This paper contains 6 questions in TWO sections: Sections A and B
Answer THREE questions only:
- You must answer at least ONE question from Section A and ONE question from Section B.
Word Count: 2,500 words in total
SECTION A – Essay-Type Questions
Question 1
In Bratton Seymour Service Co Ltd v Oxborough [1992] BCLC 693, Steyn LJ stated that upon registration, by virtue of the then section 14 - today section 33 CA 2006 - the articles of association become a statutory contract between a company and members. It has, however, its own distinctive features that make them different from a common law contract.
Discuss critically the special nature of this statutory contract.
Question 2
-If people choose to conduct their affairs through the medium of corporations, they are taking advantage of the fact that in law those corporations are separate legal entities, whose property and actions are in law not the property or actions of their incorporators or controlling shareholders- (Browne-Wilkinson V-C in Tate Access Floors Inc v Boswell [1991] Ch 512 at 531).
In the light of the above scenario critically evaluate the concept of piercing the veil of incorporation and its modern days applicability.
Question 3
The separation between ownership and control has caused that, in certain companies, members do not control the day-to-day decisions made in the business.
Critically discuss whether this separation has granted excessive powers to directors.
Question 4
‘In 1997, the Law Commission recommended that the common law action be replaced with a statutory derivative procedure with more modern, flexible and accessible criteria for determining whether a shareholder may bring a statutory derivative claim under Part 11 of the Companies Act 2006’.
Critically discuss the above statement in light of the 2006 reform as well the common law derivative action.
Question 5
‘The UK Company law pre-1985 position did not seek to aid companies experiencing financial difficulties. This was radically changed by the Insolvency Act 1985, now found in the Insolvency Act 1986, which have introduced pro-rescue procedures’.
Critically discuss the above statement.
SECTION B – Problem-Solving Questions
Question 6
At a recent board meeting, the directors of Genesis plc discussed several potential transactions, whose lawfulness has raised concerns amongst members. These are the main matters:
Robert, who chairs the remuneration committee, recommended that all directors of Genesis plc be provided with a £6,000 payment when they leave office. This term would be added to the directors’ service contracts as they were renewed. Robert notes that his contract is due for renewal in a few months’ time and, to demonstrate his long-term commitment to Genesis plc, he states that he would be willing to sign a five-year contract.
The board discussed the need to build new offices and Ray stated that he found a suitable piece of land, whose price was £200,000, upon which a new building could be built. Ray did not disclose, though, that the land was owed by his wife. If the sale went ahead, Ray would receive a £20,000 commission.
The board has authorised Rishi, a renowned businessman, to negotiate and conclude a supply agreement, that would involve luxurious furniture, with LuxFurniture Ltd. However, unbeknownst to Genesis’s board, Rishi is a major shareholder in LuxFurniture Ltd. Rishi informed the board of LuxFurniture Ltd that, if they followed his instructions, he could secure a contract with Genesis plc.
Discuss the lawfulness of the above transactions. Discuss what steps could be taken to avoid a possible breach of the law.
KEY POINTS
You must be able to show that you have a fundamental understanding of the topics and are able to discuss and critically analyse elements which are central to the questions.
The focus of this assignment is on critical analysis, rather than research skills, and therefore you are not required to provide referencing (footnotes). You must, however, recall relevant authorities in-text (statutes, case law etc.). Everything that goes beyond the word limit, it will not be considered. Given the tight word count, students should ensure they utilise an efficient structure in addressing this task. Please indicate which question you are answering by providing a heading. Please include word count after each section.