Corp Law

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Corporate Law EXAMINATION PAPER

SECTION A

This section consists of one compulsory question which carries 40 marks. Total marks for this section are 40 marks.

Question 1

(40 marks)

Read the following case. General Beauty Ltd. (“General Beauty”) is a company incorporated in 1999, well known for cosmetic products it manufactures and sells in Hong Kong. Moonlight Ltd. (“Moonlight”) is a company incorporated in 2000, producing face cream series of the General Beauty brands, and has 80% of its issued share capital held by General Beauty. Four senior managers of General Beauty form the board of directors of Moonlight. Amy suffered from facial injury as a result of using the newly marketed face cream manufactured by Moonlight. It was discovered that the face cream contained certain mercury component causing damage to human skin. Accidentally Moonlight became insolvent and went into liquidation before Amy started to take an action against it. Amy knows the corporate structure/relationship between the two companies and believes that General Beauty and Moonlight are actually the same single entity. She thinks that under present circumstance it will be fruitless to deal with Moonlight any more but General Beauty as the parent company of Moonlight shall be fully liable to her for compensation. She therefore decides to sue General Beauty claiming for damages. Amy has just graduated from university and she was employed in the Corporate Administration Department of Messy Land Limited („MLL‟) as a junior staff. MLL is a Hong Kong public company which has undertaken a large real estate development in Macao. To finance the construction contracts, MLL has issued a debenture series of 5,000 debentures, each with a par value of $200,000 secured by a floating charge over its entire assets and undertaking. The floating charge contains a negative pledge clause. Eight months later, in order to develop the land, MLL has borrowed $100 million from the Gold Sand Bank (Macao Branch) and has secured that loan by a mortgage over the land which is executed in Macao. The Company Secretary and some senior staff of the Corporate Administration Department of MLL have just resigned. As a result, Amy is the only staff left in the said Department. There is no experience staff in MLL who can handle the processing of debentures and charges. Amy is not sure whether the charges should be registered or not and she knows nothing about the related procedure.

LAW B868 (Specimen Exam Paper)

Page 2 of 6

Answer the following questions. (a) By reference to the legal principle in the case Salomon v A. Salomon Ltd. [1897] AC 22 and the exceptions thereto, comment on the chance of success if Amy take action to claim damages from General Beauty instead. (20 marks)

(b) Advise Amy on the requirement of registration of charges and the consequence of failure to do so. If both of the charges in our case are not registered, which would take priority, and would it be different if both were registered? (20 marks)

[END OF SECTION A]

LAW B868 (Specimen Exam Paper)

Page 3 of 6

SECTION B

Answer only THREE of the four questions. Each question is worth 20 marks. Total marks available for Section B are 60.

Question 2

(20 marks)

By reference to relevant legal cases, if any, explain in detail the concepts of “Past consideration in is no consideration” and the “postal rule”.

Question 3

(20 marks)

Maria owns 5% shares of C.K. Leung & Sons Ltd., a private company founded by C.K. Leung in 1950. C.K. Leung‟s two grandsons now own the remaining 95% shares and they are also the two directors of the company. Under the will, Maria appoints Penny as personal representative of her estate. Required: (a) Maria decides to transfer all her shares in the company to Penny. However, the two directors of the company refuse to register such share transfer. Discuss. If later on Maria dies, what will be the legal position in relation to her shares and...
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