COMPANY AND FINANCE LAW
LAW 2450
COMPANY AND FINANCE LAW
ASSESSMENT 2
PART 1:
This assessment is an individual assessment and consists of TWO parts.
The total mark for the assessment is 40 and is made up of:
Written assessment: 30 marks
And
Video presentation 10 marks.
PART 1:
This part consists of a written advice report where you will be required to provide written advice (supported by legislation, case law and where appropriate regulatory guidelines)
To obtain marks for this assessment, BOTH the written report and the Video must be completed. If both items are not done, then NO marks will be awarded at all for the assessment.
Part 1 is worth 30 marks
The assessment is available from Wednesday 14 September 2022 at 9 am.
The due date is Thursday 22 September 2022 5.00 pm via Turnitin.
The word limit for the written report will be 2,500 words plus or minus 10%. This excludes the bibliography or referencing.
Expectations in preparation of the report:
The organisation that you work for has a growing profile in the profession and therefore expects all staff to demonstrate a high degree of professionalism.
In the advice that you are to prepare you are expected to demonstrate that you understand the relevant law and how the law applies to the issues raised by the client and come to a logical conclusion.
You are also expected to be able to justify your conclusion by reference to the relevant legislation in the Corporations Act, ASIC Act, or any other legislation you think appropriate, ASIC regulatory guidelines and case law.
Your senior manager has high expectations of you and she will not accept:
any grammatical errors or unsubstantiated statements or conclusions made in your report.
Incorrect spelling or references to the client
She will not tolerate any material copied from textbooks, google or any other source which you attempt to pass off as your own material.
Any references you make to articles, journals or other textbooks must have been reviewed or read and understood by you and correctly referenced.
You must use the RMIT Harvard System for referencing. Here is the link to how to use the above referencing system.
Referencing - RMIT UniversityYou have been with the organisation for six months and you are in line for a pay rise and promotion. Your performance on this task could determine whether you get them or not.
Background:
You have recently graduated as an accountant/ financial adviser and your first position is with medium sized integrated accounting and financial services organisation in Melbourne.
The directors of Metrix Pty Ltd (Metrix) a large private company that is involved in the building of residential homes throughout Australia has sought an appointment. You have been asked by your senior manager (Megan) to sit in on a meeting of the client and the directors and to take notes on the issues raised and then to prepare a written report on the matters for review by your senior manager. The meeting is scheduled for Tuesday 13 September at 8 am. You will be expected to take notes of the meeting and then prepare a statement of advice for Megan to review. Once she is happy with it, she will send out to the client.
Format of report
You will be preparing a statement of advice addressed to Megan where you will be expected to identify the corporate or finance legal issues that arise from the meeting. You will then be required to apply the law to the issues and support your opinion by reference to case law, legislation, or regulatory guidelines.
We are NOT looking for a legal dissertation on Corporate and Finance Law. We are looking for you to be able to demonstrate that:
You understand the law
You understand how to apply the law to the issues raised in the meeting by the client
You come to a conclusion.
You are preparing a statement of advice to be read by a client who is not a corporate and finance law expert.
However in your answering when you make a statement you need to be able to quote the relevant law to justify your answer.
Below is the suggested template for the report you are to write to Megan
TEMPLATE FOR REPORT TO MEGAN
Memorandum of Advice:
To: Megan
From: (Your name)
Client: Insert Client name
Date:
Introduction:
Further to the meeting with (insert name of client) on Tuesday 13 September 2022 I now set out my advice based on my understanding of the matters raised by the client. Where the information from the meeting was not clear to me I have stated the assumptions upon which my advice is based.
Issue 1:
Answer all the questions raised identifying the issues raised from your understanding of the facts, apply the relevant law (case law and legislation) to the issue and come to a conclusion.
Your response must be supported by case law or legislation.
Your conclusion in respect of each query raised by the client.
Issue 2:
Answer all the questions raised identifying the issues raised from your understanding of the facts, apply the relevant law (case law and legislation) to the issue and come to a conclusion.
Your response must be supported by case law or legislation.
Conclusion in respect of each query raised by the client.
Issue 3:
Answer all the questions raised identifying the issues raised from your understanding of the facts, apply the relevant law (case law and legislation) to the issue and come to a conclusion.
Your response must be supported by case law or legislation.
Conclusion in respect of each query raised by the client.
Issue 4:
Answer all the questions raised identifying the issues raised from your understanding of the facts, apply the relevant law (case law and legislation) to the issue and come to a conclusion.
Your response must be supported by case law or legislation.
Conclusion in respect of each query raised by the client.
Issue 5:
Answer all the questions raised identifying the issues raised from your understanding of the facts, apply the relevant law (case law and legislation) to the issue and come to a conclusion.
Your response must be supported by case law or legislation.
Conclusion in respect of each query raised by the client.
THE CLIENT MEETING
The client and issues:
Metrix Pty Ltd (Metrix) is a large private company established in 1976 by Mario Le Mesurier and Stephen Adam. The two were carpenters and built up the company to be the preeminent home building company in Australia. The company focuses only on building residential homes. They do not build commercial buildings.
The company has the following directors and senior officers:
Mario Le Mesurier Chairperson
Stephen Adam: Managing director
Li Ma: Chief Financial Officer
Suren Chandra: Construction director
Victoria Moser: Design director
Joshua Leong: Purchasing director
Ali Ahmed: Senior safety and welfare manager
Kathy Di Mella: Senior architect
Mario, Stephen and Li have asked for the meeting because they have the following issues, they would like advice on.
Issue 1:
The company since January 2021 has been losing money on housing contracts due to the increase in building materials, the labour shortage and the nature of the contracts with customers. Currently to complete 58 housing contracts the company would make a loss of $3,653,000 in total. The reason for this was that these contracts were fixed price contracts and did not envisage the impact of COVID on supplies and labour.
The financial statements prepared by Li show that this would result in the company for the year ended 30 June 2022 making a trading loss of $11,200,000.
Other factors attributing to the estimated loss are rental costs, operating expenses and the cost of funding the construction of a new head office building in Mitcham.
The company currently has retained earnings as at 1 July 2021 of $15,864,372 and after the estimated trading losses of $11,200,000 for 30 June 2022, this would leave Metrix with accumulated profits of $4,664,372. Metrix is also facing pressure from its contractors to pay them for their materials and services. The outstanding creditors are $18,328,789. Some are secured over the new head office, building supplies but many are unsecured.
The shareholders funds of Metrix consist of:
Authorised share capital (ordinary)$12,000,000
A class preference shareholders $8,000,000
Retained earnings $4,664,372
Total shareholders funds of the Metrix as at 30 June 2022:$24,664,372
The directors are mindful of the need to retain funds for working capital and estimate the company needs working capital of at least $6,500,000.
Issues they seek advice on:
Is there a profit at law from which the directors of Metrix can pay a dividend if they wish to do so? The board of directors of Metrix has had a history in the past of paying dividends each year of approximately 15% of the retained earnings of the company at the end of the year.
If they do decide to pay a dividend of 15% of retained earnings, would you recommend it or not?
Issue 2:
The company has its own constitution (previously called the memorandum and articles of association). In the constitution it stated that the A class preference shareholders were entitled to a dividend of 6.5% each year. The directors would like to reduce this rate to 2.25% given the current financial position of the company and propose replacing the existing rule with a new rule reducing the dividend to 2.25%.
Issue they seek advice on:
Can the A class preference shareholders prevent the company from changing rule in the constitution to reduce the dividend rate?
Issue 3:
On a building site, one of the plumbers fell off the roof and severely injured herself. An investigation by Work Safe Victoria found that Metrix had not ensured that adequate scaffolding had been erected on site to prevent such an accident. Ali as the senior safety and welfare manager was responsible for ensuring the safety of the workers. He stated that he had delegated this responsibility to the supervisor on site and that it was that persons responsibility.
Issue they seek advice on:
Is the company liable or is Ali and the supervisor personally liable for the injury to the plumber?
Issue 4:
Because of the shortage of supply of timber and other building materials, Joshua the purchasing director found it difficult to source the materials at a reasonable price. He managed to find one supplier Sandalwood Pty Ltd who was prepared to provide Metrix with the building materials at a reasonable price. To thank the director of Sandalwood Pty Ltd, Joshua signed a contract to transfer a block of land owned by Metrix to the director of Sandalwood Pty Ltd at no cost. Joshua signed the contract and also forged the signature of Victoria on the contract.
Kathy Di Mella, the senior architect is nervous about the financial viability of Metrix and therefore her employment. She has always harboured ambitions of running her own architectural practice. During the year Victoria inadvertently left her computer on and Kathy downloaded the client list of Metrix. She established a new company called Melldik Services Pty Ltd to provide architectural services and contacted the clients from the lost she downloaded.
One of Metrixs clients advised Mario that Kathys company had contacted them.
Issue they seek advice on:
Is the contract valid and is Metrix liable to transfer the land to the director of Sandalwood Pty Ltd.
Can Metrix take action against Joshua?
Can the directors remove Joshua?
Can Metrix take any action against Kathy?
Issue 5:
Li has indicated to the board of directors that the company is fast running out of funds to survive and complete the housing contracts.
Given the downturn in the financial markets around the world, construction companies in particular are suffering from severe cash burn at the moment.
Li has indicated that Metrix only has sufficient cash at bank to fund 3 months of operations. Mario, Stephen and Li are looking at various funding options and are considering:
Continue trading and incurring further debt in the hope of riding out the financial storm.
A rights issue
Private placement to Paradise Merchant Bank Ltd, see below
The current shareholders of the company are:
Employees: 5% (15 staff)
Mario:12.5%
Stephen: 12.5%
Li: 2.5%
Tiger Investments Ltd 40% (an investment bank based in Malaysia,)
Paradise Merchant Bank Ltd: 27.5% (a venture capitalist) based in Melbourne.
There are 12,000,000 shares currently on issue. The current market price is $1.50 which represents a decrease of 30% since the beginning of the year. The valuation was prepared by your employer.
Megan advised the directors in the meeting that the price of a rights issue should be at a 30% discount to current market price. The rights issues should be in the following ratio: 1:3 (for every 3 ordinary shares owned 1 new share can be acquired under the rights issue.
When Tiger Investment Ltd and Paradise Merchant Bank Ltd acquired their interest in the company the share price was $12.45 per share.
Li estimates the company will need $15,000,000 within three months.
Mario, Stephen and Li have no spare cash to invest in the company and would be happy to reduce their holdings.
Issue they seek advice on:
What are the consequences if the company continues trading after the three months are up?
How much could Metrix raise by way of the rights issue assuming all the shareholders take up their entitlement?
What are the risks to them given the current economic and lack of confidence in the construction industry and financial markets turmoil?
What is a private placement and does the company need to issue any documents for this?
END OF ASSESSMENT PART 1 WRITTEN REPORT
COMPANY AND FINANCE LAW ASSESSMENT 2
There is a word limit of a maximum of 2,500 written words plus or minus 10%. This does not include the bibliography or referencing.
Students must state when uploading their answers that it is their work and that they have not copied or obtained external assistance to complete the assessment.
Part 1
This requires you to prepare a written report for your senior manager in the financial organisation that you are employed. :
The scenario is that you are all graduate accountants / financial advisers working for an integrated accounting and financial planning organisation.
As the graduate accountant/financial adviser (depending on your specialisation or major) you are required to attend a meeting with the firms client and take notes and then prepare a response for the client.
Your response will be reviewed by your senior manager and then by the senior partner/director of the organisation.
The organisation that you work for has very high standards and will not tolerate spelling mistakes, or grammatical errors in your report. They will also not tolerate any copying of information from websites, textbooks or other sources without proper referencing.
They expect to be able to see from your report, that you understand the relevant legislation, case law can apply it to the facts and come to a logical and well thought out conclusion.
Any conclusions not supported by well-researched reasons will be marked down.
The report will need to include :
written explanations,
calculations of numbers
simple and plain English
You are preparing g a report to the client who is not a corporate financial law expert.
Remember you are all on a 3-month probation period with the organization and your performance review is coming up in the next month.
Preparation for the question:
Students should have been practising the exam-style based questions in your tutorial question set in preparation for this assessment.
In answering the question, you will need to ensure that you identify the issues, apply the relevant law and justify your answer. Merely stating they have breached a section without explaining why will not be accepted.
If you refer to case law or legislation you must use the RMIT Harvard method of referencing in your response.
Your report must meet the standards set by the organisation.
The questions will cover issues raised in topics 1-8 (week 1-8).
