Business Law practical exam long questions and case studies
1) Discuss the documentation required under the Companies Acts for the valid incorporation of a limited liability Company. - LTD and There are certain well recognised rules in the recovery of Damages where a breach of contract is established.
Case studies of company law(separate legal personality, directors duties), Insolvency essay style question, Problem question on employee, Duties of receivers duties.
1) Mr. Jonny Nohan owns and runs a dog walking/pet minding business. He set up the business as a part-time job during college but since 2005 when he set it up the business has expanded and he now employees 4 other employees and owns three vans. The business consistently makes a large profit every year and he has now expanded the business into dog grooming and selling pet products. One of his long-standing employees has come to him and asked him whether they could go into partnershop and open up a pet-store as well. Mr. Nohan is unsure what would be best for his business as his bank adviser told him to consider the option of incorporating the company instead of a partnership. He heard He wants to invest more into the business and is thinking of forming a limited company in order that he could loan the company investment capital and has heard that he can get a "debenture" from the company but does not know what this means. He also seeks to protect himself personally against any future financial difficulties (as he is now getting married and buying a house with his wife.
He seeks your advice and knowledge of case-law on the following issues:
(a) The advantages of a limited company over forming a partnership.
And in addition briefly on the following:
i. How many directors he would need to form the company and what documents he would need to do this and where he would lodge the relevant documentation.
ii. If he were to loan the incorporated company a sum of money and receive a debenture what this would mean for him if the company went into financial difficulties.
2) Andrew, Brian, Colin, Diana and Elizabeth were the directors of Gemsales Ltd, a company engaged in the business of importing and supplying jewellery as wholesalers to the local market.
The company decided that as the market was becoming more competitive it needed to expand its business as it felt with increased volumes of sales it would be able to lower its prices and be more competitive. In order to do so it obtained a €4 million dollar loan from the Friendly Bank Ltd. €3 million was used to buy more stock and €1 million was used to buy a large new warehouse and showrooms from Traders Ltd.
Colin was not at the meeting that had made these decisions as he was in hospital recovering from a serious accident. Elizabeth, as was her usual custom, had not attended the meeting but signed the requisite documentation agreeing to the expansion of the business and the getting of the loan. Diana who attended, said she did not know if she agreed and abstained from voting. Andrew and Brian both voted to go ahead with the expansion and the getting of the loan.
At about this time Brian has established contact with Victor, who was setting up a new business as a retailer of jewellery. Victor was looking for reliable suppliers, but said he would not deal with Gemsales Ltd as he did not like Andrew, the Managing Director. Not wishing to miss out on such a lucrative business opportunity, Brian arranged to set up his own business as a jewellery wholesaler and a contract was entered into between Victor and Brian for the supply of jewellery.
Six months later, Brian resigned as a director. At the same time it was clear the company had over-extended itself and was insolvent and could not pay the interest on its loans.
It also became clear that Brian was a major shareholder in Traders Ltd and the other directors were unaware of this at the time of the purchase of the warehouse and showrooms. Furthermore, Brian had been approaching other established customers of Gemsales Ltd and had secured orders for his own business.
Advise as to the liability of the directors both under common law and statute.
3) Dickensian Times Ltd is a private limited company owned by Tim and Estella who are its only directors. The company has been in the antique business for ten years and has operated a retail shop in Francis Street. The company has a term loan and current account with Big Bank plc, both of which have been guaranteed by Tim and Estella. Both loans were also secured by a debenture incorporating a fixed charge over the company's stock. Sales were very poor in 2012 and the company fell into substantial arrears with its loans of some €2m. The company also owes Tim and Estella €100,000 as they loaned this money to the company on its incorporation. The company has no other creditors.
Despite all efforts to restructure the loans and save the company, in October the Bank was forced to appoint a receiver (Mr. Magwitch) to dispose of the company's stock and premises. Tim and Estella believed that the leasehold interest was worth €50,000 and that the stock, comprising of antiques, was worth €2,5m. Magwitch sold the premises for €50,000 and announced that he proposed to have a public auction in January to dispose of the antiques.
Tim and Estella were horrified to learn this because they believed he should have waited until spring, a time when antique dealers traditionally made a killing. Magwitch pressed ahead with the auction which realised just €1,5m for the company's stock of antiques. Together with the€50,000 for the lease of the premises, there is a shortfall of some €450,000 due by the company to the Bank.
Tim and Estella seek to maintain three claims against the receiver:
1. They allege that he acted in breach of his duties to the Company in disposing of the assets when he did and for the consideration he accepted.
2. They allege he is in breach of his common law duties to them as guarantors, (because they are liable as guarantors of the company's debts for the outstanding €450,000).
3. They also claim that Magwitch breached his duties to them as creditors of the company to the extent that their loan of €100,000 will not now be repaid.
You are required to advise Magwitch in relation to each of the claims against him. Cite all relevant case and statute law and apply them to the facts of the case.
SAMPLE ESSAY QUESTION
"Liquidators, receivers and examiners have only one thing in common: usually the company they are involved in is insolvent; in all other respects the three are appointed for very different purposes and have very different powers and duties." Discuss....
4) Walter works as a high level web designer for sports wear company - JUST RUN. Paula, the company managing director does not really understand what he does and is not in a position to tell him what to do or how to do it. She just likes the website that Walter maintains.
Walter is free to work from whatever location he chooses although he participates in meetings about the company's strategy. He tends to work from the company office one day a week and the rest from either his home or other locations. He provides his own laptop and can work whatever hours he wants as long as the website is maintained. He bills the company for his work by the hour and the company deducts PRSI but not PAYE from his wages. He is part of the company soccer team and also pays into the company pension scheme. Under his contract he cannot sub-contract the work on the company website out to anyone else and is answerable to the company PR and Development manager on a monthly basis for sales using the company website. He receives a bonus based on increase in sales via the website. He is considering joining the trade union of the company but one of the sales team tells him he doesn't think it would be open to him as he isn't an employee of the company. He also wants to go on holidays soon and has been told he will not be entitled to holiday pay. He knows that the web sales team all receive holiday pay. Walter is concerned and looks at his contract of employment which states that he works under a "contract for service". He is not sure what to do. He seeks your advice.
7) Aidan is a Public Relations & Communications expert. He is in charge of the public relations for Jamie McGrath, a top chef, entrepreneur and restaurant owner/manager. Jamie McGrath owns five restaurants in Ireland and sells various foods and food related products as part of his company "Jamie's Foods". Aidan is consulted by Jamie and his management team once a month on how various aspects of the business are doing from a public relations point of view. Jamie had a difficult year last year as he was involved in court proceedings regarding the purchase of two of his restaurants and he also went through a difficult divorce. Aidan has been heavily involved in maintaining the reputation of the company and Jamie personally during this time. He has clocked up nearly 49 weeks of work out of 52 in the last year working on the public relations for Jamie. Aidan works from his own home but often attends meetings with Jamie in his office above his restaurant on Vague Street. Jamie signs off on every press release personally. He provides his own laptop and car, although Jamie pays for the mileage. He bills the company for his work by the hour and the company deducts PRSI but not PAYE from his wages. Under his contract he cannot sub-contract his work out to anyone else and has signed a confidentiality clause regarding the details of the court case and divorce proceedings. Jamie paid Aidan a bonus last Christmas in recognition of all of his hard work in the last year. However, Adian recently decided he wished to take some time off and requested holiday pay for this time off. He also wishes to know what his notice period with the company is as he is not sure how much notice he must give under his contract. He is told by the company payroll department that he is not entitled to holiday pay his contract describes him as working under a contract for service and therefore he does not have a statutory entitlement to a notice period. Aidan never thought he was an independent contractor as he has spent so much time working for the company to the exclusion of any other work. He is not sure what to do. He seeks your advice on whether he can be considered an employee or an independent contractor.
8) Explain the difference in employment law between direct discrimination and indirect discrimination and give an example of an employer's defence to indirect discrimination using case-law.
9) Frank Dunne runs a company called Fruity Zesty. The company is a fruit importer and distributor. Frank set it up in 1986. Recently because of the financial crisis many people began to eat cheap, fast food, and sales of fruit plummeted. Concerned about the continuing decline in company business, Frank decided in 2009 to incorporate Fruity Zesty, to protect him from personal exposure if the company went bust. In 2010 Frank had made a personal loan to the company in the sum of €40,000. The company wrote him out a written acknowledgement of debt - called a debenture. Unfortunately Fruity Zesty Ltd did fail, four months ago. It is now in liquidation. Frank is aware that a number of his former supplies are owed money by the company. In total, his former supplies are owed in the region of €80,000. The company only has €40,000 left, according to the liquidator, and Frank comes to you seeking advice. He believes he is entitled to that entire sum. The liquidator told Frank over the phone that Fruity Zesty was nothing more than a sham, that Frank was carrying on business just as before through its agency and he could forget about the €40,000 he had put into the company. ‘I'm not paying you any of the €40,000,' said the liquidator, ‘that's going towards satisfying the claims of the ordinary creditors.' Advise Frank, citing all relevant case law and statute.
10)Why is it important to distinguish between persons who are employed and those that are selfemployed? How do the Courts approach the problem of distinguishing between the two?
13)Laura has worked for a company called Worldwide Pharmaceuticals Plc for the last three years. She works in the research and development department providing technical support to other staff working on new products. She has access to all the computer research data but generally does not need to access this data to do her daily tasks. The company has been engaged in extensive research on a miracle weight-loss drug for the last five years and is close to getting governmental approval for its release onto the market. Laura has worked exclusively on this project in her research support role. This drug would be worth 30million euros annually to the company if it gets approval. Laura has just been offered a position as a technical support officer in the finance department at Pharmaceuticals USA Ltd. They have offered to raise her salary by 20% and so she is very tempted to take their offer although she has never worked as support in the finance sector before. However she is concerned that her contract with Worldwide Pharmaceuticals Plc restricts her for working for any trade competitor in any capacity for two years should she leave Worldwide Pharmaceuticals Plc. Advise Laura, using all appropriate and relevant case-law.
11) GENOtech Ltd is a recently established company where two shareholders/directors have set up a biotechnology business. The company forecasts high growth prospects and is managed by an experienced and ambitious team who are capable of turning their business plan into reality. Susie Wong an employee of BS capital, provider of venture capital funds to this biotechnology start-up has been invited to sit on the Board of Directors of GENOtech Ltd. Susie is now seeking your advice on the following issues: a) Susie is concerned that the company's affairs are being handled in a relatively informal manner. She has asked for advice on her position as a non-executive director (NED) given that Joe Top and Joe Box are the executive directors of GENOtech Ltd.? b) Susie asks you to list and summarise the Common Law fiduciary duties of directors? c) Susie has heard that company directors occasionally use company assets for personal purposes unrelated to the company's business. Briefly explain why some of these transactions are legally prohibited and for the benefit of whom?
12) Nadia has been making cakes and sweet treats that she has sold at various markets for the last six years. She set up the business as a part-time job during college but since 2013 her business has really expanded and she now employees two assistants and owns a van for deliveries. The business has consistently made a profit every year despite the tough economic times and Nadia now wishes to expand by buying a shop on Capel street. One of her long-standing employees has come to her and asked her whether they could go into partnership and open up a café along with the shop. Naida is unsure what would be best for her business as her bank adviser told her to consider the option of incorporating as a company instead of a partnership. In addition she wants to invest more capital into the business and is thinking of forming a limited company in order that she could loan the company investment capital and has heard that she can get a "debenture" from the company but does not know what this means. She also seeks to protect herself personally against any future financial difficulties (as she is now getting married and buying a house with her husband). Nadia seeks your advice and knowledge of case-law on the following issues:
(a) The advantages of a limited company over forming a partnership. And in addition briefly on the following:
B) How many directors she would need to form the company and what documents she would need to do this and where she would lodge the relevant documentation.
C) If she were to loan the incorporated company a sum of money and receive a debenture what this would mean for her if the company went into financial difficulties.
13)Outline and explain the various options for companies experiencing financial difficulties, liquidation, examinership and receivership and Discuss the circumstances in which the veil of incorporation may be lifted at common law.
250 words per question
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