Documente Academic
Documente Profesional
Documente Cultură
year 3 Semester 1
Students are required to review all questions for tutorials/ week commencing 16th
November,2014..
CHAPTER 1
NATURE OF A COMPANY
1."Under the ordinary rules of law, apresent company and a subsidiary company, even
a 100 per centsubsidiary company, are distinct legal entities and in the absence of an
agency contract between thetwo companies, one cannot be said to be the agent of the
other. This seems to be clearlyestablished by the rule inSalomon v. A. Salomon & Co.
Ltd."
Critically discuss.
MINORITY SHAREHOLDERS
2."The principle laid downinFoss v. Harbottlecontinues to create a significant obstacle to
minorityshareholder action."
Discuss.
In order to secure machinery, Stacy writes to Health Fanatic Inc., on Layton Co. Ltd.'s
stationery,offering Health Fanatic Inc. the contract to provide technical training for any
staff employed by thespa.Health Fanatic Inc. accepts the offer.
Layton Co. Ltd., now refuses to build the health spa due to a depression in the market
and isconsequently not in need of Health Fanatic Inc.'s services.
Discuss.
SALOMAN V SALOMAN
PRE INCORPORATION
4. Tamara and Kathy have been conducting business as artefact restorers for several
years. In January, 1999, Tamara and Kathy decided to incorporate their business. In
order to facilitate the buildingof the registered head office of the company, Tamara
purchased land from her grandfather for$50,000.
Meanwhile, Kathy executed a contract on behalf of Heritage Ltd., engaging the services
of Sherry,a geology expert, to carry out a geological survey. Sherry submitted a report
headed "subject toconfirmation" which stated that the land was suitable for building a
multistoried complex and thatthere was evidence of mineral deposits.
In June 2004, Heritage Ltd. was incorporated as a public company with Tamara, Kathy
and Billas its directors.Tamara promptly sold the parcel of land to Heritage Ltd. for $2.2
million andsubmitted an invoice for $70,000 for services rendered prior to the
incorporation of Heritage Ltd.
In April 2005, Tamara, unbeknown to the board, enters into an agreement with Jump Up
Inc. forthe acquisition of a fleet of trucks. It is customary for Heritage Ltd. to lease trucks
as acquisitionis extremely costly.
Advise.
The capital of Bush Tea Co. Ltd. consists of fully paid up ordinary and preference
shares. The governingregulations of Bush Tea Co Ltd. provide as follows:
"17(a) Preference shareholders shall receive a cumulative preference dividend of 5%
half yearly;and
(b)Two votes shall be attached to each preference share issued."
Due to an outbreak of the Pink Mealy bug disease, the production of bush tea has
dramatically declined.
The board of directors of Bush Tea Co. Ltd. proposes to alter clause 17(a) of the
governing regulationsto reduce the preference dividend from 5% to 2% and to move a
resolution to increase the votingrights of ordinary shareholders.
Advise the preference shareholders.