your client wants to
create a new subsidiary and transfer all of the existing subsidiarys assets to it. He knows
that this will make it impossible to pay for the machines, but at the same time he hopes that
this will, as he puts it, allow a new start in a fresh line of business.
Please advise him.
2. If the shareholders controlling 51% of shareholder votes want the board of directors to do
something, then the board must, as a matter of law, comply with their wishes.
Evaluate this proposition
3. Please explain the reasons for and against each of these two conflicting views:
George: The Companies Act 2006 has made it clear that directors of companies owe
duties to groups and individuals other than shareholders.
Clara: I disagree. The directors duty under the Act is that of serving the interests of
the companys shareholders.
4. Consider this difference of opinion:
Michael: The board of directors of a typical UK company is made up of amateurs.
That is, they have not passed any examination qualifying them to carry out their
functions. It would, therefore, be wrong to hold them to a standard of skill as if they
were professionals.
Mary: I disagree. Those affected by companies in todays world cannot afford to
allow them to be run as amateur operations. The law should reflect this concern.
Which of these views, or a possible third, best describes the objective and content of the
present law?
5. Consider this disagreement:
John: In anticipation of a takeover the directors should do nothing to disturb the rights
of the majority of existing shareholders.
Ann: I disagree. The directors are entitled to affect the majoritys rights if doing so is
clearly to the benefit of the company.
Does UK Law support John or Ann or some third position?

LW225-6-FY

6. Jack and Jill and Bob are the only shareholders in Acme Films Ltd, and all three individuals
are directors of the company. Jack and Jill each hold 35% of Acme shares and Bob owns
30%. Each share carries one vote. The company specialises in documentaries about war
zones for TV news channels. Jack and Jill want to branch out into the lucrative field of
filming sports events. Bob disagrees. Jack and Jill have considered the following options
and wish your advice:
a) Jack and Jill are thinking of buying a majority of the shares in a separate company,
Expert Films Ltd. Expert Films would take the contract for filming a sporting event
which has been offered to them last week by a TV sports channel. They would then
divide their efforts between the two companies. This would, they know, drastically
reduce the revenue coming into Acme, but their response is that this is Bobs fault. He
needs simply to have gone along with them.
An alternative strategy would be:
b) Jack and Jill would vote to remove Bob from the Acme board. Bob had originally
joined Acme as an employee. Jack and Jill had been impressed by his performance, and
had allocated shares and a position on the board to him. Since they no longer agree
with him about company policy, they say, they have lost confidence in him. He can
stay on as an employee, they concede, but would no longer have a say in company
policy, and would have much less income.
Please advise Jack, Jill and Bob on the legal issues that these two courses of action raise.

END OF PAPER

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