18 Jul EXPLAIN TO HENRY REGARDING THE LAW ON DIFFERENT TYPES OF CAPITAL.
AN ASSESSMENT OF THE PRINCIPALS AND RULES OF COMPANY LAW
TASK 1
John’s friend Henry and his son Mark has been buying farm machinery from farms that have been closing and selling it about as a side business. The business has been running under the name of Henry’s Farm Solutions’ for about 10 years now. It is a successful business. John advised Henry to create a company some years ago when the business took off. Henry & Mark have come up with a name of “ Farming Solutions’ but not sure whether it should be a private company or public one. Henry just wants to carry on business as usual appreciates that young people want to modernise things. He would like his wife and daughter to be involved and become owners in this business. Mark would also like his present girlfriend Polly to have some share in it also as she helps father and son by responding to e- mails from prospective clients. Henry would like any new business entity to incorporate the old business as he already has some valuable clients. He is also concerned that given the current economic climate what would happen to the new business if things go wrong.
Mark tells you he has received a lot of orders from expanding farms in Brazil, China and India for second hand farm machinery if only he could raise some more money and banks have offered some monies but not enough for the amount he desires.
• Explain the legal background to limited liability and corporate personality. (an effective approach to a case has been applied)
• Critically evaluate the situation when the court will lift the veil of incorporation ( legal information has been correctly analysed for the purpose of the brief)
• Explain pre – incorporation contracts and how they amount to lifting the corporate veil
• Explain how the registration requirements of a private company differ from those a public company. ( effective judgement have been made about the content and structure the answer)
ASPECT S OF THE TYPES OF BUSINESS WITH APPROPRIATE CASE LAW AND LEGISLATION.
THE ANSWER SHOULD BE IN THE FORM OF REPORT ENDING IN RECOMMENDATIONS FOR HENRY AND MARK (recommendation needs to be direct name, for example I advise to Jonh he should….)
All ANSWER HAVE TO BE ACCORDING TO BRITISH LAW ONLY FOR THIS TASK. Answer should be direct name for example Mark he should do this…..
USING CORRECT HARVARD REFERENCING SYSTEM
TASK 2
David Cameron, George Osborne and Nick Clegg (John Smiths) are directors and majority shareholders of a property business, ‘Scottish Holding Ltd’. Some 10 years ago they were doing very well but then the crunch came in 2008. During good times they had purchased and sold property and land in the UK and Europe. However the economic crisis in Greece, Spain and Portugal saw the price of some of their assets crumbing down. In 2012 they were advised by the company accountant that their business portfolio was in serve difficult and could be in solved in a few months. Makeover the Greek banks were demanding their loans back. David, Nick and George were reassured by the fact that the company was incorporated as a private limited company and so were very confident that they would only have limited liability for the debts of the company. Although all three felt that they needed some professional advice about this.
David and Nick had been having considerable internal disagreement of late. The Articles of Association state that all members “ to offer their shares to other members first, who will pay for them at a fair price before seeking external buyers”. Nick has not been happy at all of recently with being outvoted regarding decisions by the other two and does not think that he will get fair value for his shares and seeks clarity on the matter.
In August 2014, property prices in Scotland first increased quickly and then dropped suddenly with referendum due to take place in Scotland. Given that Scottish Holdings does not have much money in the bank , Nick approached the Royal Bank of Scotland as the president Fred Dibley of the bank was an old school friend of his. Fred agreed to a £2.4 loan being granted on basis that the bank obtains first fixed charge on the 5 properties in London that Nick and his family own, although one of the properties is in the name of Scottish Holding Ltd. However, Nick uses the money to purchase in Scotland. The RBC also wants a floating charge on Nick’s vineyards which produce a well – know wine in Portugal.
This charge on the properties in London contains a restriction that no other bank or financial institute may acquire a charge in priority or equal to the RBS charge together with a clause which stipulates that the banks floating charge will crystallise immediately in the event that the company attempts to grant a competing charge in favour of anyone else’s.
Unknown to Davis and George, Nick uses the loan from RBS to purchase the properties outright in favour of a company which he has set up with his wife.
John Smith would like your opinions on David, George and Nick given that they are all friends of his.
a) If Nick insists on not offering his shares to other members first.( relevant law principals have been applied to solve case)
b) Explain why the memorandum is not the ‘main ‘ company document since the passing of the companies Act 2006( a range of sources of information has been used e.g relevant examples of common law and statues ( at least 5))
c) David and Gorge would like to know the listing requirements of AIM and how does it differ from LSE. (Complex information has been synthesized and processed to solve problems )
Advice the clients of the pros and cons of their situation and then arrived a solution which is justified by common law and appropriate legislation. The work produced must be clear and concise.
ALL ANSWER HAVE TO BE ACCORDING TO BRITISH LAW ONLY FOR THIS TASK. Answer should be direct name for example David he should do this…..
USING CORRECT HARVARD REFERENCING SYSTEM
TASK 3
Henry and Mark have done really well in the last two years, The company Farming Solution was incorporate as an Ltd’ it has consistently outperformed its competitors and Henry informs you that he has a number of enquirers as to how other can invest in his business. Moreover he has finally been persuaded by other directors on Marks’ ideas about expanding the business into not just selling the machinery but maintaining it also so that they provide the complete service to prospective buyers.
This will take the business into dimension but he is not sure about share capital and capital maintenance.
a) Explain to Henry regarding the law on different types of capital. (Appropriate legal terminology has been accurately used in the answer)
b) At a Henry has heard that company is not obliged to pay dividends to its shareholders, you are asked to advise him. ( Coherent and logical development of the topic has been demonstrated)
c) How would your answer differ if Martin , the latest love interest of Mark has heard from Mark which direction the company will take now; he asks his friend Alphonse to buy some shares in Farming Solutions Ltd.
RESOLVE THE PROBLEM USING CASE LAW ANS APPROPRIATE SECTION OF ANY LEGISLATION. THEY MUST REACH A CONCLUSION AND JUSTIFY THEIR ANSWERS. THE WORK MUST TO LOGICAL AND PRACTICAL.
ALL ANSWER HAVE TO BE ACCORDING TO BRITISH LAW ONLY FOR THIS TASK. Answer should be direct name for example HENRY he should do this…..
USING CORRECT HARVARD REFERENCING SYSTEM
TASK 4
Jeb is Henry’s brother, who was given 2% of share in Farming Solns plc, by Henry. He has a background in finance and Henry has always looked out for his family, hence the shares were given. Jeb is a non- executive director of the company.
Jeb is keen to establish himself as a successful member of the family in his own right. So he sets up a company, with his drinking partner, Joseph called Wiltshire Parts. This new company is to provide spare parts for his second hand machinery. He believes that because he has information regarding where the machinery is being sold , he has a ready made customer base.
a) Advice Henry when he discovers the truth about Jeb.
b) Jeb has repeatedly asked Henry for more shares in the company. Henry has refused and says that Jeb should purchase these on the open market. Jeb having spoken to other shareholders believes that Henry and Mark should not be awarded 25% pay increase and be given substantial new shares as CEO and MD’s as they have been performing really well. He Jen intended to do something about this . Advice Henry what Jeb can do.
c) Advice Henry as to what protection if any does the law give to someone with such a shareholding as Jeb has.
d) Henry has no idea as what sort of shareholders his company has. This was all done by the financial people he tells you. But since there is EGM coming up soon, he would like to abreast of the situation by asking do all shares carry equal weight; and what are debentures as he does not trust Jeb anymore.
e) It is 2015 and following some really bad deals Farming Solns plc. Has been advised by the accountants that they expanded too quickly and hence there is no money in the kitty. Henry is surprised as to how did this happen. He was doing so well. An agent Vinod has approached the courts for liquidation order as he has not been paid his commission for more than a year despite assurance to the contrary. Explain to Henry the effect liquidation will have in his company and all these who are involved in it.
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