LAW2106: David Incorporated a New Company-Business Law Assignment

Case 1:

David had a great idea for a new app, called Bookface, which allowed book enthusiasts to discuss their favourite novels. David incorporated a new company, Start Up Pty Ltd to market the app.David was the sole director of Start Up Pty Ltd but the company had three shareholders, David and his brother and sister John and Jane. Each held one share each. John and Jane were not involved in the company other than to the extent that they contributed start-up capital and were in turn provide with shares. Start Up Pty Ltd entered a contract with a web developer, Susan, to develop the app and paid a small deposit out of the monies contributed to Start Up Pty Ltd by John and Jane. Susan worked day and night on the Bookface project for one month but just before completing her work saw a news story featuring David, who had sold his Bookface idea to Big Blue Co Ltd for a large undisclosed sum.Susan tried to contact Start Up Pty Ltd but their office had been shut down. A search of the company confirms that it has no assets and Susan is unable to obtain payment for the work she has performed.

Question 1:

Advise Susan if she has any recourse against David? John and Jane have also been left empty handed as David’s contract with Big Blue Co Ltd was in his own name, making no reference to Start Up Pty Ltd. Do John and Jane have any recourse against David?

Case 2:

Steven, Grace and Amanda are siblings. Their father operated a very successful pub and upon passing away, left the pub to them in equal shares.Steven, Grace and Amanda seek your advices as to how they should operate the pub. They all wish to be involved as they have all had successful careers and now would like a new challenge. None of the children have had any experience in operating a pub as they were raised by their mother who had separated from their father while they were still very young and therefore, have not spent much time in or around pubs. They have each accumulated significant wealth during their previous careers in medicine and law and wish to protect this from any risk associated with operating the pub. The pub has operated very successfully in recent years, with a profit in excess of $5,000,000.00 per year. Steven Grace and Amanda have requested that you provide them with two alternative business structures to choose from.

Question 2:

Advise Steven, Grace and Amanda, by reference to the information provided, of two business structures and the pros and cons of each. The business structures you may suggest should be selected from the following list:-
1. Partnership;
2. Fixed/Unit Trust;
3. Discretionary Trust;
4. Proprietary Limited Company.