Question
Ann and Camille are two good friends. Ann conducts a commercial activity very successfully. Camille is very rich and spend most of her time studying
Ann and Camille are two good friends. Ann conducts a commercial activity very successfully. Camille is very rich and spend most of her time studying and collecting modern art. They are both in their late twenties.
One day Ann phones Camille and they have a very long conversation. Camille tells Ann that she is considering creating a trust with her five nephews as beneficiaries and she would like to know what the main differences are between a fixed trust and a discretionary trust. She asks Ann whether she knows anything about trusts. Ann replies that she does not know anything about trusts either, so they change the topic.
Ann tells Camille that she would like to expand her business but that she does not want to take a loan. Camille tells Ann that she really likes the way Ann conducts her commercial activity. Camille also tells Ann that she would like to write book on modern art that will take up a lot of her time in the coming two years.
(a)Explain what a trust is and why the distinction between fixed trusts and discretionary trusts might play a role in Camille's decision about what type of trust to create for her nephews.
(b)Ann and Camille think about creating a proprietary company limited by shares of which they would be the only shareholders.Explain what equity financing is and discuss how that would be relevant with respect of Ann's aversion to loans.
(c)Camille does not want to spend time looking after the company but would like to know what a dividend is and whether she can ask for dividends to be distributed at any time she wants.
Explain what dividends are and whether Camille, as a shareholder, can ask for dividends to be distributed any time she wants.
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