CLAW3501

THE COUNCIL OF COMMUNITY COLLEGES OF JAMAICA

FINAL ASSESSMENT

SEMESTER II – 2023 MAY

PROGRAMME: BUSINESS ADMINISTRATION

COURSE NAME: COMPANY LAW

CODE: CLAW3501

YEAR GROUP: THREE

DATE ADMINISTERED: WEDNESDAY, MAY 24

TIME: 2:00 PM – 5:00 PM

DURATION: 3 HOURS

ASSESSMENT TYPE: FINAL

This paper has 5 pages

1. ANSWER ALL QUESTIONS FROM THIS SECTIONS A AND B

2. ATTACH THE SIGNED CCCJ ASSIGNMENT COVERSHEET TO THE FRONT

NOTE: YOUR ASSIGNMENT WILL NOT BE ACCEPTED IF 2. ABOVE IS

YOUR COMPLETED WORK MUST BE SUBMITTED WITHIN THE SPECIFIED

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SECTION A

Instruction: Complete ALL questions from this section.

In June 2014, Shoes are Us, A Jamaican Company engaged in the manufacturing of shoes, formed
a subsidiary corporation, Shoe Plus Jamaica Limited. Shoes are Us transferred to Shoe Plus, title
to a property in exchange for $5,000,000 mortgage. The property, a commercial building in
Manchester was occupied solely by Shoes are Us. Subsequently, Shoe are Us vacated the building
and Shoe plus Jamaica Limited went into an agreement to sell the property to a Michael Green and
then refuse to handover the title of the property claiming that there was a mortgage on it.

Ethan and Nathan were the officers, directors and sole shareholders of both Shoes are Us and Shoe
Plus. The corporation maintained separate business records and bank accounts. Shoe Plus had no
employees and held no board meetings and had no letterhead.

Question 1:

A. Suggest what recourse Michael Green may have if he decides to take the matter to the
courts. (6 marks)

B. With reference to a decided case, discuss what is meant by a separate legal entity.
(8 marks)
C. Discuss THREE (3) consequences of incorporation. (6 marks)

(Total 20 marks)

END OF SECTION A

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SECTION B

Instruction: Complete ALL questions from this section.

Question 1

A number of farmers in the small rural community of Penchant Field have decided to pool their
resources to improve their businesses. They have heard that they can establish a cooperative to
support this idea. They have come to you to learn more about cooperatives.

A. Explain to them FIVE(5) characteristics of a cooperative. (10 marks)

B. Examine the differences between shares and debentures. (4 marks)

C. Companies may decide to offer different classes of shares. Examine each class of shares,
giving ONE(1) advantage and ONE(1) disadvantage of each. (6 marks)

(Total 20 marks)
Question 2

Optimum Investors & Savers (OIS) Limited, is an investment firm in Kingston Jamaica. They
specialize in advising their clients on good business ventures into which they could invest their
money and make a handsome profit. Over the past few years, they have been experiencing severe
financial difficulties in funding the expenses of the organization. The auditors have notified the
directors that the company’s debt situation is now beyond repair and that they may have to
liquidate. In spite of that fact or oblivious to the situation, the company continued to encouraged
investors to invest in OIS Limited.

One of OIS Limited’s investors, a Mr. Boulder, has turned up at the company’s corporate head
office on Monday morning, after a long-time overseas, to make enquiries as to his portfolio, with
a view to making further investment. He was given the horrendous news that all his investment is
gone and appears irrecoverable and that the company is facing liquidation. He further discovered
that the company, even before he had made the initial investment was plagued by fraud,
mismanagement and was drowning in debt. He was also told that the directors were all living in
splendour, with large bank accounts and high-end vehicles.
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Mr Boulder is livid. He was made to understand that the company was separate from its directors
and shareholders and that if the company cannot return his investment due to its indebtedness, then
that would be the end of the matter. He has come to you for advice.

With the use of relevant case/statute law, advise Mr. Boulder on the following:

A. THREE (3) duties of a director to the company. (12 marks)

B. The legal basis, if any, on which he could compel the directors to supplement the funds of
the company out of their personal resources, so that he could get back his money.
(8 marks)

(Total 20 marks)

Question 3

George, a Pharmacist, has recently graduated from college where he did most of his courses
online. He has no experience in management and is interested in opening his own Pharmacy in a
rural community where he is of the belief that there is a demand.

George has approached you, a third-year student pursuing a Bachelor’s Degree in Business
Administration, to assist him to select the most appropriate business formation based on his
present situation.

A. The THREE (3) types of business formations are Sole Proprietorship, Partnership, and a
Registered Company. Give him a detailed analysis of any TWO (2) types of business
formations by critiquing TWO(2) main characteristics of each (10 marks)

B. The main business of Little Rock Properties Limited is the acquisition, development, and
sale of residential real estate. The company has five directors. At a board meeting held on
September 27, 2017, a proposal was presented for the purchase of a piece of land in an area
adjoining an inner-city community. The price was low, but the location was felt to be
averse to the development and easy sale of houses and as a consequence the board decided
not to approve the purchase of land. On November 5, 2017, the land was bought by David
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and Samson, two of the directors of Little Rock Properties Limited and resold on December
30, 2017, at a profit of two million dollars. Having learnt of the actions of the board and
the two directors, the shareholders of Little Rock Properties Limited are upset. They wish
to know whether there has been any breach of fiduciary duty by the board of directors in
failing to approve the purchase of the land and/or by David and Samson in respect of the
purchase and sale of the property by them and, if so, what remedies they have against them.

Advise the shareholders. (10 marks)

(Total 20 marks)

END OF ASSESSMENT

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