Companies Act 2016 introduces the solvency test. The solvency test operates on the basis that a company must ensure that it has sufficient funds to pay its debts to its creditors for the following purposes: (a) Redemption of redeemable preference shares. (b) Purchase by a company of its own shares under the share buyback provision. (c) Reduction of capital. (d) Giving financial assistance.

Discuss the relevant provisions of the Companies Act 2016 which govern the solvency test and solvency statement.

To approach pmbfsm questions, use the following pointers:ft',L,A,Cj Goldenchurn entered into an agreement with Tartarsauce. The decision to take a bank loan to discharge work is passed in the board meeting where no provision is provided in the constitution ofGoldenchurn. Later, Goldenchurn decided to discontinue The joint venture. Discuss whether the bank and Tanarsauce can sue for the breach of contract. [4|] marks] Issue [5 marks} Can Tartarsauce and bank sue for breach of contract?I Law and application (31] marks} 5 marks for each of the following point: Law By virtue of section 21 of CA EDIE: provides that a company shall be capable of exercising all the functions of a body corporate and have The full capacity to carry on or undertake any business or activity including {a} to sue and be sued; {b} to acquire. own. hold, develop or dispose of any property; and [c] to do any act which it may do or to enter into transactions; and shall have the full rights. powers and privileges for the aforementioned purposes. Application Firstly, we are told that Tartarsauce and Goldenchum entered into an agreement. This makes both the parties privy to the contract and are entitled to take legal action to enforce the contract including can sue and be sued on it. The bank came into the situation to provide nancial loan to discharge work. The bank can be regarded as a third party to the contract. Next. the main question to be resolved here is ifGoldenchum has acted ultra vires by taking up a bank loan where no provision is provided in The constitution of Goldenchurn. It is clear That Goldenchurn has adopted a constitution thence bound to act in accordance to the constitution of the company. Applying section 21 of CA Ell 1 ti. IGoldenchum can be sued by Tartarsauce and The bank for breach of contract and the company will not be able to successfully rely on the doctrine of ultra vires to turn the whole contract void. It is submitted that a third panyf the bank. dealing with a company can assume that the company has full capacity to carry on or undertake any business or activity. Conclusion (5 marks) The Bank and Tartarsauce can sue for breach of contract