Capital maintenance doctrine

Assignment Help Business Law and Ethics

Reference no: EM133821878

Dragon Company Limited ("dragon"), a leading technology company in Hong Kong, was establish in 2000. Bill intends to reduce its share capital by buying back some shares from Cavin and Dave.

To Finance its operations, Dragon had taken out several loans, securing them with fixed and floating charges over its assets. A Fixed charges was secured on the company's property, while a floating charge was secured of company's book debts.

When the company's financial situation worsened, it sold the property under a fixed charge without the consent of the lender. Furthermore, the company also transferred a significant portion of its book debts, which were under a floating charge, without notifying the lender.

Last year, Bill had caused Dragon to sell some of the company's assets at costs much lower than the prevailing market process to a company named Undercover Company ("Undercover") of which Bill is the sole director and shareholder. Bill did not disclose his interest in Undercover to Calvin and Dave.

Question 1

Bills thinks that repaying any paid-capital of Dragon's shares is against the law. Advise him by referring to the Capital Maintenance Doctrine and the uniform solvency test for Dragon if applicable.

Question 2

In relation to Dragon's secured loans, analyse and evaluate the dirrerences between a fixed and a floating charge and the extent to which it is possible in company law to created a floating charge over a company's book debts, with reference to relevant case law and academic comments.

Question 3

Give a detailed analysis of the commmon law fiduciary duties of director, and advise whether Bill has been in breach of such duties, with reference to relevant provisions of theComanies Ordinace (Cap. 622) and case law, if applicable. Also, expain briefly the suitable remedies to Dragon for such breach of director's duties.

Reference no: EM133821878

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