BLAW211 FINAL TEST BANK QUESTIONS AND ANSWERS (VERIFIED ANSWERS) ALREADY GRADED A+
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BLAW211
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BLAW211
BLAW211 FINAL TEST BANK QUESTIONS AND ANSWERS (VERIFIED ANSWERS) ALREADY GRADED A+
Hollys explanation - Answer-A shareholder can bring derivative action. But the costs of the proceedings and court costs are all paid by the company. So if its going to cost the company $15,000 in costs, but the ben...
BLAW211 FINAL TEST BANK QUESTIONS
AND ANSWERS (VERIFIED ANSWERS)
ALREADY GRADED A+
Hollys explanation - Answer-A shareholder can bring derivative action. But the costs of
the proceedings and court costs are all paid by the company. So if its going to cost the
company $15,000 in costs, but the benefits will only be say $5,000 to the shareholders,
this is not fair. Or if it is extremely unlikely that they will win but they still pursue it as
they don't have to pay any of the costs. So the court will not grant leave, they will
intervene and say No, this is not what a "Prudent Business Man" would do
What is an injunction? - Answer-A shareholder may apply to the court to stop the
company or a director carrying out an action which goes against;
1. The Act or Financial Reporting Act 1993
or
2. The Constitution
What are Prejudiced Shareholders? - Answer-Oppressive conduct, abuse/misuse of
power
What is Oppressive conduct? - Answer-- An abuse or misuse of power
- Acts where the majority directly or indirectly try to appropriate (take for ones use
usually without the permission) to themselves;
- Money
- Property
- Advantages
That belong to the company or in which other shareholders are entitled to participate
Oppressive conduct
Flett v JH Flett - Answer-- Company owned a farm
- Father owned 38% of shares
- Son owned 40%
- Two sisters owned 11% each
- The father believed the company was his own and sold the farm without the
knowledge or consent of the other shareholders
Court Found
- Oppressive conduct occured
What is a Quasi Partnership? - Answer-Many small companies are often referred to as
"Quasi Partnerships". Although the companies are limited, they operate like a
partnership would. So all members take part in management AND there are restrictions
and transfers of shares to outsiders
,When do shareholder buy out rights occur? - Answer-- Altering a companies constitution
- Entering major transactions
- Merging of the company
- Altering class rights of shares
Shareholders rights occur if they don't agree with any of the above
What is the buyout procedure? - Answer-- Minority shareholder must give written notice
to the company within 10 working days of passing of the resolution
- Within 20 days of receiving the written notice, the company must give written notice to
the shareholders of its decision to either;
1. Agree to the purchase
2. Arrange for some other person to agree to the purchase
3. Apply to the court for an order exempting the company from its obligation to purchase
4. Arrange for the resolution to be cancelled
What is the application to courts in regard to? - Answer-Companies applying for
exemption of purchase
What are the grounds? - Answer--Purchase would be disproportionately damaging to
the company
-Company cannot reasonably be required to finance the purchase
-It would not be just or equitable to require the company to purchase the shares
-Board has resolved the purchase of the shares would result in the company failing to
satisfy the solvency test and the company has made reasonable efforts to arrange for
the shares to be purchased -by another person
-Proceeding with the purchase would mean the company would fail the solvency test
What if the company agrees to purchase the shares? - Answer-- Must within 5 working
days advise the shareholder of a fair and reasonable price
- If the shareholder does not think the price is fair and reasonable, then they must
immediately give notice of this objection to the company and the company must refer
the question to the shareholder???????
- If the shareholder does not object to the price within 10 working days, the company
must purchase the shares
Capital - Answer-
What are the 2 types of capital? - Answer-1. Equity Capital (Shareholder)
2. Debt Capital (creditor)
What are the main differences between the two? - Answer-Equity Capital
- Has rights IN the company
, - Has right to profit is share dividend is declared
- Has right to attend meetings/vote
- Bound by the act/constitution
- Is owner of the companies shares
- Residual claim on companies assets
Debt Capital
- Has rights against the company
- Has right to interest only
- Has no meeting rights
- Bound by contract of loan
- Is lender only
- Priority on insolvency
What is a third type of capital? - Answer-Assets
- The assets of the company in which funds are invested
Can a company purchase its own shares? - Answer-Yes by unanimous assent
Define distributions - Answer-The transfer or money or property by the company to the
shareholder OR the company incurring a debt tot he shareholder
What are the 2 types of solvency tests? - Answer-1. Liquidity test
- Is the company able to pay its debts as they fall due?
2. Balance Sheet test
- The value of assets is greater than the balance of liabilities
When will a shareholder not have to repay distributions made to them in the event of the
company failing the solvency test - Answer-- The shareholder received the distribution
in good faith and without knowledge the company did not satisfy the solvency test
- The shareholder has altered his/her position in reliance on the validity of the
distribution
- It would be unfair to require repayment in full, or at all.
What was the Securities Act 1978 a result of? - Answer-Demand for greater investment
protection following some finance company collapses in the 1970's
What does the act regulate? - Answer-The offer of securities to the public by requiring
the disclosure of information
What is the goal of the Securities Act 1978? - Answer-- Inform investors through
investment statement and prospectus
- Regulation of companies funding through equity and debt
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