Singapore Company Law

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MID-SEMESTER TEST

COURSE:LAW2464 COMPANY LAW

DATE:17/03/2012

TIME ALLOWED:1 hour 40 minutes (including 10mins reading time)

QUESTION (Prospectus Topic)
In July 2011, Ah Beng was at his accountant’s office to talk about taxation matters. Whilst there, his accountant gave him a prospectus issued by Ionic Ltd., a company listed on the Singapore Stock Exchange, to take home to read and if interested, to follow the instructions about investing in new shares in the company which were to be quoted on the Exchange. After reading the prospectus, Ah Beng was convinced that he was going to make a lot of money investing in the company which had stated that it had discovered a huge gold deposit in Western Australia. The prospectus contained a report by a geologist which stated that the gold was near the surface and therefore, easily mined. The prospectus also contained estimations of the amount of profits which it could make based on the current high price of gold.(False and/or Misleading Statements) Criminal Lability Under S253(Jail and/or fine company is liable if it is an entity. Directions are liable. Statements are materially adverse from viewpoint of investors including Ah Beng. Who else is liable? The Accountant? No advice or false or misleaeding statement. Did he act intentionally or recklessly? No. No Lability. Could Geologist be liable? Yes, as his a conman. Actions were intentional. S254 Civil Lability

Directors liable any defences under s255 SFA? Any defences under s255 SFA? Reasonable reliance on geologist, reports is reliance here reasonable. He is a conman. Not reasonable. Inquries Defence, May fail. Geologist liable to compensate no defence. Accountant assuming he made statements. Yes, if not. No. Ah beng will receive compensation for his loss.

ALTERNATIVE

Misrepresentaton.
False Statement Made during negotiation that induces one into contract Geologist is dishonest and fraudulent misrepresentation. Recession of contract of sale of shares and damages for the tort of deceit. After applying for the shares, Ah Beng was issued 50,000 shares at the price of $1.00 per share in September 2011. In January 2012, the local newspaper published an article about the arrest of a geologist in Western Australia who was claiming discovery of mines which turned out to be non-existent. A week later, news broke out that the arrested conman was the geologist whose report was contained in the Ionic Ltd’s prospectus and there was actually a very small deposit of gold very deep in the ground which would make any mining a loss-making venture. The price of the shares in Ionic Ltd immediately plunged and trading in the shares had to be halted. Ah Beng has now come to you for advise as he has been informed that Ioninc Ltd shares are now worthless and that the company will soon be wound-up. REQUIRED:

Can Ah Beng take action against any one or more persons with regard to his loss? Explain. (8 marks)
QUESTION TWO
Dinosaur Rocks Pte Ltd (Dinosaur Rocks) is a family company whose two shareholders and directors are Fred and his wife, Betty. They live in a house in Pasir Panjang owned by the company. The company owns a business of supplying rocks and sand to construction companies. In August 2011, Fred borrowed $1 million from U-O-Me Bank. The loan was secured by a mortgage charge over the Pasir Panjang property owned by Dinosaur Rocks. The loan was to be used by Fred for personal expenses. According to the articles of association, the mortgage/charge document was to be executed by way of affixing the common seal in the presence of two directors as witnesses. Fred signed the document as witness but he also forged Betty’s signature. By early January 2012, Fred had defaulted on his last two loan repayments. It has since emerged that Fred had skipped the country with the $1 million in October 2011 and is now purportedly living the high life in the Maldives. U-O-Me Bank has started...
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