Sue, a sole trader, is the owner of a very successful business called ‘Techno’ which specialises in the selling of computers. Sue has insured the business with Luky Charm Ltd against fire, theft and the like in the sum of $5,000,000.
Some five years later, Sue decided to conduct the business via a corporate structure. She incorporated a company called ‘Techno Pty Ltd’ which is validly registered with ASIC. Immediately thereafter, in January 2015, Sue enters into a sale contract with Techno Pty Ltd which purchases the business from him. As consideration for the purchase price, the company issued the following to Sue:
• a substantial block of shares as fully paid; and
• a securing interest (security) over all of the company’s assets.
After incorporation, Sue caused the company to take out workers compensation insurance policy with Safety Ltd.
A series of ‘bad luck’ accidents followed. In February 2015, burglars broke into the premises of ‘Techno Pty Ltd’ and stole stock valued at $500,000. In March 2015, Sue fell from a ladder in the store while trying to retrieve some stock and injured his back. She has incurred substantial medical costs. As a result of the Global Financial Crisis, business has declined and Techno Pty Ltd is now insolvent and under the care of the liquidator.
The liquidator has rejected Sue’s claim against Techno Pty Ltd in relation to the enforcement of the security interest granted to her. Safety Ltd, which has underwritten Techno Pty Ltd’s worker compensation policy, has rejected Sue’s claim for payment of his medical bills. Lucky Charm Ltd has also refused the insurance claim of Techno Pty Ltd to recover the value of the goods stolen.
Advise fully, with reference to legal authority, whether Sue can:
(a) enforce her security interest against Techno Pty Ltd;
and
(b) enforce her claim against Safety Ltd for the payment of her medical bills. Approximate length of answer: 1.5 pages (combined for (a) and (b))
AND
Question 2
You have the task of advising clients as an accountant. Amongst your clients’ is a family, know as the Lee Family – with a mother and father both aged 50 (and with considerable wealth), and 4 children, aged 21, 18, 17 and 10. The parents wish to involve their children in their next business venture. The parents anticipate contributing $2 million of their own capital and having the venture borrow a further $2 million. The parents seek your advice as to how the venture should be structured.
The investments under considerations are:
(a) a retail business
(b) a farm
(c) a speculative mining venture
(d) a long term investment portfolio
Advise the Lee family, with reference to the facts above, what type of business structure would best suit their needs.
Note: Your answer must offer full reasons for the advice. If more information is required, state why and proceed to answer based on any Reasonable assumption made. Your answer must also give full details on the formalities required to implement the advice given.
Your answer can be structured in the form of an essay [with the use of headings and sub-headings highly recommend]; Approximate length of answer: 2.5 pages
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