When Akil, Carrie, Ibrahim and Ursula were final year business school students they had

talked about opening a takeaway burger outlet to be called 'Burgs'. Shortly before

graduation in July 2017, the four friends decided to go ahead with the venture and

registered Burgs Ltd ('Burgs') in accordance with the Companies Act 2006. Ursula did not

become a director as, unexpectedly, she had been offered a job in Germany, but the

other three friends were all appointed as directors.

Burgs has 20,000 x 1 issued ordinary shares. As Ursula had more money to invest than

the others, Akil, Carrie and Ibrahim own 3000 shares each and Ursula owns 11,000

shares. Burgs adopted the Model Articles for private companies without amendment.

Since Burgs opened its premises, Akil and Carrie have both worked, full-time, managing

and running the burger outlet but Ibrahim has had no involvement with the business

other than to attend board meetings, where he never reads any papers and always

simply supports Carrie. Business has always been good, and Theresa is employed to

work part-time behind the counter. Burgs also provides on-line orders for home delivery.

Michel, a retail equipment salesman, recently visited the Burgs' premises when Theresa

was alone, and talked Theresa into agreeing to purchase a refrigerated display unit for

4,000. Theresa signed an order form on which the customer was named as "Burgs Ltd"

and the seller was named as Frigidaire Ltd. Michel subsequently telephoned to arrange

delivery. Akil answered the telephone and stated that no such equipment had been

purchased by Burgs.

Over its first three years of operation, Burgs has made losses of 20,000 and 5,000 in

its first two years and a profit of 125,000 in its third year. It has never paid any

dividends. Akil and Carrie do not wish to pay out any dividends as they wish to open

another takeaway outlet and purchase a storage warehouse. Accordingly they say that

they need all the cash the company can lay its hands on. Around this time, Akil learns of

the availability of a storage warehouse on a much sought-after industrial estate and

decides to purchase it for his own use as he needs somewhere to store his small

collection of classic sports cars.

LAW_36585/30053 Company Law Assessed Coursework

Page 3 of 3

At a duly convened board meeting held on 5 February 2021 and attended by all the

directors:

(i) Akil and Carrie were granted service contracts with the company for a fixed term

of six years.

(ii) A contract to purchase a new takeaway outlet Quickburger for 90,000 was

approved. There were no final accounts available for the new business, but Carrie

had just passed her accountancy examinations and she looked over the

management accounts and assured the Board that it was a good buy. The Board

also decides to staff Quickburger exclusively with foreign workers as they will be

much cheaper to employ and this will maximise the company profits.

(iii) The taking out of a loan of 250,000 from Money Bank plc ('Money') to assist in

funding Burgs' expansion plans was approved. Money asked for the debt to be

secured by a fixed charge over Burg's book debts together with a floating charge

over 'all assets and business' of Burg.

Given the uncertain times due to the global pandemic and Brexit, Akil and Carrie are

concerned about their potential future liabilities and those of Burg, if the business gets

into financial difficulties and Burg cannot meet its loan repayments.

Ursula has recently returned from Germany and is shocked to discover the way in which

Burgs has been managed when an article appears in the local newspaper accusing the

company of exploiting vulnerable foreign workers. Furthermore, it emerges that

Quickburger had some liabilities at the time of purchase which meant that its net worth

was only 50,000. She accordingly wants to become a director and to remove Akil,

Carrie and Ibrahim from the board. She also wants 'her share' of the profits made to

date and to investigate any breaches of duty by the existing three directors.

Consider Ursula's legal position and explain the steps available to her to

achieve her wishes.

Also, explain, apply and, where appropriate, critically reflect upon the law

governing the rights and liabilities arising in relation to:

The purchase of the refrigerated display unit;

the fixed charge over book debts granted to Money; and

any personal liability of Akil and Carrie if the company should become

insolvent whilst they are directors.