Cecily Tan and Betty Baker are florists who live and work in Fremantle. Western Australia. They first met in 2017, when they commenced employment with Fab flowers Pty Ltd (Fab flowers) a business that designs and retails stunning floral arrangements and bouquets for all occasions. In early March 2019, both Cecily and Betty resigned from Fab Flowers to set up their own business selling flowers, floral arrangements and bouquets.

Cecily has previously operated her own business (as a sole trader) and Betty was a partner in a partnership for several years before joining 'Fab Flowers Pty Ltd'. Their previous businesses traded at a profit, but they do not like the fact that sole traders and partners take on risks if their businesses incur unresolved debts. They sought advice on the type of business structure that may be suitable for their needs. Cecily, who owns assets to the value of $ 500 000, preferred the structure of a company over that of a partnership because of the limited liability of the company's shareholders. Betty, on the other hand, thought that a company was ideal because it is a separate legal entity. Both Cecily and Betty were required to sign non- compete causes when they commenced employment with Fab-Flowers. Theses clauses prohibit them from competing with Fab-Flowers post-employment for a period of three years anywhere within the City of Fremantle.

Cecily and Betty decided to incorporate a proprietary company called Florissima Pty Ltd (Florissima). The company was registered on 25 May 2019. Florissima has two directors, Cecily and Betty, and a total of ten shareholders (Cecily, Betty and family and friends of Cecily and Betty) each of whom hold 1000 fully paid shares, Florissima has a constitution. Clause 3 of the Constitution states that Florissima's activities are 'restricted to the hire and sale of floral arrangements and bouquets. Clause 4 provides that shareholder Emily Summer, Cecily's sister, shall become Florissima's sales manager for life.

Eager to get the business started as soon as possible. Cecily and Betty entered into a number of contracts. Cecily (on behalf of Florissima) negotiated the lease of a retail shop at 21 Harbour street, Fremantle, with 'Coastal Real Estate' , at $2000 per month. However, on 29 May 2019, a retail shop in 46 Wharf Street, Fremantle, became available at $1500 per month. As the Wharf Street shop is much cheaper and more spacious, the Harbour street shop really no longer suits Florissima's needs. Cecily wonders who, if anyone, is bound in that contract (on behalf of Florissima) to plant trees on the Fremantle Esplanade. Unfortunately, Betty underestimated the cost of the labour involved in planting the trees and is now hoping that there is a way the company can avoid its obligations under that contract.

Question Four

Florissima is registered as a Pty Ltd company. What is the capacity of that type of company upon incorporation? Who is (and who is not) liable for the debts of this company?

Four step is not required to anwer this part