Harris J, Hargovan A and Adams M, Australian Corporate Law, (4th edition), LexisNexis/Butterworths (2013)
Word Limit: Minimum 1,500 words – Maximum 1,700 words [excludes bibliography]
Question 1:
Sue, a sole trader, is the owner of a very successful business called ‘Techno’ which specialises in the selling of computers. Sue has insured the business with Luky Charm Ltd against fire, theft and the like in the sum of $5,000,000.
Some five years later, Sue decided to conduct the business via a corporate structure. She incorporated a company called ‘Techno Pty Ltd’ which is validly registered with ASIC.
Immediately thereafter, in January 2015, Sue enters into a sale contract with Techno Pty Ltd which purchases the business from him.
As consideration for the purchase price, the company issued the following to Sue:
a substantial block of shares as fully paid; and
a securing interest (security) over all of the company’s assets.
After incorporation, Sue caused the company to take out workers compensation insurance policy with Safety Ltd.
A series of ‘bad luck’ accidents followed. In February 2015, burglars broke into the premises of ‘Techno Pty Ltd’ and stole stock valued at $500,000. In March 2015, Sue fell from a ladder in the store while trying to retrieve some stock and injured his back. She has incurred substantial medical costs. As a result of the Global Financial Crisis, business has declined and Techno Pty Ltd is now insolvent and under the care of the liquidator.
The liquidator has rejected Sue’s claim against Techno Pty Ltd in relation to the enforcement of the security interest granted to her. Safety Ltd, which has underwritten Techno Pty Ltd’s worker compensation policy, has rejected Sue’s claim for payment of his medical bills. Lucky Charm Ltd has also refused the insurance claim of Techno Pty Ltd to recover the value of the goods stolen. Advise fully, with reference to legal authority, whether Sue can:
(a) enforce her security interest against Techno Pty Ltd;
and
(b) enforce her claim against Safety Ltd for the payment of her medical bills. Approximate length of answer: 1.5 pages (combined for (a) and (b))
Question 2:
You have the task of advising clients as an accountant. Amongst your clients’ is a family, know as the Lee Family – with a mother and father both aged 50 (and with considerable wealth), and 4 children, aged 21, 18, 17 and 10. The parents wish to involve their children in their next business venture. The parents anticipate contributing $2 million of their own capital and having the venture borrow a further $2 million. The parents seek your advice as to how the venture should be structured.
The investments under considerations are:
(a) a retail business
(b) a farm
(c) a speculative mining venture
(d) a long term investment portfolio
Advise the Lee family, with reference to the facts above, what type of business structure would best suit their needs.
Note: Your answer must offer full reasons for the advice. If more information is required, state why and proceed to answer based on any Reasonable assumption made. Your answer must also give full details on the formalities required to implement the advice given.
Your answer can be structured in the form of an essay [with the use of headings and sub-headings highly recommend]; Approximate length of answer: 2.5 pages
End of Question.
IMPORTANT:
1. Submission Procedure: TOP Office; to be handed to QingQing Ho)
2. Assignment Cover Sheet must be submitted with student signature and with word count
3. Plus Copy of assignment to be lodged at turnitin
4. Late submission will attract penalty (mark deduction of 5 % for each day late)
Most Important: Plagiarism is a serious academic offence and can result in failure of this course. Students are expected to submit answers based on individual effort (this is not a group project).
Requirements for a pass/good mark:
1. A legal analysis of the question with reference to relevant principles of corporations law (case law) and, where appropriate, relevant statutory provisions of the Corporations Act.
2. Students are expected to reference the relevant chapters in the prescribed textbook and to draw supporting information from there (Hint: read Chapter 5 of the prescribed textbook for the legal issues raised in Question 1; read Chapters 3 and 4 of your textbook which deals with the legal issues raised in Question 2).
3. You are strongly advised not to use the internet for resource materials (as it is unnecessary and you run the real risk of drawing on irrelevant information and/or foreign law). The Current Edition of your Prescribed Textbook is more than adequate to answer the questions.
4. Students are expected to footnote references and to provide a bibliography.
5. Marks will be deducted if the answer does not meet the minimum word count – a word count must be indicated on the cover sheet.
6. Use of margin of 1.5 and font of 12 (preferably Times New Roman] – with answers on single side of each page.
7. A good answer to Question 1 will do the following (adopt the following structure) with respect to the question:
(a) Identify the material (relevant) facts – and NOT simply repeat the question;
(b) Identify the legal issue (or issues);
(c) Identify the relevant case law;
(d) Apply the legal principles and case law to the given facts;
(e) Offer legal reasons (with legal authority) as to whether Sue can enforce the various claims identified in Question 1 (a simply Yes or No answer with personal views is inadequate).
8. Satisfactory answers will also
(a) Be proof-read to eliminate spelling and grammatical errors;
(b) Be referenced, with a bibliography;
(c) Meet the minimum word length requirement and
(d) Not simply copy/reproduce the textbook (answer must show own understanding)
(e) Not be plagiarised.
Salomon v Salomon & Co Ltd [1897] AC 22 (hereinafter Salomon’s case) discussed in Harris, Hargovan & Adams, Australian Corporate Law (4th ed, LexisNexis, 2013) pp 164-167.
Harris, Hargovan & Adams, Australian Corporate Law (4th ed, LexisNexis, 2013).