Background

Kate Manderly is a winemaker who is the sole director and shareholder of Cross Key Wines Pty Ltd. The

company operates a vineyard in Gippsland with fifteen employees. The company has $800 000 in assets,

wine-making equipment and a twenty year lease over the vineyard. Cross Key white wines have become

very popular with the drinking public.

Kate recently expanded the offering to include red wines. In order to do this, Kate purchased a second

vineyard in the Coonawarra region of South Australia. Ten experienced investors invested $500 000

each in return for:

a) 5% equity each;

b) guaranteed dividends until each investors stake is returned (after a period of 5 years). The

investors then intend to remain as shareholders, although dividends will no longer be guaranteed; and

c) Security over the entire property and shares of the company under the Personal Property

Securities Register (PPSR)

The prospectus contains the following words: Funds raised will be principally utilised to purchase land

in the Coonawarra Region of South Australia, and winemaking equipment.

Consultants and Corporate Advisors

QUESTIONS

3. Advise Kate what a security is and the difference between a share and a debenture.

[2 marks]

4. Assuming that the investors choose to purchase shares, please explain with reasons which type

of share would be most suitable for these investors.

[3 marks]