600354_A24_T1 001_CWRK: Case Study for The Law of Business Organisations

Question # 49949	Law	11 months ago

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11 months ago

yopogep946

Assignment
Module Title
Law of Business Organisations
Module Code
600354
Assessment Element
Case Study/Hypothetical Problem Questions
(100%)
Module Leader
Dr Misbau Lateef
Word Count
5000
First Sit or Resit?
First Sit
Reassessment by
resubmission or new
assessment?
Resubmission
Submission Date
Trimester 1 Assessment period
6 January to 17 January 2025
Wednesday 8 January 2025
Assignment Title
Case Study/Hypothetical Problem Questions
Instructions
ANSWER ALL QUESTIONS
Question 1: Business Structures and Incorporation (25%)
Alice, Bob, and Charlie have been running a successful online marketing business for
the past two years. They started with equal investments and share profits equally. As
their business grows, they are considering formalizing their arrangement and potentially
incorporating a company.
a) Advise on their current legal status and the implications of their current arrangement.

2
b) Discuss the advantages and disadvantages of incorporating as a private limited
company versus continuing as a partnership.
c) If they decide to incorporate, outline the key steps they need to take and any potential
issues they might face with their chosen name, "Digital Marketing Wizards Ltd."
d) Explain the concept of separate legal personality in the context of incorporated
companies. Discuss how this principle might affect Alice, Bob, and Charlie's personal
liabilities if they decide to incorporate their business.
Question 2: Corporate Finance and Capital Maintenance (25%)
Digital Marketing Wizards Ltd is planning to expand and needs to raise capital. The
directors are considering various options:
a) The company wants to issue new shares to raise £500,000. Explain the process they
need to follow and any potential obstacles they might face.
b) A venture capital firm offers to invest £1 million in exchange for preference shares
with special voting rights. Discuss the implications of this proposal and any legal
considerations the directors should be aware of.
c) The company is also considering taking out a large loan secured against its assets.
Explain the concept of capital maintenance and how it relates to the company's ability
to grant security over its assets.
d) The board is debating whether to recommend the payment of an interim dividend to
shareholders. Outline the legal requirements and considerations the directors must take
into account when deciding on dividend payments, including the concept of distributable
profits.

Question 3: Directors' Duties and Corporate Governance (25%)
Digital Marketing Wizards Ltd has now been incorporated with Alice, Bob, and Charlie
as directors. The company has been approached by a large client, TechGiant Corp,
offering a lucrative contract. However, the following situations have arisen:
a) Alice's brother owns a small software company that could benefit greatly from this
contract. She suggests to the board that they subcontract part of the work to her
brother's company without disclosing her relationship. Discuss the legal implications of
Alice's suggestion.
b) Bob, without consulting the other directors, commits the company to purchase an
expensive AI software system that he believes will help with the TechGiant contract.
The purchase exceeds his authorized spending limit. Analyse Bob's actions in light of
directors' duties.
c) Charlie learns that TechGiant Corp is planning to acquire several marketing agencies.
He personally buys shares in TechGiant Corp based on this information. Evaluate the
legal issues arising from Charlie's actions.
d) The other directors are concerned about Bob's recent actions and are considering
removing him from his position as a director. Explain the process for removing a director
under the Companies Act 2006, including any protections Bob might have against
removal.

Question 4: Shareholder Rights and Minority Protection (25%)
As Digital Marketing Wizards Ltd grows, the following situations develop:
a) Alice and Bob, who together hold 60% of the shares, consistently vote to award
themselves large bonuses and refuse to declare dividends. Charlie, who holds 40% of
the shares, feels this is unfair. Advise Charlie on his legal options.
b) The company receives an offer from a larger corporation to purchase all its shares.
Alice and Bob are in favour of this, but Charlie is against the sale. Discuss the
mechanisms available to protect Charlie's interests as a minority shareholder.
c) Charlie discovers that Alice and Bob have been diverting corporate opportunities to
a new company they've secretly registered. Explain the process and potential outcomes
of a derivative action in this scenario.
d) Following the principles established in Foss v Harbottle (1843), explain the concept
of majority rule in company decision-making. Discuss how this principle might apply in
the context of Charlie's disputes with Alice and Bob, and any potential exceptions that
might allow Charlie to challenge their decisions.

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