[Essay Help]: LST5CCL- Company And Commercial Law

LST5CCL- Company And Commercial Law.

Scenario One: FinanceRUs – The Beginning

Frank, Richard and Sophie met whilst they were studying at La Trobe University. After their graduation they decide that they want to start a business together. Frank specialises in trusts, Richard had a passion for investments and Sophie was known as a brilliant financial adviser.

Despite their proficiency in a number of areas, they lack an understanding in the law. They have heard about numerous business structures, but they are unsure which one to choose from. They come to you seeking advice on which business structure they should choose.

Task: Advise Frank, Richard and Sophie which business organisations could be an option for them.

In your advice, discuss the benefits and limitations of a partnership, proprietary company and publicly listed company. Your analysis should consider relevant statutory provisions.

Scenario Two: FinanceRUs – Problems Emerge

The trio have now been in business for three years and everything has been going quite well. Frank recently began operating as sole trustee of a very large estate (Trust A) worth $70 million. This estate is made up of various assets such as prime real estate, shares, and money.

Bob, a long-time friend of Frank’s invites him to lunch one day. Bob tells him about this amazing new company that he has started in manufacturing drones, called DroneUp Ltd. Frank decides that he wants to help out his friend, and purchases 40% of the business for a 10% of the yearly profits, and a position on the board of directors. Frank also says he will try and find more investments to help with capital growth in the company. Bob thrilled with the outcome approves Frank’s offer.

Frank, attempting to uphold his duty to invest, decides that as trustee of Trust A, he should invest $10million in DroneUp Ltd without making further investigations and without receiving any documents relating to DroneUp Ltd’s financial position. Unfortunately, DroneUp Ltd was a scam and Bob takes off with all the money that Frank invested, and the money from Trust A. The beneficiaries hear about the poor investment choice that Frank made and want their $10million returned to them.

Scenario Three: FinanceRUs – Investigations

After all the troubles with Frank, Sophie becomes concerned about the reputation of their company, (FinanceRUs Ltd). Sophie decides to make some investigations into Frank to ensure everything has been above board. It turns out that Frank been using his position as director of FinanceRUs Ltd to learn about corporate opportunities. It turns out that in March 2019, Frank went to a conference in his position as director FinanceRUs Ltd and met Greg who wanted FinanceRUs Ltd to invest $50million into SpaceX Ltd. Instead of Frank passing this corporate opportunity onto Sophie and Richard so FinanceRUs Ltd could investigate this opportunity, Frank invested the $50million himself. This investment became quite profitable, and Frank received in the last quarter $5millon in dividends.

Concerned with Frank’s practices, Sophie also investigates Richard’s conduct. According to the company’s books, Richard has borrowed nearly $10 million on behalf of the company for expansion interstate and overseas. However, during the period that this expansion occurred, FinanceRUs were undergoing financial problems. It appears that they cannot pay their debts when they fall due.

Concerned by her findings, Sophie comes to you seeking advice on whether she, or the other directors will be held personally liable for any breaches of directors duties.

PART B: Questions

Question One: Risk Management

Consider the above scenarios of FinanceRUs Ltd and provide advice on how they can undertake better risk management. Your response should also consider how these contraventions can be avoided in future.

LST5CCL- Company And Commercial Law