Ellinger, Davies, & Yao is a public company limited by shares which sells legal
textbooks in the areas of finance and investment law in Asia. They have been
in operation for over five years and have seen their company grow from desks
in a shared flat to a small office in Bloomsbury, London. Their reputation as a
publisher in the areas of Asian law has been growing larger each year.
The company itself is quite small. The three largest shareholders, Dr. Yao,
Professor Davies, and Dr. Ellinger together own 75% of the shares of the
company. The other 25% is owned by three outside investors who contributed
money into the company from its inception. All 10,000 shares are fully paid up
and the company meets minimum capital requirements as required by the
Companies Act 2006.
During a meeting, it becomes clear that the company is at a crossroads. Dr.
Ellinger has been arguing emphatically that they should to expand their
business to meet rising demand. They all appear to be quite happy with raising
capital through a new issue of shares.
Dr. Yao also raises the issue of realising a return on her investment in the
company. She believes the company should issue a dividend. She also
believes that it is necessary to make sure that no new shareholders can take
over the company.
Another meeting has been arranged in a few weeks to discuss the issues
Please prepare a memorandum of advice on the following issues:
1. The important legal requirements that must be met in order for the
company to issue more shares.
2. The legal and financial issues involved in issuing dividends. In your
answer stress why a new share issue cannot be used to finance
3. What potential options the company has to ensure that the current
shareholders can retain of control of the company. Identify and describe
these options to allay Dr. Yao's fears.
The Memorandum of Advice is worth 30 per cent of the total marks available for
the module in Comparative Commercial Law.
The Memorandum of Advice (including any attachments) should not exceed
As the Memorandum should be drafted and written in a practical style (with
numbered paragraphs) it is not necessary to include a bibliography