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THE UNIVERSITY OF HONG KONG

SCHOOL OF BUSINESS
2001-2002 (SEMESTER 1) EXAMINATION

SchoolofBusiness:

BUSIOOI0A Company Law

December 14 , 2001

2:30 pm - 4:30 pm

Answer any 3 questions. All questions carry equal marks

1. (a) What is the difference between a compulsory winding up and a voluntary winding
up?
AND
(b) In the process of winding up , the liquidator has considerable powers to avoid
ceain transactions made on behalf of the company prior to commencement."
Discuss.

2.

Partnership

is a flexible though relatively risky mode of business organization"


Explain this statement. Would you assess the registered company in the same way?

3. Wong incorporated Holy Company Ltd in 1980 as a private company to import and
sell Chinese medicines in Hong Kong. Wong held 90% of the shares, with the
remaining shares being held by Jim , Wong's accountant. The articles named Wong
and Jim as the directors and Jim as company secretary for life. When Wong died in
1992 , his shares were inherited equally by his two sons, Mike and Ike. After
inheriting the shares and becoming directors , the sons proposed changes to various
clauses in the Memorandum and Articles of Association which would allow the
company to begin manufacturing food in China. When Jim objected to the proposal ,
Mike and lke announced that he would be removed as director and company
secretary. They also announced that they were going to propose that the Articles be
changed so that directors would have the power to force shareholders to transfer their
shares back to the company , where , in the opinion of the directors , their conduct is
detrimental to company interests. Advise Jim

4. (a) 1n what circumstances will an agent bind a company to a contract made with a
third party? What effect do the Memorandum and Articles of Association have
on the power of agents to bind companies to such contracts?
AND
(b) Directors are in a fiduciary position in relation to their company. The effect is
that they cannot make any profit from the exercise of their powers , irrespective of
fault or loss to the company." Discuss
5. (a) A floating charge has considerable disadvantages from the view point of the
creditor". Discuss.
AND
(b) Kong Ltd. created a floating charge over all its assets in favour of Tang Bank,
which had provided a substantial loan to the company. This charge was duly
registered. Four months later Kong Ltd. created a fixed charge over its factolin
favour of Hung Ltd
Before taking this charge, Hung Ltd. had made a search at the Companies Registry
and discovered the existence of the floating charge in favour of Tang Bank
More than twelve months after the charge in favour of Hung Lt d. was created , Kong
Ltd. went into liquidation.
Explain the rules relating to priority of charges and state which charge is likely to
have priority

6. The principle derived from Salomon v Salomon Co. Ltd. [1897] is viewed as
fundamental to company law. Outline the consequences of this principle and explain
the circumstances in whch it may be ignored.

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