X Ltd intends to lend £20,000 by way of a personal loan to A, a director of Y Ltd, the holding company of X Ltd. Y Ltd owns 100% of the shares in X Ltd.
Which of the following best describes the approvals required in respect of this proposed transaction?
Shareholder approval is required by an ordinary resolution of the shareholders of Y Ltd.
X Ltd intends to lend £8,000 to its director, A. No other loans or similar transactions have been entered into between X Ltd and A. X Ltd is a 75% subsidiary of Y plc.
Which of the following best describes the approvals required in respect of this proposed transaction?
No shareholder approvals are necessary.
A is a director of X plc. They are experiencing temporary personal cash-flow issues due to a matrimonial breakdown. A agrees to rent an apartment from L, and a friend of A’s – B – agrees to make the rental payments for A until such time as A’s circumstances improve. A will then start making the rental payments and, in due course, repay B. A approaches their colleagues on the board of X plc to ask if the company could help by giving a guarantee to B for A’s liability to B. You are asked to advise the board of X plc.
Which of the following provides the best summary of advice that you would give the board of X plc based on the above facts?
The board can approve the guarantee provided the shareholders of X plc first approve the proposed transaction.
A man has recently been appointed as a director of a private limited company (with unamended Model Articles). The company intends to enter into a one-year service contract with the man at its next board meeting.
Which one of the following correctly explains the restrictions on the man under the company’s articles and the Companies Act 2006 at the board meeting to approve his service contract?
The man cannot count in the quorum or vote at the board meeting on the matter of his service contract.
A wholly owned subsidiary (the ‘Subsidiary’) of a public limited company (the ‘Plc’) is proposing to acquire plant and machinery from one of its directors. It has been agreed that the Subsidiary will pay the director £70,000 for the plant and machinery.
Which of the following best describes the requirements of the Companies Act 2006 in respect of the acquisition?
The acquisition only requires the approval of the board of directors of the Subsidiary.
A woman has been appointed as a company director. She lives two hours away from the company’s office and the other directors are concerned that she may not continue in her role unless she can reduce her commute. The directors have decided that the company should help and lend her £95,000. The company has unamended Model Articles.
Which of the following best describes the action which must be taken to ensure that the making of the loan to the woman meets the requirements of the Companies Act 2006 and the company’s articles?
The proposed loan must be approved by ordinary resolution of the shareholders of the company.
X plc is to enter into a quasi-loan with one of its directors. This will involve the company assuming liability for a series of rental payments to a third party, with the director agreeing to repay the company at a later agreed date. The transaction in question has a value of around £20,000. You have advised the company on the need for shareholder approval and X plc is going to convene a general meeting for that purpose. You have now been asked to advise on the required information to be provided to shareholders regarding the approval.
Which of the following provides the best summary of advice that you would give the board of X plc based on the above facts?
Provide notice of the proposed resolution and make available to members at the registered office a memorandum with prescribed details of the transaction for not less than 15 days ending with the date of the meeting and at the meeting itself.
A is a director of X plc, which holds 75% of Y Ltd. A enters into a contract with H Automotive Ltd for a new car, which includes a series of monthly payments over 2 years. Y Ltd agrees that it will set up a standing order to make these monthly payments to H Automotive Ltd on behalf of A. A will then repay the total of the monthly payments to Y Ltd over a 4-year period. The total of the monthly payments will be £12,000.
Which of the following best describes the approvals required in respect of this proposed transaction?
Shareholder approval is required by ordinary resolutions of the shareholders of X plc and Y Ltd.
A company, which has unamended Model Articles, is owned by two men. Both are directors of the company together with a third director, a woman. The company intends to sell its warehouse. The woman has suggested her family business could acquire the warehouse and it has been agreed by all three directors that the family business, a company solely owned and run by the woman’s husband and two sons, will buy the warehouse for £950,000.
Which of the following best describes the requirements of the Companies Act 2006 and the company’s articles in respect of the sale of the warehouse?
The shareholders of the company must approve the sale of the warehouse to the woman’s family business.
A has been appointed as a director of X Ltd. The board of X Ltd have agreed with A the terms of a service contract for an initial fixed period of three years. Because A’s appointment was made by the board, the service contract was also approved by the board at the same time. That is, no shareholder approval was sought.
Which of the following best describes the advice you would give regarding the service contract, given the above information?
The contract will be void as to the initial fixed period only and terminable by reasonable notice.
A company intends to enter into a contract for the supply of materials. The supplier of the materials is one of the company’s directors. The company is aware that s175 of the Companies Act 2006 provides that directors have a duty to avoid conflicts of interest and it is unsure how this might affect the supply contract.
Which of the following best describes the duties owed by the director if the company enters into the supply contract with him?
This is not a situation which gives rise to a conflict under s175 but the director should declare his interest.
X Ltd intends to buy equipment with a value of £15,000 from A, who is a director of both X Ltd and Y Ltd. Y Ltd owns 100% of the shares in X Ltd. The net asset value of X Ltd is £100,000.
Which of the following best describes the shareholder approvals, if any, required in respect of this proposed transaction?
Shareholder approval is required by an ordinary resolution of the shareholders of Y Ltd.
X Ltd intends to buy machinery with a value of £120,000 from Z Ltd. X Ltd is 75% owned by Y Ltd. A, a director of Y Ltd, owns 50% of Z Ltd.
Which of the following best describes the approvals required in respect of this proposed transaction?
Shareholder approval is required by ordinary resolutions of the shareholders of X Ltd and Y Ltd.
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Available Business Structures in the UK10
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Companies - An Introduction and Formation of a Limited Company7
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Public Companies13
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Fundamentals of Partnerships and Limited Liability Partnerships6
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Equity Finance - Share Capital and Allotment of Shares and Dividends9
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Purchase by a Company of its own Shares and Transfer and Transmission of Shares9
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Financial Assistance for the Purchase of Shares and Debt Finance for Companies10
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The Articles of Association of a Private Limited Company13
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Company Directors and Secretary and the Appointment and Removal of Directors9
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Statutory Controls on Contracts Between Companies and Directors13
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Shareholders6
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Company Meetings, Resolutions, Disputes within a Company, and Protection of Minority Shareholder Rights13
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Companies - Maintenance of Records, Changes to Features, and Accounts6
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Partnerhsip Management and Finance6
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Liability of Partners to Outsiders10
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Termination of and Retirement from a Partnership and Partnership Disputes9
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The Partnership Agreement6
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Company Insolvency Proceedings and Claw-Back9
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Bankruptcy8
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Income Tax7
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Capital Gains Tax11
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Inhertiance Tax0
