#10104 - Large Company Procedure - Business Law and Practice

QUESTION ONE: Study the shelf company documents and make a list of the items that still need to be completed.

• The name needs to be changed to Charlestone Mills Ltd (CM)

• The registered office needs to be changed to the same as CPL at Fountain Park

• The accounting reference date needs to be changed to 31 March

• Appointment of:

  • Tony Li as chair and managing director

  • Nick Berkley as the finance director

  • Gemma Jackson as a non-executive director

• Transfer Nicola Simms’ shares accordingly (so that CM won’t be wholly-owned subsid.):

  • One to CPL

  • One to Nick

• Allotment of shares to CPL (199,000 for 199,000 shares) and Nick (24,999 for 24,999 shares)

• Purchase the freehold warehouse from Yorkshire Mills for 7million in cash. Remember that Nick owns 30% of the issued shares in Yorkshire Mills.

QUESTION TWO: Prepare an explanation about whether any shareholder resolutions are required to implement these remaining items.

Decisions that do not require shareholder resolutions

The board of Newco can resolve to deal with the following without shareholder approval:

1. Appoint Tony as MD (MA3 and MA19(1));

2. Appoint Nick as a director (MA17(1)(b)) and finance director (MA3 and MA19(1));

3. Appoint Gemma as a director (MA17(1)(b))

4. Register CPL and Nick as members holding one share each (MA26)

Decisions that do require shareholder resolutions

QUESTION THREE: Prepare a chronological plan of the meetings necessary to implement these remaining items from your supervisor’s instructions, with the first board meeting taking place on 13^th of next month. If any members’ resolutions are required, use written resolutions rather than general meetings.

1. Board Meeting

1. Notice

• MA9 and Re Homer: the BM must be validly called by any director by giving reasonable notice to the others.

• Tony is the only director, so he must know it will be held on 13^th of next month.

2. Quorum

• Special Article 3.1: at least one director (Tony) must turn up to satisfy the quorum requirements.

3. Directors’ Interests

• Tony has an interest in his appointment as Managing Director of Newco

• Once Nick is appointed as director, he will have an interest in

  • his proposed appointment as finance director;

  • the registration of transfers to both him and CPL;

  • the allotment of shares; and

  • the purchase of the freehold premises.

• Special Article 3.4: all interested directors can count in the quorum and vote on board resolutions in spite of any interest they may have.

• Special Article 1.2 removes the effect of MA14 (conflict of interest)

4. Declarations of Interest

• Tony (in his appointment as MD) and Nick (in his appointment as FD) would not need to declare their interest in the proposals under s.177 because the other directors are clearly aware of them (s.177(6)(b)).

• It is a matter of good practice to declare them anyway.

• Nick’s interest in the transfer of shares and purchase of the freehold property arise out of his YM shareholdings which the other directors may not be aware of. Therefore he should declare them.

5. Board Resolutions

• The board must have the properly executed Stock Transfer Forms from Phil and Nicola at hand (s.770). They should be signed by CPL and Nick. The directors have discretion whether to register the transfers (MA26).

• The board will resolve to:

  • Appoint Tony as MD (MA3 and MA19(1))

  • Appoint Nick as director (MA17) and then as FD (MA3 and MA19)

  • Appoint Gemma as director (MA17)

  • Register Nick and CPL as members, each holding one share

  • Approve the terms of the subscription letters from CPL and Nick

  • Approve the terms of the draft contract for the purchase of YM (subject to obtaining the necessary resolution from the members)

  • Propose written resolutions (WR)

6. Voting

• Each director has one vote at the BM on a show of hands

• All decisions are passed by simple majority (MA7)

• Resolutions 1 and 2 will be passed easily because Tony is the only director

• After Nick’s appointment, the others will be passed if both Tony and Nick vote in favour of the resolutions

2. Internal Administration

Prior to circulating the WRs, both Nick and CPL must be updated on the Register of members to that they are eligible members to vote (s.112)

3. Written Resolutions

1. Distribution

• The WR must be provided to all members for signature (s.291(2)) and auditor (s.502)

• After resolving to distribute the WRs, the directors will ask us to give all eligible members (Nick and CPL):

  • The WR (s.291(2))

  • Statement explaining how to signify agreement and the 28 day deadline for returning the WR (beginning with the circulation date) (s.291(4) and s.297)

2. Voting

• One vote per each voting share they own (s.284(1)(a)). So, one each.

• There must be more than 50% to vote in favour to pass the OR (s.282(2)).

• There must be at least 75% to vote in favour to pass the SR (s.283(2))

• The resolutions will all be passed as soon as an authorised signatory on behalf of CPL and Nick have signed and returned them to the company (s.296(4))

4. Reconvened Board Meeting

• Notice, interests and declarations have all been made as above.

• The quorum is now 2 because Nick is now a director.

1. Board Resolutions

• The board will now be able to complete the allotment and resolve to complete the SPT under their general powers under MA3

• The board resolves to:

  • Allot 199,999 shares to CPL;

  • Allot 24,999 shares to Nick;

  • Execute the share certificate for CPL and Nick;

  • Authorise two out of Tony, Nick and Gemma to sign the share certificates;

  • Enter into and execute the property contract and property transfer for the Yorkshire Mills site; and

  • Authorise two out of Tony, Nick and Gemma to sign the purchase contract and execute the property transfer.

2. Voting

• The resolutions will...