Tutorial WorkbookSubject: LAW202Name: XStudent Number: X Tutorial Class 1Myra is the only shareholder and director of Kids Clothes Pty Ltd (Kids Clothes) which makes cheap children's clothing. The company has 10 employees. In the past Kids Clothes had operated profitably, however since 2011 it has been running at a loss. In July 2012 Myra paid herself a large bonus and then transferred all the remaining assets of Kids Clothes to a new company called Clothing for Kids Pty Ltd. The employees continue to be employed by Kids Clothes. Kids Clothes has no assets and owes each of its employees several thousand dollars in accumulated holiday, superannuation and long service leave entitlements.
- What possible legal grounds might the employees have to claim their entitlements from Clothing for Kids Pty Ltd?
- Could any action be taken against Myra personally?
Consider the following in your answer: - IRAC method of problem solving
- Separate legal entity
- Limited liability
- Piercing the corporate veil
Tutorial WorkbookSubject:Name:Student Number: Tutorial Class 2QUIZ
Tutorial WorkbookSubject:Name:Student Number: Tutorial Class 3MrShifty, MsAvoider and MrMarginal call to make an appointment with your firm, Fees Ruthless, consultants. 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:
- MrShifty 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;
- MsAvoider is currently unavailable for meetings as she has five months still to serve for her last conviction for falsifying company accounts; and
- MrMarginal is 72years old and has Alzheimer's disease. A trustee has been appointed to administer his estate.
Consider the following in your answer: - Restrictions on director appointments
- Age issues
- Consent issues
- Insolvency issues
- Prior conviction issues
- Capacity issue
Tutorial WorkbookSubject:Name:Student Number: Tutorial Class 4In April 2011, Earl became the managing director of a newly registered company, Go-Carts Limited (Go-Carts). Go-Carts at that time controlled a chain of successful go-karting venues and was in a strong financial position.
In December 2011, a liquidator was appointed to Go-Carts. An investigation of the affairs of Go-Carts by the liquidator disclosed a probable shortage of funds of over $3million.
Although there had been a steady increase in Go-Carts' sales of tickets into the go-karting venues from 2010 to 2011 (resulting in substantial trading profits), the liquidator reported the following:
- the purchase of a $4million chateau in France with funds from Go-Carts which, upon resale, was only likely to realise $3million – representing an expected net loss of $1million;
- the purchase of new motorised sweepers designed to collect litter on the go-karting tracks which, despite high hopes at the time and potentially large (labour) cost savings, subsequently proved to be unsuitable and had to be replaced at a net cost of over $800,000;
- that $200,000 is due from Shrewd Advisers Ltd (Shrewd), Go-Carts' investment advisers, a company of which Earl is the governing director and majority shareholder. There is a guarantee by Shrewd in favour of Go-Carts for $100,000 but, given Shrewd's financial position, no more than $70,000 is likely to be recovered. Earl did not disclose his interest in Shrewd Pty Ltd to the Go-Carts Board, although they knew about it; and
- Earl had himself fraudulently misappropriated about $1million to finance his extravagant lifestyle. Fraud charges against Earl are currently being heard by the county court.
The directors of Go-Carts during the period XXXXXXXXXXwere:
- Earl, as Managing Director and Chair;
- Elisabeth Deal, a partner of a leading firm of chartered accountants;
- Enid Patton, a highly regarded doctor who sits on several public company boards;
- Eleanor Arnold, a public relations consultant and go-karting enthusiast. Eleanor was ill for much of 2008 and was unable to attend board meetings or take any part in the company's management.
The day-to-day management of Go-Carts was left to Earl. The non-executive directors conceived their role to be planning and policy-making. There is no evidence of wilful neglect or default by any of the non-executive directors, who were all deceived by Earl, as were the auditors.
Advise the liquidator whether she should pursue any of the non-executive directors for compensation.
Consider the following in your answer: - Statutory duties:
- s.180 (1)
- s.180(2)
- s.588G
- s.189
- Business judgement rule
- General law duties
- Duty of care, skill and diligence
Tutorial WorkbookSubject:Name:Student Number: Tutorial Class 5Roberta is the managing director of Eternal Youth Pty Ltd (EY), a profitable company specialising in buying and selling anti-ageing cosmetics and shampoos for sensitive hair. The market for EY's products are women between the ages of 40 and 70years.
While at the hairdresser's having a power perm, Roberta chats to her hairdresser, Leonardo. Leonardo asks Roberta whether her company would be interested in helping him to market a new organic hair soap called “Wonder Bar”. Leonardo claims that the soap prevents male hair loss.
Roberta tells Leonardo that her company would not be interested because it sells women's products only. She offers to help Leonardo herself. Leonardo agrees. Roberta and Leonardo set up a company called Wonder Hair Soap Pty Ltd (WHS) and become its directors and members. Roberta is the majority member. The business of the company is an overnight success.
At a board meeting of EY six months later, Roberta proposes that EY enters into a long-term contract with WHS to buy supplies of the organic hair soap for resale. The board agrees and, as part of the contract, Roberta negotiates with the board that she will be paid a small commission on each sale because she drew the board's attention to this new product opportunity. EY makes large profits from selling the soap overseas.
EY learns that Roberta is the majority member in WHS. They seek advice on the following:
- Has Roberta breached any of her directors' duties owed to EY? Which (if any) has she breached and why has she breached them?
- Should Roberta have been present at the board meeting when the contract with WHS was discussed and voted on?
- Should the contract also have been disclosed to the general meeting for approval before EY went ahead?
- What general law or statutory remedies (if any) should EY seek against Roberta?
- What statutory penalties (if any) can be imposed against her? Who can impose them?
Consider the following in your answer: - Statutory duties
- General law duties
Tutorial WorkbookSubject:Name:Student Number: Tutorial Class 6GROUP PRESENTATIONS
Tell me about your presentation experience.
Consider the following in your answer: - the process
- how you organised
- your feelings during the presentation
- your performance
- suggested improvements
Tutorial WorkbookSubject:Name:Student Number: Tutorial Class 7 - Harry, Jim and Ken are the directors of HJK Pty Ltd (HJK). Although Ken has never been formally appointed by the board as managing director, he has been running the day-to-day operations of the company since it was registered 10years ago with the knowledge and acquiescence of the other directors, Harry and Jim. Last month, without telling either Harry or Jim, Ken signed a contract agreeing to buy a new computer system for HJK. Harry and Jim think that HJK cannot afford to buy a new computer system at this time and do not want to go ahead with the purchase.
Advise Harry and Jim whether HJK will be bound by the contract to buy the new computer system.
Consider the following in your answer: - General reasons for invalidating a contract
- Formal authority (ie. direct or indirect authority)
- Substantive authority (ie. actual or apparent authority)
- Statutory assumptions (see s.129; s.128(4))
- Indoor management rule (ie. put on enquiry)
- Companies should decide who to engage as Auditor’s and Auditor’s should not be responsible to third parties that rely on their reports. Do you agree?
Consider the following in your answer: - Essay format (Intro, Body, Conclusion)
- Intro
- Definition of Auditor
- Purpose of company auditors
- Duty of care
- Your view
- Body
- Role of auditor in corporate collapses
- Importance of auditor independence
- Scope of duty of care
- Conclusion
- Summary of if your view
- Future trends, policies, recommendations
Tutorial WorkbookSubject:Name:Student Number: Tutorial Class 8Morris, John and Paul are directors and shareholders of Newry Property Developments Pty Ltd (NPD), a property development company which owns and operates a tavern. Morris and John are brothers. John and Paul are friends and partners in an accounting firm. Morris is an unemployed artist and sole parent of three young children. The total number of issued shares in NPD is 6,000 ordinary shares. Each shareholder has 2,000 shares. All the shares are fully paid.
NPD has been very successful but has not paid any dividends to its members for the last two years. Profits have instead been invested in further development projects. Morris' wife has recently died and he is very short of money to look after his family. He approaches John and Paul and asks them to consider whether NPD could begin to pay dividends again to its members. John and Paul refuse to consider Morris' request as it would upset the “long-term goals of NPD”. Morris is upset by this response and announces that he wants to sell his shares. John and Paul refuse to buy him out and demand that Morris resign as a director because he has lost his objectivity. Morris resigns reluctantly. He asks to see NPD's most recent set of financial statements. John and Paul refuse to provide the information. Morris discovers accidentally that NPD has been paying large “management fees” to John and Paul's accounting firm. Morris consults you as his legal adviser. He wants to know:
- Should he bring a derivative or personal action against John and Paul? What factors should he take into account in making this decision?
- If he brings a personal action, should he bring it under the general law or make an oppression claim under s232? What factors would influence your recommendation?
- If successful, what remedies should he seek?
Consider the following in your answer: - Derivative action
- Personal action
- Remedies
Tutorial WorkbookSubject:Name:Student Number: Tutorial Class 9Shareholders' funds in the balance sheet of Galaxy Ltd as at 31December 2011 showed the following.
| Issued Capital |
| 20,000,000 fully paid ordinary shares issued for $1.00 | $20,000,000 |
| 2,000,000 fully paid preference shares issued for $1.00 | 2,000,000 |
| Retained earnings | (2,000,000) |
| Asset Revaluation Reserve | 1,000,000 |
| Total Shareholders' Funds | 21,000,000 |
The directors of Galaxy Ltd have received the following information from the company's accountants in February 2012:
The company's net asset position has further deteriorated because of an increase in the provision of bad and doubtful debts. This is likely due to the non-recoverability of a large accounts receivable account that will have a material impact on the company's ability to remain as a going concern.The company intends to hold its Annual General Meeting in March 2012. Under the terms of the share issue, the preference shareholders have the right to a dividend rate of 6% of the issue price per share. The Board intends to declare a 5cent final dividend to the ordinary shareholders. Can the board declare the ordinary dividend without being in breach of s254T?
Consider the following in your answer: - balance sheet test
- protection of shareholders
- solvency requirements
- see 254TCorporations Act 2001 (Cth)
Tutorial WorkbookSubject:Name:Student Number: Tutorial class 10PopsiSoftdrinks Ltd (Popsi) is a successful softdrink and fruit juice drink manufacturer. Popsi has 2,000,000 ordinary shares issued at a price of $1 per share. Popsi decides to sell its fruit juice operation for $500,000. Popsi has no present or future use for this money. It already has a substantial “capital projects” reserve from which it will finance any further expansion of its business. The directors propose to return the funds to shareholders. Popsi seeks advice as to how to undertake such a transaction.
Answer the following questions:
- What transaction(s) could Popsi undertake in order to return the funds to shareholders?
- If more than one transaction is possible, which one would you recommend that Popsi undertake and why would you recommend it?
- Assume that Popsi undertakes a capital reduction. Would the transaction satisfy the requirements of Ch2J if:
- Ginger Ale, a shareholder with 30,000 ordinary shares, objects to the proposed distribution on the ground that it will adversely affect her tax position for the current financial year?
- Popsi owes Carbonated Waters Pty Ltd $600,000 for carbonated water supplied to Popsi last month?
If the proposed distribution takes place as a capital reduction, how much per share will each shareholder receive and what changes, if any, will occur to the company's accounts and the holdings of the shareholders?
Consider the following in your answer: - Share buy back
- Capital reduction
Tutorial WorkbookSubject:Name:Student Number: Tutorial class 11 - Certain offers of securities do not require a disclosure document: see s 708. Explain the rationale behind the exclusions.
Consider the following in your answer: - Short answer question
- Need for protection
- Commercial flexibility
- Discuss the basis for the insider trading offences in the Corporations Act.
Consider the following in your answer: - Essay format (Intro, Body, Conclusion)
- Intro
- Definition of insider trading
- Types of insider trading
- Legal authority
- Commercial basis
- Community basis
- Body
- Unethical - greed
- Conflict of interest
- Manipulation of market
- Misuse of position/information
- Conclusion
- Importance of market integrity
- Role of managers as fiduciaries or agents
- Appreciation of reasonable care or employee duties
Tutorial WorkbookSubject:Name:Student Number: Tutorial Class 12 - List three differences between an off-market bid and a market bid.
Consider the following in your answer: - Short answer question
- Bid extent
- Bid restrictions
- Bid method of consideration
- Do secured and unsecured creditors have too much protection under the Corporations Act at the expense of other stakeholders such as members, employees and customers?
Consider the following in your answer: - Essay format
- The rights of a substantial secured party;
- Protection from creditors under voluntary administration;
- Rights of creditors at the first and second meeting of the creditors;
- Rights of creditors under a receivership;
- Rights of creditors to wind up the company;
- Loss of member power and rights on winding up;
- Loss of goods paid but not received by consumers; and
- Loss of work completed but not paid for the employee.