27 Oct Amy, Bob and Cathy are shareholders in a company. Amy has 20 ordinary shares, Bob has 20 cumulative non-participating preference shares and Cathy has 20 participating non-cumulative preference shares
Amy, Bob and Cathy are shareholders in a company. Amy has 20 ordinary shares, Bob has 20 cumulative non-participating preference shares and Cathy has 20 participating non-cumulative preference shares. The company did not declare dividend for the last two years even though it made profit. The company has however declared surplus profit this year and the board has decided to recommend payment of dividend and issuing of bonus shares. Bob is protesting against the issue of bonus shares and is insisting that surplus profit should be paid out as dividend. Six months ago, Amy decided to sell part of her shares in the company. She approached a stock broker who promised to sell the shares for her. She left her share certificate and a blank signed transfer instrument with him. The broker transferred the shares to his wife who was issued with a share certificate. The broker’s wife subsequently sold the shares to Luke. The Company has refused to register the transfer to Luke. Better bank created a fixed charge over the entire present and future assets of the company on the 15t of April 2002. The charge was registered 10 days after it was created. One of the terms was that the company may continue to use the assets in its ordinary course of business. Risk bank subsequently created a floating charge over the same assets which, was registered 5 days after its creation. A term of the charge stated that the charge will become fixed if the funds in the company’s current account with Risk bank go below $2million. The account was withdrawn leaving a balance of $500,000 on the Ist of September. The company owes a supplier $1million and has not filed GCT returns for the last five years. Better bank recently appointed a receiver because the company has fallen behind in servicing its loan. i. Advise the shareholders on the nature of their shares, the payment of dividend and the validity of the transfer of shares. ii. Advise the receiver on priority of charges
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