Forum Replies Created
- Posts
You are so welcome! Well done for clearing this law exam and the very best of good fortune in your onward progression towards qualification.
I’m sure that all the future OpenTuition tutors that you contact will be just as helpful.
My understanding is that an administrative receiver is appointed by the floating charge debenture holders to take control over the charged assets and sell them to raise the money necessary to repay those charge holders.
Can they be appointed without a court order? Yes
Not only the company and the floating charge debenture holders but also the board of directors may appoint an administrator without a court order. Additionally, with a court order the creditors can be given the authority to appoint an administrator
OK?
Ah! You have to consider the practicalities of the situation! As a fixed charge holder, it’s possible (probable?) that you hold the title document to the asset.
Along comes a liquidator and says ‘Please will you let me have that title document so that I can sell the asset?’
What are you going to say to this liquidator?
It seems to me that you have two choices:
1 Keep the document, sell the asset, calculate how much capital, interest and selling costs that you are owed. Deduct that amount from the sale proceeds and pay any surplus over to the liquidator.
2 Give the document to the liquidator (with the liquidator undertaking to pay you the outstanding amounts of capital and interest from the proceeds of subsequent sale) and let her go through the process of selling the asset. If the liquidator discovers that the charged asset will realise only an amount less than the debt + interest, I assume the liquidator will contact the secured lender and ask what the lender wants the liquidator to do
I once, many years ago, asked a liquidator ‘Who gets paid first in a liquidation?’ He answered, apparently without any careful fore thought, ‘Why the fixed charge debenture holders of course’
This was a gotcha moment! I followed up with ‘So they will be paid in advance of your own charges and costs!’
‘Oh no! Obviously I will take my costs first’
In my course notes, I believe that I rank fixed charge holders along side the liquidator in joint first place and that is where I’m resting my case. First equal.
If this came up in a question, what to do? The question might say something like ‘What’s the sequence of payments of a company’s debts in a liquidation?’ Then that would likely be fixed charge debenture holders as first recipient. Why? Because, at the date of commencement of the liquidation, the liquidator was not a payable / creditor
If the question says something like ‘Who should the liquidator pay first from the sale of a company’s assets?’ I would probably go for fixed charge debenture holders. A liquidator would likely RETAIN an amount of company’s funds to settle the liquidation costs and fees so wouldn’t actually PAY herself.
Does that help?
OK?
Ah, OK! Whereas a company requires a set of Articles of Association, it is available for a company to adopt, in full or in part, a set of model articles. In the event that the model articles are adopted in full, there is no need for the proposed company to prepare its own document. So, I suppose, it is true that a company does not need to submit Articles of Association. It may simply declare its full adoption of (what used to be called) Table A. (I’m not aware that that title has changed!)
As for minimum number, I too find this area confusing. Section 7 (1) of the Companies Act that I quoted in my previous post (one or more members …) covers the formation of companies both private and public. I have always understood that 2 was the minimum number for a public company. From re-reading relevant sections from the Companies Act, I could continue to believe that it’s 2.
However, when faced with the same question a number of years ago, I wrote to a firm of lawyers and asked them ‘What is the minimum number of members in a public company?’ and they replied ‘One’
I’ve just checked my own notes again and I had removed the ‘2 members minimum’ note.
So … in conclusion, I believe that it’s just 1 member but 2 directors
Incidentally, I wrote above that ‘I have always understood that 2 was the minimum number for a public company.’ Strictly speaking, that is not true! When I was learning all this stuff for my exams, the minimum number was seven (7). But why bother with that irrelevant history 🙂
I hope that this clears up your confusion. Or, at least, it hasn’t made it worse!
Companies Act 2006 Section 9 (5) (b) tells us that Articles must be submitted at the time of seeking registration
Can you let me know the page number in the notes that says that there should be at least two members of a public company? I have a dim recollection that I changed this note some distant time in the past
In fact, the Companies Act is a little bit strange as it is only in Section 7 (1) that states that a company is formed by ‘one or more persons …’ and, from then on, the Act consistently refers to members / subscribers in the plural
I hope to hear from you soon so that I may resolve this issue
OK?
According to the ACCA’s website, the format for the Law paper remains the same for 24 / 25 as it was for 23 / 24.
I know of no proposed changes to the format beyond September 2025
Does that help?
Hmmm!
Q1 is tricky! Estoppel, I can agree with. The principal is estopped from denying the authority of the ‘agent’ because the principal has allowed the ‘agent’ to represent herself as the agent of the principal in prior situations.
But implied agreement? Personally I believe that I would have selected ‘ratification’ as my second choice from the four options but, even so, I’m not 100% 🙁
‘Implied agreement’ suggests activity on the part of the ‘agent’ without the formality of creating an ‘express agreement’ Nevertheless, it seems that the agent has acted and the principal is now being held to account for the agent’s actions.
Ratification? The agent has acted, beyond the bounds of any express or implied agreement and now the principal is facing the situation of an agent having clearly acted beyond their powers. Do we say to the other party ‘Yes, OK, we’ll accept the contract that the agent has entered into apparently on our behalf’. But, you see, that has, by definition, involved some action by the agent.
Oh dear! Ratification or implied agreement? They both have involved the actions of the agent. I’m going to opt for ‘ratification’. Sorry!
Q2 This really comes down to ‘What could the other party have known?’ In the three options a, b and d the third party couldn’t have known that the ‘agent’ was an agent. The principle (not principal!) is that the third party could not have known of any agency situation until the contract is defaulted and then the principal is available to be sued. We’re now into the doctrine of the undisclosed principal.
But, for option c, the agent DOES say that she is an agent and therefore the other party is given notice that there is a principal who can be looked to for any default on the contract.
It’s yet another awkward situation! Sorry 🙁
Model laws are not really laws at all! They are models / blueprints / guides / proformas designed by international organisations such as the United Nations and are created with the intention that independent states may use the model as a guide when the state is creating its own equivalent law
As stated, the model laws are not ‘passed’ as such. They are non-binding and really are advisory, issued as suggestions as to how states in the future, wishing to design their own domestic law on the relevant subject matter, can use the model law as an initial (or even ‘final’) draft
Blank cheques! In all my years of being involved in the teaching of Law for the accountancy qualifications, I have never been asked this, and nor have I ever considered this question. Your source obviously states that a blank cheque IS a bill of exchange, even though the part of the definition that specifies ‘a sum certain in money’ is clearly not satisfied.
I looked up the Bills of Exchange Act from 1882 – ‘a sum certain in money’
I looked on the Internet for International Bills of Exchange. First came a link to an Indian accountancy tuition establishment – ‘a sum certain in money’ Then came a definition – ‘a sum certain in money’. This was followed by a section of parts of the definition and, again, we have ‘a sum certain in money’I asked the question of AI. And there, and only there, did I find that a blank cheque IS a bill of exchange EVEN THOUGH it clearly fails to satisfy the definition. The explanation is that, even though on issue the sum in money is not specified, it can, subsequent to issue, be completed by inserting the appropriate amount and then it satisfies the definition.
2 questions are now raised in my mind!
1 – what is it BEFORE the amount is written in subsequent to issue? and
2 – what drawer or drawee would write / accept such a bill drawn without the amount involved being specified?I hope that this has helped!
Hi Ann (O’Nymous)
Section B in the exam is, in some ways, similar to Section A in that the answers that you give are selected from a number of options.
Section B, though, comprises 5 short ‘stories’ about which questions are then asked. The questions give you a selection of answer options for you to select the most appropriate.
You could always check on the ACCA’s mock exam!
OK?
Q1 That indorsement is the key! Because it’s a negotiable bill of lading, that indorsement transfers the rights to the goods identified in the bill of lading.
Q2 And then, of course, because the endorsee has the title to the goods, the endorsee is able to sell them and receive the payment of the proceeds from sale
Q3 Yes, as above, it IS both cases
Q4 The question here should be ‘How has anyone other than the named buyer managed to get their hands on a non-negotiable bill?’ The carrier must deliver to the named recipient and that recipient should produce the bill to the carrier to establish the right of receipt of the associated goods.
Is that OK now?
Mateja! How can you possibly say that this brilliant, stimulating, enthralling topic is ‘dreary’? It’s wall-to-wall FUN
87%! In a subject for which you found the studying such hard work! What on Earth are you going to score when you come across an exam that you find even just a little bit interesting?
Well done, Mateja 🙂 An impressive score, indeed. And I’m so happy to have been a small contributor to your success. Keep scoring marks like this and your ACCA journey will be complete in a commendably short time
Hi again Maria
(I’ve never been asked this before!) My feeling is that, where arbitration decision is announced before the Court action is resolved, the court will likely see the arbitration decision as persuasive.
However, it’s also my belief that the Court would likely see itself as having the authority to overturn or amend the arbitration decision.
In summary, the Court’s decision would prevail but would be persuasively influenced by the arbitration process
OK?
Hi Maria
My understanding (good question!) is this: where a contract specifically states that any dispute between the contracting parties is to be settled by arbitration, then that’s how it shall be settled (Hickman v Kent or Romney Marsh Sheep Breeders Association)
But, if specificity is absent, then the dispute could be settled by court
Does that answer you?
Hi Maria
Imagine a decision in the Court of Appeal. And then a similar case appears in the Court of Appeal. The judges in that second case must clearly follow the earlier case’s precedent. Otherwise all sense of consistency and certainty would be lost. So, in answer to your post, Yes. A precedent established in a court is binding on the subsequent similar cases in courts of same standing. Clearly, there have to be exceptions to the general principle of stare decisis, but such exceptions are exceedingly rare.
Your second post? Yes, absolutely correct.
OK?
Hi again, Natasha
You say ‘I didn’t know that’
What do you mean? What is there about my initial response that you didn’t know?
I’m lost, sorry
Good morning Natasha
I’ve read your question through twice and I’ve reached the conclusion that this is a question more appropriate for either the FA paper of the FR paper.
If indeed it is a law question, could you please direct me to a specific extract from the source of your query – or even just the context?
Thank you
1. Redeemable means when company repays owed money back to the shareholders while irredeemable means when company cannot repay owed money back to the shareholders. Does that means that in liquidation situation redeemable shareholders will get their money back to them and company is obliged to return the money back, but irredeemable shareholders do not get their money back even in the liquidation situation?
The first point, Hamza, is that the holders of preference shares are INVESTORS in a company. The company does not OWE these investors the amount of their investment. They are not like creditors or trade payables.
Secondly, the expression ‘redeem’ means that the company is able to buy back the shares (and, typically, cancel them) at a time that would normally be pre-established in the issue document applicable to the shares.
Therefore, if shares are issued as ‘redeemable preference shares’, the company is able to pay back those investors and (as stated above) will likely cancel the shares (thus preventing a subsequent re-issue)
In a liquidation situation, both classes of preference share will rank for payment AFTER ALL other liabilities have been settled in full but BEFORE ANY MONEY is distributed to the ordinary / equity shareholders. As to a question of which class of preference share ranks ahead of any other class of preference share, this pecking order would be established by the document behind the issue of the second class of preference share. (In the same way that the English Queen Elizabeth, daughter of Henry VIII was never known as Elizabeth the First until 1952 following the accession of the late Queen Elizabeth. Only then was it necessary to distinguish by regnal number which Queen Elizabeth one was referring to. Similarly our historical Kings John and Stephen are not referred to as John I nor Stephen I)
2. Redeemable preference shares are those shares that are repayable after the agreed period. This means that company can buy back the shares and return all the owed money back to the shareholders?
Essentially correct – I still don’t like the use of ‘owed’
3. Irredeemable preference shares are those share that are not repayable and there is no specific period. This means that company has no option to buy back the shares and return all the owed money back to the shareholders?
Same comment as previous point
4. Irredeemable preference shares are never repayable and so are just like ordinary shares
(which are also never repayable) BUT preference shares pay a fixed dividend?Hmmm. Ordinary shares / equity shares can be redeemed! You are correct in saying that preference shares pay a fixed dividend
5. Preference shareholders do not have voting rights
but they receive fixed dividends each year in preference to ordinary shareholders while ordinary shareholders do have voting rights and they receive variable dividends if company has enough profits?Correct
6. Dividend is calculated by multiplying the nominal value of the shares with the dividend percentage that was proposed by the directors in the AGM?
No, not really. On the issue of preference shares, the issue document will specify the rate of dividend to be paid on those shares. So the holders of the issue of £100,000 4% (ir)redeemable preference shares will be paid £4,000 dividend each year (so long as there are sufficient distributable reserves available to finance that amount)
Is that OK?
