Business Law & Practice Mock

Q 1 (20 MARKS)

Your firm acts for SBL Bakery Limited ("SBL"), which runs a food manufacturing business in Rotherham.A schedule of the directors and shareholders in SBL together with a copy of SBL's articles of association is set out in Document B. SBL's current Net Borrowing is 3.5 million and its current Net Worth is 10.5 million.

The directors of SBL wish to put into effect the following proposals:

1)The purchase of a new Heissenkoch 123 Oven for 105,000.

2)The entry into an unsecured loan of 100,000 from Flytrap Plant Finance Limited to finance the purchase of the oven.

3)The appointment of Dilip Sharma to the board of directors as a non-executive director as soon as possible.

DOCUMENT B

Shareholder Number of fully paid shares of 1 nominal value Directorship

*Jessica Drew 45,000 Managing director and Chairperson

*Andrew Thompson 25,000 Finance director

*Dilip Sharma 25,000 No

*Sharad Kapoor 0 Production director

*Hilary Lane 5,000 No

The Companies Act 2006

Private Company Limited by Shares

Articles of Association of SBL Bakery Limited ("the company")

1.Definitions: [assume that "Model Articles", "Net Borrowing" and "Net Worth" are all appropriately defined.]

2.The Model Articles shall apply to the company, except in so far as they are modified or excluded by these articles or are inconsistent with them.

3.The directors of the company may not increase Net Borrowing of the company where as a result thereof Net Borrowing would exceed two times Net Worth unless they are authorised to do so by a special resolution of the members.

4.Model Article 8 shall not apply to the company.

(a)Explain how SBL may put these matters into effect within one set of chronological meetings/documents, identifying all relevant matters of company procedure. Assume for the purposes of this part (a) that all participants are in favour of the proposals.

(14 marks)

(b)For the purposes of this part (b), assume that a board meeting has been called to appoint Dilip that Andrew Thompson is opposed to the appointment and that Sharad Kapoor is unable to attend the meeting.Explain whether Andrew can prevent Dilip's appointment.

(6 marks)