- 20 Marks
Question
a. There are various tests of determining if a company is insolvent.
Required:
List and explain briefly THREE of these tests specified by the Companies and Allied Matters Act (CAMA 1990). (6 Marks)
b. Company indebtedness could be by way of debentures.
Required:
State THREE types of debentures. (3 Marks)
c. Adex Plc employed ‘A’ as a Company Secretary. ‘A’ hired luxury cars from Bee Enterprises, giving the impression that they were for the use of Adex Plc, but he used the cars for his own purpose. Bee Enterprises has sued Adex Plc.
Required:
(i) Advise Adex Plc. (5 Marks)
(ii) Assuming that the Board of Directors of Adex Plc intends to remove ‘A’ as the Company Secretary, state THREE matters which the notice of removal must contain. (3 Marks)
d. By S.401 of CAMA, the legal way to terminate the life of a company is by winding up.
Required:
State THREE ways by which a company may be wound up. (3 Marks)
Answer
a. The THREE tests for insolvency under CAMA are:
(i) Inability to pay debts exceeding N2,000 within three weeks after demand for payment has been made;
(ii) Issuance of a court-certified process regarding a judgment debt;
(iii) Determination by a court that liabilities exceed assets after taking into account contingent liabilities.
b. The THREE types of debentures are:
(i) Perpetual Debenture;
(ii) Convertible Debenture;
(iii) Secured Debenture.
c. (i) Adex Plc can deny liability for the actions of ‘A’ since he acted outside the scope of his authority by hiring the luxury cars for personal use.
(ii) The notice of removal must contain:
- A statement of the intention to remove the Company Secretary;
- Reasons for the proposed removal;
- Details of the right to be heard before removal.
d. The THREE ways by which a company may be wound up are:
(i) Compulsory winding up by a court;
(ii) Voluntary winding up by members;
(iii) Winding up subject to the supervision of the court.
- Tags: Company Law, Debentures, Insolvency
- Level: Level 1
- Topic: Company Law
- Series: MAY 2018
- Uploader: Theophilus