1. John holds shares in Derwent Ltd and wishes to retire and dispose of his shareholding for cash. Dick and Harry are the other two shareholders but they cannot afford to pay for the shares. John is thinking of selling his shares to his brother and Dick and Harry do not want this.
Explain to Dick and Harry how the company might purchase John's shares and outline the procedure to them.
2. Corporate insolvency: a case study Trent Ltd is a small company. John and Paul are the shareholders and the company's overdraft with the Barchester Bank plc is secured by a floating charge on the whole of the company's undertaking.
Problems have arisen within the company. Trent Ltd is over-borrowed and has declining margins. The company has started to run short of cash. It is struggling to pay its bills and may fail in the near future.
Nevertheless, John and Paul intend to carry on business through the company. The bank and other creditors are pressing for payment. John and Paul seek your advice on resolving the present difficulties.
Matters to be addressed:
(a) The consequences for John and Paul of continuing to trade through the company in its present state.
(b) The suitability of a company voluntary arrangement or administration and the steps to be taken.
(c) The last-ditch possibility of a winding-up, preferably without the involvement of the court. Discuss procedures.
(d) Explain to John and Paul what steps the Barchester Bank can take.
(e) Explain the steps that unsecured creditors can take.