Reference no: EM132310667

PART A: Assessment Task

Assessment topics:
- Choosing a Business Structure
- The Company - A Separate Legal Entity: Nature, Regulation and Registration
- Management
- Directors' Duties
- Share Capital and Fundraising
- External Administration of Companies
- Associations
- Trusts

Elements and Performance criteria:
Research corporation and trusts law and related legislation, regulation and practice.
Identify different types of corporations and trust law transactions and clearly outline their legal context, establishment procedures and purpose.
Identify relevant legal principles applying to corporations and trusts matters.
Identify areas of risk in the application of law in corporations and trusts matters.
Analyse how legal issues can impact on different types of business structures.
Evaluate the relevance and implication of risks for the structure, operation and performance of different types of business structures.
Assess the ways in which risk mitigation is addressed in the formation and operation of different types of business structures.
Collect and collate available information for analysis.
Interpret, analyse and process available information to obtain required knowledge.

Seek advice and guidance of specialist expertise where required to interpret, analyse and synthesise.
Provide advice based upon identified facts and relevant law.
Relevant legal sources are reviewed regularly and any changes applied in daily
Systems for keeping up with changes and maintaining up-to-date knowledge about relevant aspects of commercial and property law are put in place and used

ASSIGNMENT QUESTIONS

You have recently been employed by The Trusted Accountants and Business Advisors (the firm). In the course of your employment you are asked to assist in gathering and applying information to provide advice to accounting and business clients.

Question One
Geoffrey Banks, an architect and interior designer is married to Marjorie. They have two adult children, Jennifer 21 and Benjamin 19. Geoffrey is discontent with his present employer and wishes to start his own architecture and interior design business. Marjorie, already a partner in her own accountancy practice is happy to give Geoffrey financial and emotional support in the proposed business but does not have the time or inclination to take any active involvement in the business. Jennifer is keen to work full time in the business in an administrative and marketing capacity, but Benjamin, who is studying engineering, can only help in university vacations.

Geoffrey seeks the firm's advice on whether he should set the business up as either a partnership or a proprietary limited company. In making and explaining your decision you should address all matters you consider relevant including the following:

(a) The possibility of involvement in the business of any or all of the family members (provide two options);

(b) The minimum number of people required to establish the business structure you have proposed;

(c) The elements required for the creation of the business structure/s; and

(d) Liability for the debts of the business should it fail for both proposed structures.

Question Two
Adrian is an experienced pastry chef. He is interested in starting and running his own business but is aware of the risks. Adrian is now considering purchasing a dessert franchise, ‘Decadent Delights'. He seeks the firm's advice on the following matters.

(a) How does purchasing a franchise differ from simply starting up your own business?
Include in your answer the possible advantages and disadvantages to the franchisee.
(b) What information must be provided to a franchisee before the making of the franchise agreement and during the life of the franchise agreement?

Question Three
Helen and Randolph are partners in ‘Parasol Ventures', a business which manufactures umbrellas. The business is growing, and Helen and Randolph wish to obtain further capital for expansion, begin exporting their products and also reward 6 long-serving and skilled employees who are vital to the success of their business. They have decided to change their business structure to a proprietary limited company and request your advice as to the following matters:

(a) How is a proprietary limited company created?
(b) What information must be provided and to whom?
(c) Does the company's registered office have to be the main place of business of the company?
Give reasons for your answer.
(d) Can the business continue to be called ‘Parasol Ventures'? If not, what changes must be made and why?
(e) What does it mean to ‘purchase a shelf company'?
(f) Is an ‘A.C.N' and a ‘corporate key' the same thing? Give reasons for your answer.
(g) How will decisions about internal governance of the company be made?
(h) What registers and minutes must the company keep?
(i) Helen and Randolph had unlimited personal liability for the debts of the partnership. Will they also have unlimited personal liability for the debts of the company? Give reasons for your answer.
(j) How may Helen and Randolph use the structure of a proprietary limited company to reward employees and encourage them to remain with the business?
(k) How may Helen and Randolph use the structure of a proprietary limited company to raise capital to grow the business?
(l) Why is a company structure beneficial for a business involved in export? Explain your answer.

Question Four

Katherine is an established client who has recently inherited a share portfolio in various companies from her grandmother. Katherine has not owned shares before and wants advice from the firm on the following matters:

(a) Katherine is now the owner of 25% of the ordinary shares issued by Beyond Collective Ltd, a public company listed on the ASX. Does this give Katherine the right to make management decisions for the company? Give reasons for your answer.
(b) What is the difference between a ‘defacto director' and a ‘shadow director', and between an ‘executive director' and a ‘non-executive' director?

(c) How is a person appointed to be a director of a public company?
(d) Does the chairman of the board have greater responsibility than other board members? Give reasons for your answer.
(e) Do all the directors have to be present in the same room for a quorum to exist at a meeting of a board of directors?
(f) How are directors' resolutions passed at a meeting of a board of directors?
(g) Katherine has received notice of a general meeting of the members of Beyond Collective Ltd which has been called to consider a resolution to remove 2 of the directors of the board, Ellen and James. The board itself opposes the resolution. What process is required for the resolution to remove the directors to be successful?
(h) Under what circumstances may there be a calling of a members' meeting by directors?
(i) What is the process required for Beyond Collective Ltd to hold an Annual General Meeting? Does Beyond Collective Ltd have to hold an Annual General Meeting? Give reasons for your answer.
(j) How does voting at a members' meeting take place?
(k) What occurs if the votes at the meeting are split? What process must occur for resolution?

Question Five
Genie is an entrepreneurial aeronautical engineer who has grown her business into the publicly listed company, Engineers Are Us Ltd (the Company). Genie has recently become the new chairman of the board. The board is composed of 8 non-executive directors and Will, the managing director.
Genie has been reviewing some of Will's previous decisions, and is concerned that she may have to obtain legal advice.
(a) Explain the meaning of ‘material personal interest' and how it affects the voting powers of
directors in a public company.
(b) Explain the meaning of ‘related party' and how it affects the voting powers of directors in a public company.
(c) What is the purpose of the ‘business judgement rule'? What conduct may exclude a director from relying on the ‘business judgement rule'?
(d) One year ago, Will as managing director of the company, entered into a contract with Aircraft Design Pty Ltd, to provide them with 30 pilot consoles for $2 million. The order has been manufactured and delivered to Aircraft Design Pty Ltd but no payment has been received.
Genie has now discovered that it was very clear at the time the contract was entered into that Aircraft Design Pty Ltd was in financial difficulties and was known in the engineering industry to be a bad credit risk. She has also discovered that Will knew this, but wanted to help Aircraft Design Pty Ltd trade out of trouble, as Jack, the managing director of Aircraft Design Pty Ltd is his cousin. Aircraft Design Pty Ltd is now in liquidation and the company is still owed $2 million.

(i) Has Will properly fulfilled his duties as a director of Engineers Are Us Ltd? Give reasons for your answer. If not, what duties has he breached and what are the possible consequences of his conduct?
(ii) Has Jack properly fulfilled his duties as a director of Aircraft Design Pty Ltd? Give reasons for your answer. If not, what duties has he breached and what are the possible consequences of his conduct.

The Board of the Company and the board of Aerosplat Ltd have been negotiating a merger of the two companies in strict commercial confidence. Will has told his wife and adult children that they

should buy shares in Aerosplat Ltd immediately, so they can be sold for a higher price in the merger. Will does not buy any shares himself.

Six months later the merger has occurred between and Will's wife and children have made a profit
of $50 000 each.
(d) Has Will properly fulfilled his duties as a director of Engineers Are Us Ltd? Give reasons for your answer. If not, what duties has he breached and what are the possible consequences of his conduct?

Question Six
Katherine has been further researching her share portfolio and has the following further questions:
(a) Why is there a general prohibition on a company buying its own shares?
(b) When does a ‘rights issue' take place?
(c) What are cumulative preference shares?
(d) When dealing with options, what is the meaning of the following terms?
‘time value' ‘strike price'
‘in the money'

(e) What is a dividend re-investment plan?
(f) Is it lawful to vary or cancel class rights to benefit some members at the expense of others by increasing the rights attaching to some shares but not others?
(g) What is the meaning of the 10/12 limit?
(h) In the case of an issue of shares for a publicly listed company there must be a prospectus. Why? What must it contain?
(i) What is ‘stop order' issued by ASIC under s739(1) of the Act?
(j) What is a ‘Professional Investor Exemption'?

Question Seven
A partner at the firm has asked you to research and provide answers on the following matters:
(a) Bill is a builder who operates his business as a sole trader. He undertook work for Abode Homes Pty Ltd 10 months ago for which he has not been paid the $80 000 he is owed. He has filed an action in court against Abode Homes Pty Ltd but has now been told the company is in receivership. Explain to Bill what this means and how it may affect his claim for payment.
(b) What is a ‘deed of company arrangement'? When does it occur?
(c) When does a ‘deed of company arrangement' come to an end?
(d) How may consumers or members of the public obtain information about companies under external administration?
(e) Who can make an application for a company to undergo compulsory winding up because of insolvency? What steps must be followed?

Question Eight
Rachel is a very successful jeweller who operates under the label Snazzy Fox. Rachel is married with three teenage children. Her husband is not currently working but has returned to university to complete his PHD. Rachel is considering setting up a trust and wants answers to the following questions.
(a) What is the meaning of the term ‘dual ownership' in relation to a trust?
(b) What is an ‘express' trust and what is the most common reasons for their creation?
(c) What is a ‘discretionary' trust?
(d) Explain the ‘three certainties' which are needed for a trust to exist.
(e) What would be the most beneficial type of trust and trustee for Rebecca's situation?
(f) What are the main duties of a trustee?

PART B: Assessment Task

From case studies covered only in class, identify a recent Corporate Collapse or Corporate Governance issue (i.e. misconduct), and research and report in 1,500 words on the following:

1. What was the Company and/or Who was the Individual and business the Company was involved in?

2. What year did the incident occur?

3. What led to the collapse of the Company or the Corporate Governance issue/misconduct?

4. Did the Company (or Individual) comply with good governance? Explain your answer to illustrate your understanding.

5. What was the outcome of the collapse/misconduct/governance failure and or and is the matter ongoing (i.e. unresolved in Court)?

6. Did Shareholders recover their investment (if this was impacted)? What happened to the Director/s of the Company (i.e. where there any civil or criminal penalties? What were the penalties and consequences to the Company/ persons involved/ other (be sure to include qualitative consequences i.e. reputation damage, stock price etc)?

7. From your learnings, what would be your recommendation to avoid this issue re-occurring and what would you suggest is put in place for 1) The Company impacted and or 2) The individual responsible for the misconduct? Explain your answer and be sure to include recommendations in alignment with the Corporations Act and ASX Corporate Governance Principles (3rd or 4th Edition) to demonstrate your understanding.

Attachment:- Apply legal principles in corporations and trust law.rar