QUESTION 3:

Matthew Mark and Luke, three auto mechanics, were delighted to start an auto repair business and decided that they would incorporate a private company to do so.

It was to be called Mechanics Ltd. They were short on capital however, so they approached ABC Ltd, a public company, to be a shareholder in their private company. John, the Company Secretary and Accountant for Mechanics Ltd decided that he will not file accounts, because it was a private company. John came to you privately to find out if he is on good ground in not filing accounts.

a) You are required to tell John if he was correct in his decision or not, and give reasons for your answer, directly from the Companies Act. (15 marks)

At the same time, Luke is very disgruntled that the company is planning on going into the business of selling auto parts as well, and said that this is in breach of the Memorandum of Association's Objects Clause which states: "To repair, service and provide diagnostics to all types of motor vehicles, and to replace the relevant parts as required". Luke comes to you for advice.

Using relevant Case Law, advise Luke. (10 marks)