Answer questions 1 AND 2.? ? ?1. Is a public company’s proposal to repay capital to members likely to meet with opposition under the procedures in ss.641-649 and ss.630-640 Companies Act 2006?? ?? (50 marks)? ? ?
2. In 2005 Cog Down Ltd (CG) is formed to run an engineering business. In January 2006 CG borrows £10,000 from Lenda plc and this is secured by a floating charge over CG’s vehicles without covering any other assets. The floating charge is properly registered. In 2007 CG’s finances deteriorate and John, the managing director, fears that CG might ‘go bust’ by the end of the year. In June 2007 John sells off particularly valuable CG tools and equipment to his sister for a nominal price of £5.
? ?In 2008 business improves slightly and in April 2008 CG borrows £90,000 from Dee Bank plc who take, as security, a fixed charge over CG’s main building. Unfortunately this charge is never registered at Companies House but CG does in fact keep details of the charge in its own charges register. In July 2008 CG borrows £20,000 from John’s wife, Beatrice, but no security is given for the loan at this stage. In August 2010 CG transfers ownership of a storage shed to the Engineering Department of the local further education college. In return, the college places a plaque above the shed door stating: ‘Kindly donated by Cog Down Ltd’.? ?
In March 2011 CG grants a floating charge over the ‘entire undertaking’ in favour of Beatrice to secure the existing £20,000 loan and also to secure a further advance of £12,000 from Beatrice. The £12,000 is actually paid to CG one hour before the floating charge is executed. Beatrice ensures that all charge registration requirements are met. ?
?On 15 July 2012, one of CG’s unsecured creditors presents a petition to the court for CG’s compulsory liquidation. On 12 November 2012, a winding up order is granted.? ?
The liquidation process reveals the following matters:?
?(a) The tools and equipment sold to John’s sister were in fact worth £10,500. The shed transferred to the college is now worth £180,000. Advise the liquidator on whether the validity of these two transactions may be challenged. (20 marks)?
?(b) On what grounds, if any, will the liquidator be able to challenge the validity of the floating charge in favour of Beatrice?? (10 marks)? ?
(c) There is only one vehicle left and it is only worth £300. Lenda plc wants to know how the ‘Prescribed part’ sum is calculated and whether Lenda would be able to receive a share of the prescribed part.? (10 marks)? ?
?(d) Advise Dee Bank plc on the precise consequences, if any, of the failure to register their fixed charge at Companies House.?(5 marks)?
?(e) The liquidator discovers that Sylvia, who is on the list of disqualified directors, has been acting as a management consultant for CG. Managers in CG have been following her orders despite suspecting that she might have been in trouble with the authorities at some stage in the past. Consider any possible liability of Sylvia and the manager
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