Analyse the practical importance in terms of legal personality, formation, financing, liability and termination in the context of

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Analyse the practical importance in terms of legal personality, formation, financing, liability and termination in the context of the main types of business organisations

 BHL 5015  Corporate and Business Law

WRIT 3

This assessment is divided into two parts. The mark for each question is clearly identified in the task. Please take note of the weighting of each question in terms of your word count.

The assessment contributes 40% of the overall module mark.

 Question 1.

Michael’s business continued to prosper and meeting up with an old university acquaintance, Zara they starting working together from Michael’s office in Cardiff.  Zara contributed equally to working in the business and decisions were taken together about the way in which the business is run. Zara received a 30% share of the profits each month. There was no written agreement in place.

After a very harmonious year, relationships between Michael and Zara became strained when Zara suggested opening a new office in Swansea. Michael was totally opposed to the idea which he thought was an expensive waste of money, whilst Zara took the view that the business could not just stand still, but needed to expand further. The upshot was that Michael told Zara she was fired and should no longer bother to turn up for work.

Zara has sought legal advice and intends bringing an action against Michael.

Task 1

Using relevant case law and legislation as and when appropriate critically discuss the issues arising from the scenario and advise Michael of any potential legal liability he may face if Zara commences proceedings against him and the likely outcome of ( if  any) of such proceedings [ 40 marks]

AND

Question 2.

Michael decided that he no longer wished to run his own accountancy business after all the aggravation he had had. He applied for and took his Insolvency Practitioner examinations which he successfully passed.  He has recently been appointed as Liquidator for Electra Ltd which went into insolvent liquidation in March 2016.

 The company carried on business as a supplier of electrical wiring and components to the building trade. It commenced business in January 2010. The Company’s audited accounts for the period 31^st March 2014 showed that the business was solvent at that date and had been profitable for the preceding twelve months.

Following the appointment of a new finance director and stock manager in June 2014 profitability had declined, largely due to overstocking and heavy discounting to customers in an effort to boost sales and give the Company an edge in a difficult market.

 The audited accounts for the period to 31^st March 2015 showed the Company had accumulated losses of £475,000 and the amount of its current liabilities exceeded its current assets by £500,000. The Company’s principal liabilities were to the Black Dog Bank plc. and Electrical Suppliers plc, the Company’s main supplier of electrical wiring. The Company had an overdraft facility with the Black Dog Bank allowing it to borrow up to £1 million, which was fully drawn. It also owed £500,000 to Electrical Suppliers plc. and a further £300,000 to other trade creditors. The Company’s debtors included a £50,000 loan made to one of its directors.

In the course of Michael’s investigations into the Company’s affairs he discovered the following information:

a)    At a board meeting held in June 2015 to consider the Company’s financial position, it reported that losses and liabilities had increased and several creditors were demanding payment of outstanding bills. The directors nevertheless decided to continue the Company’s buying and discounting policy in the hope it would eventually pay off and decided to continue to trade.

b)   It was also decided to write off the loan to the Director

c)    In October 2015 the Bank wrote to the Company expressing concern about its deteriorating financial position and asking for security as a condition of continuing its loan. In December 2015 the Company executed a floating charge over all its assets and undertaking in favour of the Bank

Task 2

With reference to appropriate case law and legislation analyse the legal implications arising from the scenario and advise Michael as to which ( if any) of the actions by either the Company or its directors could be challenged and the potential outcome of such challenge/s [ 60 marks]

Total Word Length Maximum of 2,400 words .  This excludes case names, legislation and references,

Referencing:  Students are required to use the Harvard style of Referencing and appropriate legal referencing. Students are directed to the resource folder on moodle where such information can be found.

Marking and Grading Criteria: Students are encouraged to read and understand the overall marking criteria to be used in determining performance levels. The document is provided on blackboard within the assessment folder.

Learning Outcomes being assessed

• Analyse the practical importance in terms of legal personality, formation, financing, liability and termination in the context of the main types of business organisations
• Examine the concept of corporate governance and ethical issues in the context of the registered company and their management