Diagnosed having terminal cancer

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Question

Cassy's mother Lala has recently retired. Unfortunately, Lala has been diagnosed having terminal cancer and Cassy is in desperate need of cash to pay the medical expense for her mother. Cassy holds 10,000 ordinary shares of Sky Co. Ltd (Company) which engages in money lending business. Donny, the other shareholder of company told Cassy that the company has made good profits in the latest financial year. Cassy has approached you for advice on how she could raise money by using her share for a loan of HK$1 million.

1. Donny proposes to Cassy that the Company may lend HK$1 million to him to finance his purchase of her shares. Is Donny's proposal a legal or an illegal way to carry out the transaction? Explain your answer in light of the relevant provision of the Company Ordinance (Cap 622)

2. If Cassy does not want to sell her shares in the company to Donny and, as an alternative, she wats to borrow money from Donny by mortgaging her shares to Donny for a loan of HK$50,000. Explain to Cassy by meaning of shares and possible ways of creating an equitable mortgage of shares.

Reference no: EM133821782

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