Law of Organisations Coursework Assignment

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Law of Organisations Coursework

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ULAWS LLP

MEMORANDUM

To: Supervising Partner From:

A Trainee Date:

1 May 2021

Matter: Investment in Data Gets Results Limited

As asked by the client Mr Smith for a drafted report regarding his new project of investment in the Data Gets Results Limited (DGR), the following piece of advice is being drafted for his meeting next week. As the client Mr Smith wishes to make the investment of £200,000 in the above-mentioned company, he needs to get acquainted with the investment structure options he has for this purpose. Discussing the most appropriate investment structure for Mr Smith, it is hereby stated that he proceeds with individual investment in the company DGR.

Individual investment is the simplest and the easiest way of making his £200,000 investment where he shall make it in his name singly. Under individual investment, he shall have the advantages of easy set-up and management due to the inclusion of income and gains in the person's tax returns. Further, individual investment shall be easy to monitor and control as there shall be minimal paperwork. This is considered a cost-effective investment structure as there are no additional charges required to set up the investment. Moreover, in terms of efficiency in taxes, individual investment is a tax-effective structure especially at times when the investment is heading negatively.[1]

Though Mr Smith requires the investment to be individual and this investment structure offers less flexibility, yet this structure can be amended and Mr Smith could make flexible amendments by adding such terms and conditions in the investment agreement with Jane Dorsey and other directors. Another disadvantage of individual investment shall be Mr Smith shall be held personally liable and all his assets shall be at risk from the creditors. But this disadvantage of individual liability is least probable in this case as the company DGR is not at all in debt and the company is currently running in profit.

The protection Mr Smith can seek in investing his £200,000 is that he shall include the clause of dividend payments in the investment agreements. Dividends act as a cushion at times when the market prices are down. Further, it also helps in lowering and reducing instability. This protection shall also be a benefit to Mr Smith at times of inflation.[2] Hence, it shall prove to give an overall increased return to Mr Smith in this new project.

As proposed to Mr Smith regarding the flexibility in his investment, there are certain advantages and disadvantages in investing all of his money at once. He shall have the advantage of better management of the portfolio. As discussed above, he shall be given the benefit of dividends and hence, he can reinvest his dividends for better returns. There shall be less risk in the investment as the company DGR is debt-free and is succeeding in profits every year. Further, making all the investment at once shall be convenient for Mr Smith as the project of hiring software developers and adding equipment is s success. Moreover, investing at once shall also give Mr Smith the advantage of fair pricing by the company DGR.[3]

But simultaneously there are some disadvantages of investing all the money at once which include the problem of tax inefficiency. Moreover, there are also chances of poor execution of trade and its management. Another disadvantage in investing the complete amount is that there are chances if management abuses.

As Mr Smith wishes to secure his position of director after investing but does not wish to get involved in the everyday business, it is recommended that he enter as a non-executive director in the company DGR. A non-executive director is a member of the board of directors but he is not a member of the executive management team. In other words, these directors are not the employees of the company and they may not get involved in the everyday business of the company but their position as a director shall be secured. These directors are referred for advice on sensitive issues. But it is important to note for Mr Smith that non-executive directors are also equally responsible and they have the same duties and responsibilities as other directors.[4]

Hence, this way Mr Smith can invest his £200,000 in the new project of the company DGR and take benefits from the company's business. But it is advised to Mr Smith that he get the benefits and protections included in the investment agreement while entering into the investment so that he shall be entitled to the benefits as provided under the terms of the agreements.

Part-2

ULAWS LLP

MEMORANDUM

From: Supervising Partner

To: A Trainee

Date: 1 May 2021

Matter: Forward Thinking LLP

As asked by Emma Smith for advice on their firm's liability to perform the contract with Geotherm Limited, the following piece of advice has been drafted for her. As per the facts, it is clear that one of the partners named Jason Hughes of the firm FT LLP has entered into an agreement with the company Geotherm Limited for the installation of ground heat technology so that the company represents environmental sustainability. In consequence of the entering of the agreement by Jason Hughes, it is evident that the provisions of the Partnership Act 1890 of the United Kingdom are attractive in this case.

The partnership Act 1890 provides for the responsibilities and liabilities of the partners acting in the firm. In this case, the act of entering in the contract by Jason Hughes shall make all the partners of the firm FT LLP equally liable to perform the contract. According to the provision of section 15 of the Partnership Act 1890, it is provided that the partners in the firm shall be held equally liable in the admissions and representations made by anyone partner.[5] As Jason Hughes has entered into the contract without the knowledge of other partners for the installation of ground heat technology, his act of entering the agreement with the company Geotherm Limited has made all the other three partners liable to act according to the contract.

The provision under section 5 of the partnership Act 1890 is also highlighted as this provision provides that every partner in the firm is the agent of the firm and for all the acts done by him in the due course of business. The essential for making all the partners liable for the actions of one partner under this provision is that the act must be done in the due course of business.[6] Further, there shall be no liability of the other partners if the acting partner has no authority to act on behalf of the firm or if the party with whom he is dealing does not know that the acting partner has no authority. But in this case the company Geotherm Limited knew that Jason Hughes is a partner of FT LLP and that he is acting on this behalf. Hence, it shall hold all the partners liable to act as per the contract between the two companies.

Though it has been provided in the signed deed that no partner shall be entitled to act or deal with the client for any business, yet it is advised that the partners in the firm FT LLP do not take any action against Jason Hughes as he is highly skilled in environmental sustainability and that his act of entering in the agreement was for the benefit of the firm and not for his benefit. Further, his decision was in response to the discounted rate offered by the company Geotherm Limited and hence, he decided in the interest of the company and not for personal gain.[7]

Thus, it is advised that all the partners shall be liable to act as per the agreement entered between FT LLP and Geotherm Limited and it is also advised that no action be taken against Jason Hughes as he is a skilled consultant and the firm should proceed with the retention of such employees.[8]

Part-3

ULAWS LLP

MEMORANDUM

From: Supervising Partner

To: A Trainee

Date: 1 May 2021

Matter: ESG

As the advice is needed by Mr Smith regarding his concern on the ESG issues that are not addressed by the company Affinity where he is a non-executive director, it is advised that compliance with the ESG factors is mandatory under the Companies Act 2006. The Act provides for the duties of directors under Section 170 where the directors shall be held responsible for not abiding by the ESG rules and regulations. It shall be the duty of the director that the ESG factors be taken into consideration while making the decisions for the company. further, the directors are also required to consider the ESG risks and assess them accordingly whether they are acting independently or collectively as the board of directors.[9] Hence, the directors shall be held independently liable for not considering the ESG factors while deciding for the company even if the decision was made jointly and collectively.

Discussing the first issue highlighted by Mr Smith, it has been recommended that the company Affinity proceed with the replacement of its diesel vans as continuing with the old vans for property visits shall impact the environment due to the emissions and it shall also be discomfort for the visiting customers. Further, the company is under the obligation of abiding by the environmental standards under the Companies Act 2006 where environmental sustainability is a requirement to be fulfilled.

Further, the issue also attracts the fulfilment of the director's fiduciary duty to act in a way that is in good faith for the company as a whole as well as for the shareholders. The company is required to make success by acting in good faith for business and the shareholders, but the issue highlighted by Mr Smith reveals that the company has not made the disclosures to the shareholders and hence, the directors shall be in violation of the fiduciary duty towards the shareholders.[10]

The second issue is regarding the gender inequality in the board of directors as there is only one female amongst the eight male directors. Apart from this among the 50 national managers in the area, there are 20% females. Hence, it is clear that there is no gender equality in the hiring of managers and directors. The provisions of the Equality Act 2010 are attractive in this case as this Act provides that there shall be equal representation of male and female employees and directors in any organisation. Further, the Act also provides that the organisation shall work to enact policies for the equal representation of male as well as female members within its internal policies and memorandum.[11]

Thus, to conclude it can be stated that to address the first issue the company is required to make a strategy for the replacement of its diesel van so that the company can meet the sustainable requirements of the statutes and also it shall be convenient for the customers visiting the property. And to address the second issue it can be concluded that the company amend its current policy of hiring and increase the hiring and participation of women to 50%. Moreover, it is also recommended that the company make necessary disclosures to the shareholders as it is the fiduciary duty of the directors to act in good faith of the corporation and the shareholders.

References

Bock AJ and George G, ‘The Business Model Book: Design, build and adapt business ideas that drive business growth (2017) Pearson UK.

Chandra P, ‘Investment analysis and portfolio management (2017) McGraw-Hill education

Langford R, ‘Company Directors' Duties and Conflicts of Interest’ (2019) Oxford University Press

Munk C, ‘Financial markets and investments’ (2018) Copenhagen, Denmark: Lecture notes

Nofsinger JR, ‘The psychology of investing’ (2017) Routledge

Partnership Act 1890, s 5, 15

Quinn J, 'The Sustainable Corporate Objective: Rethinking Directors’ Duties' (2019) 11 Sustainability

Seenacherry M, 'LIABILITY OF COMPANY DIRECTORS: THE BUSINESS JUDGMENT RULE AS DEVELOPED IN THE US AND ADOPTED BY GERMANY COMPARED TO THE NETHERLANDS’ APPROACH' (2020) 12 Amsterdam Law Forum

Sheppard A, Peel D, Berry S and Ritchie H, ‘The essential guide to planning law: Decision-making and practice in the UK’ (2017) Policy Press

Weetman P, ‘Financial and management accounting (2019) Pearson UK

[1] Prasanna Chandra, ‘Investment analysis and portfolio management (2017) McGraw-Hill education

[2] John Nofsinger, ‘The psychology of investing’ (2017) Routledge

[3] Adam Bock and Gerard George, ‘The Business Model Book: Design, build and adapt business ideas that drive business growth (2017) Pearson UK

[4] Claus Munk, ‘Financial markets and investments’ (2018) Copenhagen, Denmark: Lecture notes

[5] Section 15 Partnership Act 1890

[6] Section 5 Partnership Act 1890

[7] Adam Sheppard, et. al., ‘The essential guide to planning law: Decision-making and practice in the UK’ (2017) Policy Press

[8] Pauline Weetman, ‘Financial and management accounting (2019) Pearson UK

[9] John Quinn, 'The Sustainable Corporate Objective: Rethinking Directors’ Duties' (2019) 11 Sustainability.

[10] Langford R, ‘Company Directors' Duties and Conflicts of Interest’ (2019) Oxford University Press

[11] Melissa Seenacherry, 'LIABILITY OF COMPANY DIRECTORS: THE BUSINESS JUDGMENT RULE AS DEVELOPED IN THE US AND ADOPTED BY GERMANY COMPARED TO THE NETHERLANDS’ APPROACH' (2020) 12 Amsterdam Law Forum.

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