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Anna and Berita are directors of Pesa Limited and each holds forty per cent of the ordinary shares. The remainder is held by Charles. ...

      

Anna and Berita are directors of Pesa Limited and each holds forty per cent of the ordinary shares. The remainder is held by Charles.

In addition to the shares, Anna also holds debentures issued by Pesa Limited, redeemable on 8 August 2003. Anna wishes to dispose of her shares and debentures.

On the other hand, Berita and Charles do not wish Anna's substantial interest in the company to pass to other people upon the sale of the shares and debentures.

Advise Pesa Limited on the legality of each of the courses of action listed below:

(a) Pesa Limited will raise the necessary funds and purchase the shares and debentures.

(b) Pesa Limited will raise funds and lend them to Charles so that he may purchase Anna's debentures. Charles will also arrange for a private loan guaranteed by Pesa Limited so that he may purchase Anna‟s shares.

(c) A new company, Pendo Limited, will be formed and eighty per cent of its ordinary shares will be held by Pesa Limited. Berita and Charles to hold ten per cent each. Pendo limited will borrow money to buy Anna's shares and debentures

  

Answers


Martin
(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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