(a)
-Pesa Limited cannot raise funds to purchase Anna?s shares as if in contrary to the rule in?
- Trevor V. Whitworth.
- The rule in Trevor V. Whitworth is emphatic that a company must not purchase its shares or finance their purchase. However, there are certain circumstances in which a company may purchase its share e.g. redemption of redeemable preference shares.
- Pesa Limited is free to redeem redeemable debentures out of reserves or the share premium account. The debenture must be redeemed in accordance with its provisions.
(b)
It is unlawful for a company to finance the purchase or subscription of its shares. In this case, the lending of money to Charles is unlawful and the purported guarantee by Pesa Ltd is unlawful as well. This case does not fall within the exceptions prescribed by the provisions prescribed by the proviso to section 56 of the Act in which a company may finance the purchase of its shares.
marto answered the question on February 6, 2019 at 10:47
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