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Business Law and Practice Model Answers
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Model answers to core module BLP - practice assessment and one other past paper (questions included in the text).
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Allotting SharesSpoils Limited (the ‘Company’) has an issued share capital of 2,000 ordinary shares of £1 each
which were issued at nominal value - no premium. The Company is proposing to allot 1,000
preference shares of £1 each, for cash at nominal value. These preference shares will carry the
right to a xed (capped) annual dividend of 5% of the nominal value of the shares and a xed
(capped) right to participate in the assets of the Company on a winding up. The Company was
incorporated in 1999 and its memorandum of association states that it has an authorised share
capital of £2,000, divided into 2,000 ordinary shares of £1 each. When the Company was
incorporated it was not envisaged that it would issue preference shares. The Company has not
reviewed its articles since the Companies Act 2006 came into force.
Based on these facts, which of the following statements is/are CORRECT?
i) The Company can pass an ordinary resolution under the transitional arrangements to remove
the restriction in its articles deriving from the authorised share capital with which it was
registered under the Companies Act 1985.
ii) The Company will need to grant its directors authority to allot the preference shares.
iii) A share premium account would need to be created.
iv) The Company will need to amend its Articles of Association.
Choose ONE of the following options:
[A] i), ii) and iv) - s551 (more than one class of shares) - states that directors of a company can
only allot shares if they are authorised to do so by the company’s articles or by resolution of the
company. As the Articles are pre CA 2006, the company will need to pass an ordinary resolution
to grant the directors this power, if they do not have it already.
[B] i) only
[C] i), ii) and iii)
[D] ii) and iv)
Legal Compatibility
Paramatta Limited (‘Paramatta’) was incorporated in 2015 and currently has unamended Model
Articles. Paramatta’s two shareholders, Craig and Siobhan, each own 50 shares. Craig and
Siobhan are the only directors of Paramatta. Craig (who is the chairman) and Siobhan have
suggested a number of amendments that they would like to make to Paramatta’s articles. There is
no shareholders’ agreement in place.
Which ONE of the following proposed amendments to Paramatta’s articles is NOT legally
compatible with the Companies Act 2006?
[A] ‘Subject to Model Article 18, for the purposes of s.168 of the Companies Act 2006, no director
shall be removed from o ce except by a unanimous resolution of the shareholders in general
meeting’. - such an amendment should be made via shareholders’ resolution - it fetters the power
of the company/shareholders, and imposes a higher restriction than the MA.
[B] ‘If the number of votes for or against a proposal at a meeting of the directors are equal, the
chairman or other director chairing the meeting shall not have a casting vote. Model Article 13 is
deleted’. - MA (2) leaves this, to some extent, up to the articles
[C] ‘Subject to s.318(1) of the Companies Act 2006, the quorum at a general meeting shall be two
shareholders’. - s318(1) says that one person is needed in a company with only one member;
Paramatta has two members.
[D] ‘Any director may call a directors’ meeting by giving not less than 10 days’ notice of the
meeting to the directors’. - Browne v Trinidad - the company could be de ning a notice period
fi ffi fi fi
, Tax
Sonja has Taxable Income of £44,280 during the year ending 5 April 2020, of which:
(a) £5,000 is savings income from Bardale Bank plc, and
(b) £1,300 is dividend income from Vodacall Group plc, what will Sonja's total income tax liability
be for that year?
You may assume there have been no deductions for PAYE and you should round down each
individual gure to the nearest pound at each stage of the calculation.
Choose ONE of the following options:
[A] £9,692
[B] £9,492
[C] £17,712
[D] £9,914
44,280 - (5,000 + 1,300) = 37,980
INCOME
37,500 x 20% = 7,500
+ 480 x 40% = 192
= 7,692
SAVINGS
higher rate, so PSA is £500
500 x 0% = 0
+ 4,500 x 40% = 1,800
DIVIDEND
No dividend taxable, as rst £2,000 is tax-free
therefore:
7,692 + 1,800 = 9,492
Shelf Companies
You are preparing a Price Prior shelf company for transfer to your client Hemmingford Limited
(‘Hemmingford’). All Price Prior shelf companies are private limited companies and have
unamended Model Articles as their Articles of Association. It is proposed that the shelf company
will be a wholly-owned subsidiary of Hemmingford.
Which of the following statements are INCORRECT?
i) Hemmingford must pay up one quarter of the shelf company’s share capital before a certi cate
of incorporation will be issued by Companies House for the shelf company. only for plc
ii) An ordinary resolution must be passed to approve the appointment of the shelf company’s rst
auditors. This can be done by directors at a board meeting
iii) A trading certi cate will need to be issued by Companies House before the shelf company can
commence trading in its own right. only for plc
iv) The shelf company is required by s.154 of the Companies Act 2006 to have a minimum of two
directors once it is transferred to Hemmingford. This section states that public companies must
have 2 directors; private companies only need one.
Choose ONE of the following options:
[A] ii) and iii)
[B] i), iii) and iv)
[C] i), ii) and iv)
[D] All of them
fi fi fi fi fi
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