Theyset up a company,known as ABC Limited, to develop machines for business cunsumer. It is a private company limited by shares.There is pre-emptive right in the articles of association. Mary holds 75% of the shares in the companyand Sam holds the remaining 25% of the shares.Oneyear has passed. The business is successful, but Sam plans to change job. Sam will be required to quit ABC Limited and sell his shares in it. Hence, he intends to sell his shares in ABC Limited to his friend,Eric,for $625,000 in order to realise his investment.Mary, however, does not want to share the business with a stranger.If the shares will be sold, he wishes that her brother Leo buy them.
However, as a fresh graduate, Leo cannot afford to buy Sam’s shares in ABC Limited .Hence, Mary proposes that Sam sells the shares to Mary herself first.ABC Limited will pay Sam $625,000 first. Later when Mary is entitled to dividends from ABC as ashareholder, he will use the dividends as a setoff against the sum of $620,000.At that time she will transfer the 25% shares to Leo free of charge
Q: Mary proposes that ABC Limited pay Kelvin $625,000 first. In what circumstances will Mary ’ s proposal be considered illegal if it is carried out?
Could you answer the question
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