Reference no: EM13492400

QUESTION 1

Nicola and May are partners in a business which operates a second-hand book shop. They have two employees working for the business. The shop is located in leased premises. The business is doing well and has been profitable for them.

An opportunity has arisen to purchase two second-hand book shops in nearby suburbs. Nicola and May are keen to expand their business. They will need a large injection of funds to purchase the additional businesses. They will need to appoint a manager to at least one of the shops, as they will be fully occupied by the other two.

Nicola is concerned about her potential liability for the debts and liabilities of the partnership. Also, she is concerned about the future of the business if one of them should decide to leave, as the lease is in both of their names.

Advise Nicola on the advantages and disadvantages of incorporating. If you recommend incorporation, what form of incorporation would be the most appropriate? Why?

QUESTION 2

Marcia is an entrepreneurial 17-year old with a busy window cleaning business. She is studying for a commerce degree. She wants to incorporate her business. She wants to become an employee of the business so that she can be covered by workers' compensation and superannuation. She completes the registration documents for a proprietary company. She uses her own name as the sole director/shareholder but falsifies her date of birth (showing she is 19 years old).

ASIC subsequently registers the company having no knowledge of the fraud.

A) If the fraud were discovered what could ASIC do about the company?

Now assume a slightly different scenario. Marcia does not register her company until she is over 18. She wants to call the company "Marcia's Guaranteed Sparkle Pty Ltd".

B) Will Marcia be able to register the company with this name? If so, how can she ensure that no one else uses it before her company is registered?

C) Is Marcia required to have a registered office? If so, can she use her parents' home address and, does the office have to be open to the public?

D) Does she have to display the company name and/or ACN/ABN

- on her accounts?
- outside her parents' house?

QUESTION 3

Mr. Shifty, Ms Avoider and Mr. Marginal call to make an appointment with your firm, Fees Ruthless, solicitors. You have been asked to establish their new company (No-Tax Agents Pty Ltd). You advise them not to bother with their own constitution, but instead to rely on the replaceable rules in the Corporations Act. Advise who should be appointed as directors of their company in view of the following information:

A) Mr. Shifty states that he does not want to be appointed a director or secretary. He suggests instead that:

 his family company be appointed as a director; and
• the company not have a company secretary;

B) Ms Avoider is currently unavailable for meetings as she has five months still to serve for her last conviction for falsifying company accounts;

C) Mr. Marginal is 72 years old and has Alzheimer's disease. A trustee has been appointed to administer his estate.

Assume that Mr. Shifty's family company subsequently goes into liquidation. In her report to AS1C, the liquidator states that the secured creditors have been repaid in full, but the unsecured creditors will not receive more than 20 cents in the dollar. The liquidator does not find any evidence of wrongdoing on the part of Mr. Shifty or any of his fellow directors.

D) What (if any) ramifications does this have for Mr. Shifty, assuming that ASIC's records show that Mr. Shifty has, over the last nine months, had a similar track record with two other small, proprietary companies?