SQE1 sample questions

Question 105

A private limited company issued ordinary shares to five shareholders for nominal value on incorporation several years ago. Four of those shareholders are also directors of the company.

The fifth shareholder, a man, only has 10% of the ordinary shares. He has never been a director nor involved in the management of the company.

There have been no changes to the company’s share capital since incorporation.

The company has always made a profit and has distributed a large proportion of those profits annually to the shareholders.

This year the directors resolved to award themselves a substantial pay rise, far in excess of the market rate. As a result, the company made very little profit and no dividends have been declared by the directors this year.

The man consults a solicitor about what his remedy is likely to be if he is successful in an action for unfair prejudice under the Companies Act 2006.

If the man is successful in an action for unfair prejudice, which of the following is the most likely remedy that will be ordered by the court?

A. That the company buy back the man’s shares at fair value.

B. That the company buy back the man’s shares at nominal value.

C. That the man be appointed to the board with immediate effect and cannot be removed from office by the other shareholder directors.

D. That the company be wound up.

E. That any future pay rises for directors be aligned with market rates.


A - That the company buy back the man’s shares at fair value.

Candidates who answered correctly: 61%


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