Discuss the restrictions that are imposed on appointment of directors and directors' legal position
a) Consider a stock price at Sh.60 which pays dividend of Sh.5 per share in one month. The risk free rate is 10%. A forward contract expiring in a month was priced at Sh.59.37. One month later the spot price is Sh.62. Required: The forward price and the value of the contract at this stage. b) A medium sized manufacturing company in South Africa is tendering for an order in Kuwait. The tender conditions state that payment will be made in Kuwait dinars 18 months from now. The company is unsure as to what price to tender. The company's marginal cost of production at the time of tendering is estimated to be SA rand 1 million and a 25% mark-up is normal for the company........... Exchange rates Dinars/1 SAR Spot 5.467 - 5.503 No forward rate exists for 18 months period South Africa Kuwait 9% Annual inflation rates 3% Annual interest rates available to manufacturing company: 14% 9% Borrowing 9% 3.5% Lending Required: a) Explain how the manufacturing company might protect itself against foreign exchange rates changes. b) Recommend the tender price that should be used.a) Discuss the rules relating to appointment and vacation of office of directors. (10 marks) b) Triple H, Undertaker Austin and Flair are directors of Mieleka Lid, a company regulated by Table A. Fair is the managing director and Undertaker is the chairperson of the company. Sometime ago the directors meeting as a board decided to: i) Lend Triple H Kshs.500,000 to purchase a car for his wife Stephane for her personal use; ii) Advance Kshs.500, 000 to Austin to cover his expenses on a worldwide (promotional tour on behalf of the company). Booker T, the company secretary informs you that Stone Cold a shareholder claims that this transaction should have been approved by the members and that he intends to raise the matter during the next general meeting. Required i) Advise Booker T, which of the transactions need approval by members in the general meeting (4 marks) What are the consequences of the necessary approval not being obtained? (6 marks) (Total: 20 marks)Birds Limited has three directors: Peacock, Sparrow and Vulture. Explain the legal implication of each of the following situations: a) Vulture's son has recently come of age and Vulture wishes to appoint him a director of the company (4 marks) b) The company is considering the purchase of a substantial quantity of goods from Fly Itd., in which sparrow has a large shareholding through he is not a director Peacock and vulture are unaware of sparrow's interest in Fly Itd. (4 marks) c) Because of adverse publicity about Peacock's private life, vulture and sparrow wish to remove him as a director, since he refuses to resign. (4 marks) d) In view of the adverse publicity, Vulture and Sparrow decide to exclude Peacock from participation in the company's affairs. (4 marks) e) The directors are advised by Wise & co., the company's auditors, that there is no possibility of the company trading at a profit in the foreseeable future and no reasonable prospect of its paying its debts. (4 marks)
