Question 21 Company has issued 250 shares; 150 to Shareholder X and 50 shares each to Shareholder Y and Shareholder Z. Company's board of directors comprise Y and Z and a fulltime executive director, W. Company's board by unanimous vote resolves to make an unsecured interest free loan to Shareholder Z of $250,000 in order to prevent him facing bankruptcy. Which one of the following statements is not correct?

A The making of such loan amounts to the commission of a breach of the directors' fiduciary duty.

B Company may, in these circumstances, bring a lawsuit against Y, Z and W for breach of duty.

C Shareholder X may pass a resolution of the company in general meeting to remove and replace Y, Z and W from the board.

D The loan is lawful, as it is made with the unanimous consent of the board, and no cause of action arises

Question 22 Company Inc. comprises three shareholders (A, B and C, who each own onethird of the issued shares), and three directors (D, E and F).Against the objections of Director D, Directors E and F decide to diversify the business interests of Company Inc. into an area that they know very little about and, as a result, Company Inc. suffers considerable losses. Who, if anyone, may bring a lawsuit for the losses suffered?

A Noone may bring a lawsuit in these circumstances as the directors are protected by the concept of limited liability.

B Director D may bring a lawsuit against Directors E and F for breach of their fiduciary duty to the company.

C Shareholders A, B and/or C may bring a lawsuit against the board of directors for breach of their duty of care. \

D Company Inc. may bring a lawsuit, requiring a prior resolution of a majority of the shareholders, against Directors E and F for breach of their duty of care.

Question 23 Some jurisdictions still allow the issuance by a company of Bearer Shares, subject to certain provisions in the law for their safekeeping by the licensed and regulated Corporate Service Provider. In this context, which of the following statements are correct?

I A bearer share certificate does not name the ultimate beneficial owner, but the CSP must ensure that her name is duly inscribed in the register of members.

II A bearer share certificate, having been lost by the ultimate beneficial owner, can be replaced after a period of 10 years, provided the present holder does not come forward in that time.

III Bearer shares were substantially restricted in their use in some jurisdictions as it became more difficult for the CSP to correctly identify their client for KYC purposes.

IV In order that the ultimate beneficial owner may continue to operate the company anonymously, it is common practice for the CSP to provide nominee shareholders, but give the ultimate beneficial owner a general power of attorney to operate the company himself

A I, and II.

B I, III and IV.

C III only.

D I and III.

Question 24 You are a corporate administrator employed by Service Provider in a typical offshore financial centre. You manage a private company by the name of AB Inc. You are registered shareholder of the two shares issued by the company and have been appointed its sole director. Your client, the beneficial owner of the shares, instructs you to invest corporate assets in the purchase of 100,000 shares of Microsoft stock. You are aware that the market price of Microsoft is extremely volatile due to its pending antitrust lawsuits. What is your best and most appropriate course of action?

A Draw up a written director's resolution to make the proposed investment in Microsoft, and ensure that it is cosigned by the beneficial owner to indemnify you from liability in case the investment suffers losses.

B Draw up and sign a written shareholder's resolution that approves the proposed investment in Microsoft and instructs the director to proceed, and then also draw up and sign a director's resolution resolving to invest in Microsoft and instruct the company's brokers accordingly.

C Retain brokers on a discretionary management basis and give instructions to invest in Microsoft as required by your client.

D Retain brokers to advise and, provided they say it is appropriate, invest in Microsoft as directed.

Question 25 You are an employee of an offshore service provider in charge of new business. You have to explain to a prospective client the implications of holding a portfolio of investments in a structure or vehicle that comprises an underlying company with an overlying trust. If the proposed structure is created, which of the following statements are correct?

I The portfolio of investments is owned by the company.

II The company, and hence the investments, are effectively owned by the client because the trust is not a legal entity.

III The trustee is legal owner of the entire issued share capital of the company.

IV The trustee holds indirectly the investments upon the terms of the trust and controls them though its control of the board of the underlying company.

A I, III and IV.

B I, II and III.

C I and III.

D I, II and IV.