Business and Corporations Law

Take Home Test 2
Unit Name: Fundamentals of Business and Corporations Law

QUESTION
Two years ago Jason and Gerry registered a company called Shiny Shoes Pty Ltd to conduct an on-line shoe business. The company’s business was financed through the issue of 300,000 $1 shares to Jason and 200,000 $1 shares to Gerry which have been fully paid up by both Jason and Gerry. Jason and Gerry also became the directors of the company. The business was very successful and required more capital, so a year ago Jason and Gerry decided to convert Shiny Shoes Pty Ltd into a public company. Shiny Shoes Ltd had the following inserted into its constitution:
“The Replaceable Rules of the Corporations Act 2001 (Cth) shall apply to this company. In addition, the following applies:
1. Joe shall be the company’s accountant.
2. The company shall only operate the business as an on-line shoe store.
3. Any contracts requiring expenditure over $200,000 need to be approved by the board of directors”

Shiny Shoes Ltd now has a large number of shareholders through the issue of 1 million shares to the public and the directors of the company are Jason, Gerry and Tai. Tai has been appointed as the managing director to manage the day to day business of the company.
Six months ago, the directors of Shiny Shoes Ltd decided to open a shoe shop in the new Joondalup shopping centre as sales from the on-line store have been affected by cheaper shoes available from other countries. This decision was based on recommendations from Joe.
Being confident of the success of the new shoe store, Tai on behalf of Shiny Shoes Ltd places an order of $500,000 worth of shoes from China Shoes Ltd without obtaining approval from the board of directors. When the invoice from China Shoes Ltd arrives for payment, Joe passes it to the board of directors for approval. Jason and Gerry are most displeased with Tai for placing such a large order without board approval. They want to cancel the order on the basis that the procedures required in the company’s constitution have not been complied with and in any case, the company lacks capacity as its business is restricted to an on-line shoe store.

REQUIRED:
With reference to the Corporations Act 2001 (Cth) and case law, you are required to answer the following questions:
1. Discuss the advantages and disadvantages of operating the business:
(i) as Shiny Shoes Pty Ltd; and
(ii) as Shiny Shoes Ltd.
[5 Marks]

2. Discuss the procedure and the legal requirements that need to be satisfied to convert the company from Shiny Shoes Pty Ltd to Shiny Shoes Ltd. Also include in your answer whether Shiny Shoes Ltd is a new company after the conversion.
[4 Marks]

3. Shiny Shoes Ltd has received an invoice from China Shoes Ltd for the purchase of the shoes. Discuss whether the directors can cancel the order on the basis that Tai did not have the authority to enter into such a large contract?
[6 Marks]

4. Advise the directors of Shiny Shoes Ltd of the legal implications under the Corporations Act 2001 (Cth) and case law of signing contracts to do business through the shoe shop in the Joondalup shopping centre.
[5 Marks]

5. The directors of Shiny Shoes Ltd are displeased with Joe and wish to remove him as the company’s accountant. Joe is of the opinion that the constitution creates a binding contract between the company and himself and therefore he cannot be removed. Discuss.
[5 Marks]

TOTAL 25 MARKS

NOTE: In answering some parts of the questions, a formal 4 step process may not be required. However, if application is required, please write the law before applying to solve the problem. You are also not required to discuss legal issues arising under the Law of Contract.

Referencing

Type of Citation Detail and Example
Reported cases Case Name (Year) Volume Law Report Abbreviation Starting Page, Pinpoint (Court).
Example of reported case citation 1 Wong v Commonwealth (2000) 236 CLR 573, 595.

Legislation Title of Act Year (Jurisdiction abbreviated) Pinpoint.
Example of legislation citation 1 Crimes Act 1958 (Vic) s 3.

Journal articles Author, ‘Title of article’ (Year) Volume number(Issue number) Journal Title First page of article, Pinpoint.
Example of journal article citation 1Andrew Kenyon, ‘Problems with Defamation Damages?’ (1998) 24(7) Monash University Law Review 70, 74.
Books Author, Title (Publication details) Pinpoint.
Example of book citation 1 Malcolm N Shaw, International Law (Cambridge University Press, 6th ed, 2008) 578.
Internet materials (including lecture slides) Author, Document Title (Full date) Website Name Pinpoint <URL>.
Example of Internet citation 1Prafula Pearce, Lecture 1 (16 September 2013) Edith Cowan University Blackboard <www. https://lms.ecu.edu.au>.

This assignment is from the following chapters of Business and Corporations Law.

Chapters:
1. Business Structures
2. Company Incorporation and its Consequences
3. Company Internal Rules, Management and Contracting

A Guide to 4-steps Process
1. Identify the area of law;
2. Discuss the relevant legal principles;
3. Apply the relevant law to the given facts;
4. Conclude.

Step 1: Identify area of law
• As you are reading the question, examine what law or legal principles will assist you in resolving the problem/s in the question.
• This helps you to determine the relevant legal principles you will be required to discuss in step 2.

Step 2: Discuss law principles
The legal principles you identified in step 1 may require:
• Definition of terms
• General rules and exceptions and defences
• Case authority à facts, court decision
• Proper spelling of case name
• Case year is not necessary
• Section/s of an Act of Parliament, eg Corporations Act

Step 3:Application
• State how the law is likely to apply to the facts in the question.
• State the likely outcomes. There could be more than one possible outcome.
• Under Application, you are trying to resolve the problem.

Step 4:Conclusion
• State the likely and logical conclusion.
• Re-check: what the question asks you to do and that you have answered that question.

Assessment Criteria

Students will be assessed on the following components:
1. Demonstrate an understanding of the relevant law
2. Apply relevant law to the facts of the problem question

For this unit we were recommended the book below

Fitzpatrick, J., C. Symes C., A. Veljanovski, and D. Parker. 2011. Business and Corporations Law, 1st Edition,
LexisNexis Butterworths.

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