Company Law (Fall 2020) Written Assignment

• Please read the below fact patterncarefullyand answer the below questions applying relevant

Fact Pattern: Fortunately, Donald and Joe (together "DJ") reconcile and decide to move forward with their business. Given the excellent job you did assisting them previously, DJ turn to you again to advise them on additional matters related to their company, DJ Best Friends Limited ("DJBF"), a Hong Kong private company limited by shares. DJ are still currently the sole directors and shareholders of DJBF.

DJ would like to expand DJBF but require additional financial capital to do so. An IPO is not an option, so DJ are considering either a renounceable rights offering or a private placement with an investment firm. If they pursue a private placement, the investor will receive common shares in DJBF and warrants. DJ are not familiar with either of the options and seek your advice about which of the two might be best for them.

Based on your advice, DJ successfully raises capital for DJBF and uses part of that capital to make an investment into Ivanka Limited ("IL"), a Hong Kong private company limited by shares that is a subsidiary whose holding company is a Hong Kong company that is listed on the Hong Kong Stock Exchange. Unbeknownst to Joe, IL's CEO and majority shareholder is Donald's daughter, Ivanka. Additionally, Donald has a large ownership stake in IL, which Joe is also not aware of.

As part of DJBF's investment into IL, DJBF negotiate to receive a seat on IL's board of directors. IL is eager for DJBF's investment and readily agrees to having a seat on its board of directors filled directly by DJBF as a body corporate.

IL grows rapidly and is very successful. Given its profitability, IL is intending to issue a dividend to its shareholders, but due to unknown reasons DJBF is not on IL's register of members. As a result, DJBF may not receive a dividend. Donald argues that DJBF should still receive a dividend because Ivanka knows DJBF invested in IL and that he's her father.

Around this time, DJ also want to give back to the community by incorporating a new Hong Kong company called Puppies for HKU, a non-profit organization started to decrease the stress of HKU student by allowing them to play with puppies.

*Please addresses the issues in the facts above and give response.*