DE3E 34: Business Law: An Introduction Assessment task 3 Outcome 3 covered Assessment task instructions
Candidates will be given one closed-book exercise consisting of four case studies for the assessment of Outcome 3. This exercise should take candidates approximately 2 hours to complete. The case studies can be given to candidates 7-10 days before the assessment event takes place. Candidates will be allowed to bring to the assessment a copy of the case study and two sides of an A4 sheet of paper with relevant notes. This material must be submitted with the candidate’s answer. Textbooks and class handouts will not be permitted.
Case Study 1
Lisa has just graduated from Kirk wall College of Art and Design. She has a particular talent for designing and producing jewelers. While at College, Lisa ran a weekly stall at the local market, but she is now anxious to start a small business on a more permanent basis. Matters have been greatly helped by the fact that she has been given a modest grant by Orkney Entrepreneurial
Trust. One of the conditions of the grant is that Lisa must attend a six-week course run by the local enterprise company. Part of the course deals with business organizations and gives people on the course some idea of what would be the most appropriate structure for their business. Until Lisa came on the course, she had no idea that there were such a variety of business organizations.
Case Study 2
Sanjay is a qualified accountant who has been working in London for the past three years since graduating from the University of North Kelvinside. He has now returned home to Scotland in order to set up in business with three of his friends from University. All four are as yet undecided about whether they should establish a traditional partnership or a limited liability partnership (LLP). They seek your advice on the following matters:
Case Study 3
Macgregor Building Supplies Ltd is a very profitable business that is solely concerned with the supply of building materials for use in the construction of housing estates. About six months ago, Macgregor entered into a project with two of its long-standing business associates — Build it PLC and Constructor Ltd had approached the company with an interesting proposal.
Together the three companies will build a large housing estate situated on the outskirts of
Falkirk. Macgregor’s Chief Executive, Rob Roy has been keen on the project from the start and he convinced a majority of his fellow directors to back the new venture. Rob Roy is only too happy to ignore the fact that the company’s objects clause states that its sole business purpose is the supply of building materials. Nowhere in the objects
clause does it state that the company has the power to enter into contracts that involve the construction of a housing estate. However, the project has now turned into a complete disaster with Buildit being declared insolvent and it would appear that unforeseen problems with the housing development mean that it will not be completed on time and Macgregor will make huge losses as a result.
A large group of angry Macgregor shareholders has now managed to pass a special resolution
at the company’s annual general meeting which forces Macgregor to withdraw from the project.
The Directors of Constructit have vowed to take legal action to prevent this.
Macgregor profits have been badly hit as a result of the failed business venture and the shareholders will not be paid any bonuses on their shares this year. The shareholders are used to the regular payment of bonuses and this news goes down very badly. Some shareholders are now taking legal action to force the company to pay out the expected dividends. According to the company’s Articles of Association, the shareholders do not have an absolute right to the payment of a dividend.
Case Study 4
Angus, Euan, Jaspreet, Sam and Valerie are seriously considering going into business together. A number of difficulties have arisen which are currently preventing the creation of the new business. They have not, as yet, managed to reach an agreement, as to how their prospective business should be organized. All five agree that they should form a company, but they are not sure whether the company should be private or public. They are also deeply ignorant about the need to comply with any legal requirements before they can begin trading as a company. The five are unsure about how companies are run and the personal liability of each member of a company.
