Jim is a successful investment banker and entrepreneur. He started driving his own cab when he was 18. Jim attended university to further his knowledge and broaden his mind. After graduation, he started working for a large investment bank. Feeling dissatisfied, after 2 years, he sat down one night and looked to the stars. It was in that moment he found the inspiration to start his own company. Jim registers a company called 'Elysian Pty Ltd' and Jim would be its sole shareholder and director. His business would focus on doing deals in the corporate, finance and equity space. Jim is approached by his childhood friend Lucy. Lucy is in the business of property finance. Jim and Lucy decide to become partners and Lucy registers a company called 'Elysian Property Pty Ltd'. Lucy is the sole director and shareholder of her company.

After 2 years, Jim and Lucy have completed some solid deals. To formalise their relationship, they become the additional shareholder and director in each other's company. Jim and Lucy now each have 1,000,000 shares in each company purchased at a price of $1. One evening, Jim takes a long walk across the harbour. It is a beautiful night with the stars sparkling. He is inspired again to expand the business. Jim recalls Steve who is a property developer that has built some of the largest skyscrapers in Sydney. Thinking Steve would be a perfect partner to the business, Jim talks to Lucy about Steve entering into the business with them. Jim introduces Steve to Lucy. Lucy is enraged and does not want Steve to be a partner in her business with Jim. Many years ago, Steve had cut Lucy out of her commissions from several deals and Lucy did not trust Steve and did not want to be in business with him.

Despite Lucy's outrage, Lucy has great respect for Jim so she agrees to help Jim and Steve in finding finance for future development projects. Even though Lucy is no longer concerned with working with Steve, Jim works secretly with Steve without Lucy. They have completed a few developments together without Lucy's knowledge. They are paid in cash and this is not recorded on the company books and Lucy is not paid despite Lucy arranging for finance. They tell Lucy the deals simply fell through. Jim determines it is time for the business to expand and to seek a cash injection into the business. He speaks to his friend Howard who suggests that it would be a wise move to issue some more shares in the company. He also thinks it would be an opportune moment to network and introduce some more business contacts who could also be shareholders of Elysian Pty Ltd. Jim thinks this is a wise move and issues more shares. The new shareholders are Julia, Alfred and Lee who have each purchased 1,000,000 shares at $1 each. This gives them equal voting rights and the shareholders are also required to provide their authority prior to any transfers made from the company accounts. Feeling proud of this new capital injection, Jim is inspired to continue on closing his deals.

Steve has been operating on the sly. Steve is now looking for finance for a large development project for a rural area in New South Wales. He is seeking $330 million dollars. To get this loan, Steve needs to get a personal guarantee from the directors ofElysian Pty Ltd. Jim wants this project to go ahead as building are part of his future vision. The Shareholder's Agreement states that any personal guarantee given by the directors must be approved by the shareholders. The personal guarantee is given by Jim without the shareholders' approval.

The funding has been approved and there is $350 million in Elysian Pty Ltd's bank account. Jim's parents are in financial distress. They require $500,000 to meet their debts. They had originally planned for this to be paid from the proceeds oftheir sale oftheir property however the prospective purchaser had pulled out at the last minute. As the Sydney property market is booming and the property would likely be sold in a short period, Jim uses the funds from the company's accounts and transfers $500,000 to his parents without telling anyone.

The next day Jim is surprised when a group of men turn up at his office demanding repayment. They had loaned Steve $330 million to fund the property with Jim's personal guarantee. Steve had not made any repayments. Jim looks to his bank account. There is only $2 million left in the account. It looks as though Steve had run off with $330 million and Lucy had made a withdrawal for $17.5 million. Jim is scared. He transfers the $2 million to his personal account and deregisters the Elysian Pty Ltd. He gets on a flight to the Bahamas and leaves.

The shareholders are now being approached for payment of the finance that has been provided to the company. The company has no income and the shareholders now realise the company had been a scam all along. There had been no deals. The affairs ofthe company are in a mess.

After Jim leaves for the Bahamas one more deal by a born dealmaker is unearthed. It appears in order to bump up his finances in the Bahamas he had approached his bank and asked for a fresh loan. Jim had been an old customer at Dutch Bank. He had been dealing with them for years. He had made an appointment to see his Bank Manager. When he turned up at the Bank he was met by a Loans Officer who apologized profusely for the Bank Manager who was unexpectedly caught up in a meeting. The Loans Manager offered to deputize for his boss. Jim agreed and proceeded to launch into a business pitch for establishing a vineyard and winery that would include a group offellow entrepreneurs who had taken a share stake in the business. The Loans Manager listened to this with enthusiasm as he considered himself a connoisseur of fine wines. Jim reeled off a list of four directors. He also listed the individual who would be the Secretary. He had indeed incorporated a company to handle the affair. The company had four directors and a Secretary and Jim has been given leeway by directors to get extra finance above and beyond what had been subscribed in shares for the new venture. The Loans Manager is impressed by the list of directors, and also the present five shareholders as they were well known figures in business circles. As Jim concludes his talk the Loans Manager asks about listing on the Stock Exchange, and the number and value of shares that would be issued. Jim responds the constitution covers all that information, and asserts every base has been covered. He agrees floating the company on the stock exchange is a great idea and that is underway. The Loans Manager makes a mental note that the company has a constitution and listing on the stock market is in motion but then gets involved in a long conversation about different types of French champagne. Their discussion concludes with a loan document being signed and Jim provides his signature on behalf of his new company. The loan was duly given and added to the sum that Jim siphoned off for his new life in the Bahamas

Q1: The shareholders seek your advice