FUNDAMENTAL OF BUSINESS AND CORPORATIONS LAW BLAW-5016
Test 2 (Essay Questions and Guidelines)
QUESTION No. 1
Joseph, Judd, and Blair have decided to start a business of manufacturing kids’ pajamas. Joseph and Judd will each invest $10000 in the business. While they do not want to participate in the day-to-day running of the business, they still want to have an active role in the management. Blair has no money to invest but she has years of experience in making and distributing pajamas.
Blair’s son, Thomas also wants to invest $60000 in the business. He wants to have a steady income from his investment. However, he does not want to be involved in the management except directing how his investment of $60000 is spent.
Required
With reference to the Corporations Act 2001 (Cth) and case law, you are required to answer the following question:
Discuss what legal structure you would advise for their project: a partnership, an incorporated association, a company (if company, provide details on the type of a company) with at least three advantages and disadvantages. Why would you recommend this structure? Provide details. You are NOT required to use the 4-step process in answering this question.
[6 Marks]
QUESTION No. 2
Joe is the sole director and shareholder of Homes Building Pty Ltd, a company that builds prestigious homes in Perth, Western Australia by mainly using sub-contractors and a few employees. Joe knew that due to the downturn in the building industry, the company’s business was in trouble. For the last 6 to 8 months, Joe had been making late payments to his sub-contractors and had accrued $200,000 in overdue payments. Joe had also missed some payments to the Australian Taxation Office (ATO) for taxes deducted from employees pay as well as superannuation contributions.
Joe sought advice from his accountant, Bill from Water & Young. Bill advised Joe that he should take urgent steps to stop the company from collapsing. Bill introduced Joe to Ken, a pre-insolvency adviser who offered to restructure Homes Building Pty Ltd for $25,000, which Joe accepted.
Ken advised Joe to register a new company Homes Building (WA) Pty Ltd, with Joe remaining the sole director and shareholder of the newly formed company. This name was chosen so as not to alert the building industry that there had been a change. Ken also advised Joe that the newly formed company should purchase the most asset of Homes Building Pty Ltd, being its future business projects. This was formally done by drawing up a Purchase Agreement and obtaining a valuation through a friend to give the impression that everything was above board. However, the amount paid for the future business projects was below market value.
After the restructuring, Homes Building Pty Ltd had no assets left, but had an abundant amount of outstanding liabilities. Ken appointed a friendly liquidator to wind up Homes Building Pty Ltd and deregister that company. By doing this, the creditors, the subcontractors and the ATO have no means of being paid for their outstanding debts from Homes Building Pty Ltd.
REQUIRED:
Discuss the following matter [referring to the Corporations Act 2001 (Cth) and cases].
With reference to the concept of the veil of incorporation and lifting the veil of incorporation, discuss if Joe could be held liable for the debts of Homes Building Pty Ltd. You must follow the 4-steps process to answer this question.
[7 marks]
QUESTION No. 3
In early March 2022, James, a person willing to form a new company started discussing with his friend, Ashton. His objective was to manufacture face masks and finding a suitable office premises, he signed a 20-year lease (worth $100,000) with Jamie as “agent of the business.”
On April 24, 2022, James and Ashton registered the company named Apex Pty Ltd. The other shareholders of the company were Nabin besides the other members of both James and Ashton’s extended family. James becomes the managing director with an agreed salary of $100000, which was $30000 more than other managing directors in a similar company. Ashton becomes the director and the sales manager of the company.
One year later, Nabin came to know that James’ salary was high, and he knew that but did not inform this to anyone. Further, the company has now found land with less price and so, is not willing to proceed with the 20-year lease signed by James before registration of the company.
REQUIRED:
Discuss the following matter [referring to the Corporations Act 2001 (Cth) and cases].
Discuss who is James in the above scenario before registration of the contract and under the Corporations Act 2001 (Cth) who will be liable to perform the contract. You must follow the 4-steps process to answer this question.
[6 Marks]
QUESTION No. 4
Technology Ltd designs and manufactures Technology keyboards. The managing director of Technology Ltd is Williams and the board of directors has given him the authority to undertake any transaction on behalf of the company up to a spending limit of $350,000. Any expenditure above this amount requires the approval of the board of directors. The other directors of the company are Major Quick and Slow Buck.
Williams is on a business trip when she meets Elizabeth Smith, an inventor who has designed a revolutionary method of inputting data into Technology that could make the keyboard obsolete. Mary believes she has to act urgently to protect Technology Ltd.’s interest so she agrees that Technology Ltd will pay Elizabeth Smith $400,000 to buy his invention. When Mary returns to Technology Ltd, the company’s research and development staff determine that Elizabeth Smith’s invention is not a threat to keyboards as Mary thought it might be. The other directors are angry with Mary for breaching their expenditure limit instruction and order that Technology Ltd should not pay Elizabeth on the grounds that Mary had no authority to act.
REQUIRED
With reference to Corporations Act and case law, determine whether Elizabeth Smith would succeed in enforcing the agreements against Technology Ltd. You must follow the 4-steps process to answer the question.
[6 Marks]
TOTAL: 25 MARKS
Please see the guidelines below
Guidelines to prepare the assignment
Note:
Reference your answers to cases and the Corporations Act 2001 (Cth) where possible. Please refer to the unit outline on how to reference your assignment using the AGLC system.
In answering the questions, a formal 4 step process is required. Answer each part separately.
You do not need to consider whether the directors have breached their duties when answering this question.
You do not have to discuss or apply Contract Law.
GUIDELINES FOR TEST 2
Where the question requires you to use the 4-step process, the 4 steps are:
Step 1: Introduce the area of the law
Step 2: Discuss the applicable law to solve and quote relevant cases and the sections of the Corporations Act 2001 (Cth) where applicable.
Step3: Apply the law to the facts to resolve the problem.
Step 4: Concluded
When writing your answers for Test 2, you cannot copy word for word from another source. You can paraphrase or summarise ideas or data obtained from another source, so long as you reference the source of your information using the AGLC footnote referencing style. More information can be found on this style from blackboard or the Curtin library web site: www.library.curtin.edu.au. A Bibliography is NOT required under the AGLC footnote referencing system.
Please note that plagiarism occurs when the work of another person is presented as one’s own, without appropriate acknowledgement or referencing. Plagiarism is a serious offence. This unit is ascribed to Turnitin, an electronic plagiarism detection service. Students should be aware that their work will be required to be submitted to this service to check for unacknowledged use of others’ work. Please read the Test 2 submission process carefully to determine how to submit your test through Turnitin.
The research for legal principles and cases can be restricted to that referred to in the prescribed textbook, lectures, and case studies. You will not be awarded marks for referring to cases or legislation outside these sources.
You should not exceed the word limit stated in the questions. The marks for each part should give an indication of the words that should be allocated for that part. You should check the rubric to ascertain how marks are allocated and the criteria that will be used to assess your level of achievement. Marks will be deducted for exceeding the word limit.