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Corporate and Business Law

(English)
PART 2 TUESDAY 6 DECEMBER 2005

QUESTION PAPER Time allowed 3 hours This paper is divided into two sections Section A Section B SIX questions ONLY to be answered TWO questions ONLY to be answered

Do not open this paper until instructed by the supervisor This question paper must not be removed from the examination hall

The Association of Chartered Certified Accountants

Paper 2.2(ENG)

Section A SIX questions ONLY to be attempted 1 In relation to sources of law, explain the meaning of: (a) Case law. (b) Statute law. (6 marks) (4 marks) (10 marks) 2 Explain the process of arbitration and assess its relative advantages and disadvantages as an alternative to court proceedings. (10 marks) In relation to the intention to create contractual relations explain: (a) the meaning of the terms presumption and rebuttal. (b) how presumption and rebuttal operate in the context of; (i) domestic and social agreements; (4 marks) (4 marks) (10 marks) 4 In relation to contract law explain: (a) anticipatory breach of contract; (b) express anticipatory breach of contract; (c) implied anticipatory breach. (4 marks) (3 marks) (3 marks) (10 marks) 5 In relation to company directors explain how the following types of authority may arise and explain the extent of the authority arising under each category: (a) express authority; (b) implied authority; (c) apparent/ostensible authority. (3 marks) (3 marks) (4 marks) (10 marks) 6 In relation to company law explain and distinguish between the following: (a) annual general meeting; (b) extraordinary general meeting; (c) class meeting. (5 marks) (2 marks) (3 marks) (10 marks) 7 Explain the meaning and effect of wrongful trading under s.214 of the Insolvency Act 1986. (10 marks) 8 (a) Explain the term money laundering and how such activity is conducted. (b) Explain how the Proceeds of Crime Act 2002 seeks to control money laundering. (5 marks) (5 marks) (10 marks) (2 marks)

(ii) business agreements.

Section B TWO questions ONLY to be attempted 9 Arvo operates a small business manufacturing computer chips. In January he placed an advertisement in a computer trade magazine stating that he would supply particular chips at 75 but would consider a reduction in the price for substantial orders. He received two enquiries, one from Bell Computers plc and the other from Crash Computers plc, each requesting his terms of supply for 10,000 chips. Arvo replied to both companies offering to supply the required chips at a cost of 50 each. Both companies responded to Arvos letter stating that they accepted his offer but that they would only pay 45 per chip. Arvo wrote back to Bell Computers stating that he would supply the chips but only at the original price of 50. When Arvos letter arrived, the purchasing director of Bell did not notice the alteration of the price and ordered the 10,000 chips from Arvo, which he supplied. When Arvo wrote to Crash Computers plc, the latter responded that its maximum price was still 45. Arvo once again wrote to say that such a price was not satisfactory. Crash Computers plc subsequently sent an order for 10,000 chips at Arvos original price of 50. Arvo realised, however, that he could only fulfil one of the contracts so he wrote to Crash Computers plc stating that he could not supply the chips, even on the original terms. Arvo then received an order from Eveson Computers plc for 5,000 chips at the original advertised price of 75, which he cannot meet from his reduced stock. Now Bell Computers plc are refusing to pay more than 45 per chip and both Crash Computers plc and Eveson Computers plc are threatening to sue Arvo for breach of contract. Required: Analyse the situation from the perspective of contract law and in particular advise Arvo as to his rights and obligations in relation to all three computer companies. (20 marks)

10 Impact College Ltd provides private tuition. The college is managed by Jack, who also has responsibility for personnel matters. The College has lost a considerable number of its clients in recent years and the decision has been taken to reduce the staff numbers by ten. Fred, Gale and Hilda are amongst the 60 lecturers currently employed by Impact College Ltd. They have all worked for Impact College for the past six years. Fred has been the staff trade union representative for the past three years and has had several confrontations with Jack as to the working conditions of the colleges employees. Gale has been off work twice in the past four years on maternity leave, to Jacks stated annoyance, and is pregnant once again. Last year Hilda reported the college for breaching health and safety requirements and the college was fined a substantial amount of money. It has transpired that Fred, Gale and Hilda are amongst the ten members of staff to be selected for dismissal by the college and they all suspect that Jack has pursued a personal vendetta against them. Required: Advise Fred, Gale and Hilda, and the other seven members of staff to be dismissed, as to what action they can take against their employer. (20 marks)

[P.T.O.

11 Klang Ltd is an engineering company formed some fifteen years ago by three brothers; Liam, Larry and Lenny Lamb. The company has a nominal capital of 500,000 shares of 1 nominal value, allotted as follows: 200,000 to Liam, 200,000 to Larry and 100,000 to Lenny. The company has not been performing particularly well for some time but it has made a profit of 50,000 in the past year. Lenny has recently suffered a heart attack and needs to realise his 100,000 shareholding to help finance the purchase of a retirement home. Liam and Larry would like to help Lenny but neither of them has the money necessary to buy his shares at their nominal value and, given the companys trading situation, an outsider cannot be found to buy them at that price. The brothers would like Lou, their only nephew, to take over the shares but Lou does not have any money to finance the purchase. Required: Advise the parties as to whether there is anything that can be done to help Lenny to realise the nominal value of his shares. In particular, consider whether Klang Ltd can: (a) assist Lou to purchase Lennys shares; (b) buy the shares itself. (20 marks)

12 Mick has operated a house building business as a sole trader for a number of years. Now his accountant has recommended that he should consider registering as a company in order to gain the benefits of separate personality. He is unclear as to what is meant by this and seeks advice as to what exactly are the advantages that might accrue were he to register as a company and how he would go about registering. Required: (a) Explain the concept of corporate personality. (b) Advise Mick as to the general advantages that might follow from his change of business form. (c) Detail the procedures and the documentation required to register a private limited company. (5 marks) (8 marks) (7 marks) (20 marks)

End of Question Paper

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