November 2020 Exam

Question 1

When a company enters administration there is a moratorium on certain legal proceedings. Explain the effects of the moratorium.

Answer 1

(1) The effects of the moratorium are that as long as the company remains in administration, then without the consent of the administrator or the permission of the court:

• (1) no step can be taken to enforce security over the company’s property;
• (1) no step can be taken to repossess goods subject to a hire purchase agreement;
• (1) a landlord cannot exercise a right of forfeiture by re-entry;
• (1) no resolution may be passed for the winding-up of the company;
• (1) no order may be made for the winding up of the company, except a public interest petition;
• (1) no legal process may be commenced or continued against the company or its property

Question 2

Explain who determines how much executive directors are paid.

Answer 2

(1) Who determines the directors’ pay is a matter for the articles.

(1) If the articles are silent on this, directors’ pay can be determined by the company in a general meeting.

(1) The model articles provide that directors can determine their own remuneration for their services as directors (1) and for any other services they undertake to the company.

(1) In larger companies, the role of the remuneration setting is usually delegated to a remuneration committee.

Question 3

Explain why a fixed charge offers better security to a creditor of a company than a floating charge.

Answer 3

(1) A fixed charge is a charge over a specific asset of the company. Unlike floating charges, fixed charges generally provide the following advantages:

• (1) If the company defaults on the loan, the fixed charge holder can seize the charged asset
• (1) the company cannot sell or deal with the charged asset without the charge holder’s consent.
• (1) the charge instrument usually precludes the creation of other fixed charges without the charge holder’s consent.
• (1) assets secured by the fixed charge are not available to the liquidator if the company enters liquidation.

Question 5

Explain the difference in the ways that votes are calculated at a general meeting in public and private companies.

Answer 5

(1) Methods of calculating votes in private and public companies are set out in ss. 282 and 283.

(1) If the vote is held at a meeting, the votes counted are those cast by members who are eligible to vote, (1) who attend the meeting and vote, (1) and by proxies validly appointed by eligible members.

(1) In private companies only, the written resolution procedure is available. (1) If the vote is held under the written resolution procedure, the requisite majority is calculated based on the voting rights of the total number of members eligible to vote, and not just those who actually do vote.

Question 6

Explain the principal purposed of the Takeover Code

Answer 6

(1) The introduction to the Takeover Code provides that its principal purposes are, “to ensure that shareholders in an offeree company are treated fairly (1) and are not denied an opportunity to decide on the merits of a takeover (1) and that shareholders in the offeree company of the same class are afforded equivalent treatment by an offeror.

(1) The Code also provides an orderly framework within which takeovers are conducted.

(1) In addition, it is designed to promote […] the integrity of the financial regime.”