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Carborundum Case Solution

Decent Essays

Part A (i) Issue: Are members liable for Carborundum’s debts when winding up? Rule & Application: Since Carborundum is limited by shares and member’s liability is amount unpaid on share held, Alan, Ben and Colin who fully paid up their shares owed no liability, while others had to pay unpaid $0.9/shares. As stated in Salomon , debt is therefore the company’s responsibility, and the ‘corporate veil’ protects shareholders in their personal capacity from any liability. Conclusion: Alan, Ben and Colin owed no liability, Eric Sanders owed $3600 (4000*0.9), Donald Thump owed $10800(12000*0.9), and Inventions owed $19800 (22000*0.9) (ii) Issue: How can company remove Hilary from her position? Rule & Application: Firstly, Carborundum can …show more content…

(iv) Issue: Can other directors remove Clause 5(further requirements) and then remove Hilary as chief engineer? Rule & Application: GM can remove Clause 5. Clause 5 can only be removed when the Clause 5 itself is applied there is 80% approval at a GM (s136 (4)). After removal of Clause 5, Carborundum can fire Hilary. If there is a separate employment contract between Hilary and Carborundum, Carborundum would breach the contract and pay for damages. Conclusion: Shareholders may vote to remove clause 5 considering 5 out of 6 shareholders agree the removal. Part B (i) Issue: Is it possible not to pass deletion of Clause 3 in GM by Inventions? Rule & Application: In order to remove Clause 3, a special resolution must be passed. (s136 (2)). Therefore, on the GM, it only requires one of Alan, Ben, Colin and Eric to vote against Inventions in order not for deletion of Clause 3 to happen. Besides, Donald’s concern is unnecessary because according to s 125, the statement of company’s objects is optional and business contrary to any objects in the company’s constitution carried out by the company is not invalid irrespective of whether object clause exists or not. Conclusion: Donald only needs to make sure one of Alan, Ben, Colin and Eric votes against Inventions. (ii) Issue: Is it possible not to pass both change of name of Carborundum and change

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