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A comprehensive set of questions and answers covering key topics in company law and employment law, including director's duties, shareholder remedies, unfair dismissal, and acquisition agreements. It is a valuable resource for students preparing for blp exams, offering insights into common exam questions and providing verified solutions.
Typology: Exams
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Ways to indemnify directors - ANS ✓1. insurance
Foss v Harbottle - ANS ✓Derivative Action - which allows a minority shareholder to bring a claim on behalf of the company (minority shareholder remedies) s260- 263 Pedley v Inland Waterways Association Ltd - ANS ✓- directors refuse to place the s.168 CA 2006 resolution on the agenda for the general meeting because they are not bound to place the removal resolution on the agenda for consideration at a forthcoming general meeting Bushell v Faith - ANS ✓- involved a family company, father of the business had three adult children; 2 daughters and a son. Difficulty was the son hated the sisters and vice versa. Father was worried that holding 2/3 of the vote (sisters) would push the brother out.
burden of proof switches to employer ACAS code of practice, employee handbook (reason 1 & 2 requires employer to investigate & establish facts of case to hold meeting with employee & inform them of problem) - if not follow proper procedure, compensatory award can be increased by 25%)
Warranties - ANS ✓Binding statement of fact made by seller about the target company in the acquisition agreement (if factually incorrect, buyer can claim damages for breach of contract) Indemnities - ANS ✓A promise from the seller to the buyer to reimburse the buyer on £ to £ basis in respect of any liability arsing after completion by reference to pre-completion events (seller expected to cover costs of any such liability) Retention (escrow) account - ANS ✓Part of purchase price is put into a bank account opened in the joint names of a seller and buyer pending the outcome of eg. litigation involving target company Conditions precedent - ANS ✓Where consents, clearances or completion of specified documents is a pre-requisite to buyer entering into SPA De Maximis - ANS ✓Financial cap on amount a seller can be required to pay in respect of warranty/indemnity claims under SPA De Minimis - ANS ✓lower level which warranty/indemnity claims cannot be brought (avoiding nuisance claims) Buyers Prefer - ANS ✓Business Sales (Asset) Sellers Prefer - ANS ✓Share Sales Disclosure Letter - ANS ✓Prepared for seller's solicitors, qualifies warranties
Acquisition Agreement - ANS ✓Prepared by buyer's solicitors, includes warranties and indemnities. Heads of Terms - ANS ✓Largely non-binding (but moral force), sets out key terms of the transaction as agreed between the parties and key steps the parties have agreed they will (or will not) take during negotiations. Purpose is to avoid misunderstanding and wasting time and costs. fraudulent trading - ANS ✓where a person continued trading even though he knew the company could not pay its debts and the business is carried on with the intent to defraud creditors (or any fraudulent purpose) S213/ 245ZA - imprisonment up to 10 years & fines, liability to contribute to company assets, disqualification as director s10 CDDA dishonesty Wrongful trading - ANS ✓s214/246ZB - at some point before the commencement of the winding up of the company, a director knew, or ought to have concluded, that there was no reasonable prospect that the company would avoid going into insolvent liquidation. It is established by proving negligence but no liability if every step taken by director to minimize creditor losses. Consequences include liability to contribute to company assets and disqualification for the director Reasonably diligent person test - ANS ✓s214/246ZB - Objective (4)(a) or subjective (4)(b) test applied to wrongful trading - higher of the 2 standards
members voluntary liquidation - ANS ✓when shareholders decide to close the company but the company still has money to pay its debts (solvent, surplus distributed)
Whitewash procedure - ANS ✓before 1st Oct 2008, company under CA rules Prohibition on financial assistance applied to target company (public & private) & any subsidiaries (public/private) - make unlawful transactions lawful