Assignment Problem: Corporations Law
Problem 1: Barbara, Mandy and Cynthia are sisters and recently inherited an accounting firm named Elite Accountants. Elite Accountants was a partnership between their father and their uncle, but when their father recently died, the uncle decided to retire and leave the business to the three sisters.
Elite Accountants was a very successful business with many clients. The three sisters see opportunities opening up in new markets and would like to expand the business. They want the family business to be in a form that would allow it to expand as necessary and also make it easier to raise the capital required for this expansion.
As a result they come to you for advice on what business structure would be best for them. They want to know the advantages and disadvantages of retaining the business as a partnership or changing it to a company structure. They also want to know in detail what the steps to incorporating the business are, what types of companies exist and any tax advantages.
There is some contention regarding the naming of the business. Mandy and Cynthia prefer to retain the name "Elite Accountants" but Barbara wants to change the name after their deceased father "Donald Accounting". They want to know whether the business name "Donald Accounting" is available with ASIC and how a business name can be registered.
Advise the three sisters of the steps that need to be taken to incorporate and register a company as well as the other issues raised by them.
Problem 2:
Dorothy was a senior executive at SuperCheap Supermarkets Pty Ltd from 2015-2017. SuperCheap Supermarkets Pty Ltd is a company that operates in Victoria and South Australia. Dorothy had a restraint of trade clause in her employment contract which stated that she was not allowed to work anywhere else in the supermarket industry for three years, should she ever cease employment with SuperCheap Supermarkets Pty Ltd.
Dorothy ceased employment with SuperCheap Supermarkets Pty Ltd in 2017 and decided to register a new company operating in Victoria, called Really Expensive Groceries Pty Ltd. There are two shareholders in the new company: Dorothy owns 90% and her partner Cecil owns 10%. As the majority shareholder, Dorothy elected Cecil to be the managing director and CEO.
Based in Melbourne, Really Expensive Groceries Pty Ltd sells expensive delicatessen, fine foods and groceries mostly to customers that Dorothy still knows from her employment with SuperCheap Supermarkets Pty Ltd. As a result, Cecil signs an employment contract with Dorothy in his capacity as managing director, appointing Dorothy operations manager for Really Expensive Groceries Pty Ltd.
Cecil rarely ever gets involved with the operations of Really Expensive Groceries Pty Ltd as Dorothy handles the day-to-day operations. However, on one occasion in 2017, he signed a contract with Business Bank for a $300,000 loan on behalf of Really Expensive Groceries Pty Ltd. The Bank required no security for the loan and the money was used to help setup the new business.
Really Expensive Groceries Pty Ltd performed really well in 2018, but was unable to repay a loan installment of $90,000 owing to Business Bank Ltd in January 2019. Business Bank is also handling the personal finance of Dorothy and Cecil and the Bank knows that Cecil and Dorothy are very wealthy.
Dorothy has received two letters and comes to you for help:
- The first is from SuperCheap Supermarkets Pty Ltd demanding she cease the operations of Really Expensive Groceries Pty Ltd in Victoria,
- The second is from Business Bank Ltd threatening to sue her and Cecil personally for the outstanding $90,000 loan repayment.
Advise her as to her legal position, citing all relevant AUSTRALIAN legal authority.
Please note that you should assume that the restraint of trade clause in the contract that Dorothy had with SuperCheap Supermarkets is valid under the law of contract. Note that this question is NOT about employment law or contract law but refers to corporation law instead and you should therefore limit your answer to relevant Australian corporation law only.
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Attachment:- Corporations Law.rar