Smith and Roberson’s Business Law
17th Edition
ISBN: 9781337094757
Author: Richard A. Mann, Barry S. Roberts
Publisher: Cengage Learning
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Chapter 5, Problem 6CP
Summary Introduction
To discuss: Whether the company P is correct or not.
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Jenny is the director of a company, Shipley Ltd, which is involved in building and construction. There are four other directors of this company. The company has been lending large sums of money to its parent company in China via an offshore subsidiary for more than two years. The directors have relied on letters of comfort from the parent company that the money will be repaid in due process. Of late, the building and construction industry is facing difficult times due to rising costs of materials which have to be imported from overseas. Shipley Ltd’s financial situation has become more serious and many creditors and subcontractors have not been paid. The parent company is continuing to make assurances that the it will repay the loans but the money has yet to appear in Shipley Ltd’s bank account. Jenny is very concerned as she believes that Shipley Ltd is no longer solvent and the company’s performance is very poor. The other directors brush Jenny’s concerns aside, saying that it is the…
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