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LAW707 CRN16195 7 COMPANY LAW CASE STUDY (First sits and Resits, Summer/Autumn 2022) John and Jim are friends, They decided to start two companies respectively, both based in Dublin, The company that John agreed to form was to be called MegaCorp, It had a share capital of 100,000 split into 10,000 shares of 10 each and these were subscribed to by 5 persons, including John, wir each holding 2,000 shares, all fully paid up. All ve persons agreed to become Directors in the company. Before the company was registered, John was entrusted with the task of buying furniture for the company's ofce which it was estimated would cost 15,000 and for which provision was made in the budget drawn up by the ve prospective Directors. When John was sourcing the furniture, he discovered that he had a friend who ran a rmiture business and that friend agreed to supply all the furniture needed by John for 12,000. The transaction was recorded in e-mails between the two of them. The friend also told John that, as a gesture of friendship, he would gi a bunk bed costing 800 to John's 3-year-old son 7 an offer which John gmterlly accepted, albeit aer expressing some initial reluctance The furniture was duly delivered to the company's ofce, and the gi to John's home, two days before the company was registered. The registration took place on 1 June 2017, John had asked his iend to send the inVOice for 12,000 to the company which the friend duly did a week later, indicating that payment was to be made within 30 days, Within a week of the incorporation of MegaCorp, Jim requested John to jump ship and join his, Jim's, company 7 which had been registered as MiniCorp 7 as a consultant, arguing that John's talents would be more userlly deployed in MiniCorp than in MegaCorp. John considered the offer and decided to accept it, not least because Jim had offered him very generous terms. He resigned as Director of MegaCorp and sold his shares in that company. This was seen by the other Directors as an act of disloyalty on the pan of John and they made their displeasure known not only to John but also to his circle of business acquaintances which, in tum, angered John. When the time came for payment of the invoice for the furniture, the remaining four Directors reised to accept that MegaCorp was liable to pay it, and they retumed the invoice to the supplier with a remark that he should claim payment from John. The supplier is arguing that the company was bound to pay since the furniture was clearly inmnded for the company as recorded in the e mail exchange with John. Is that argument sustainable in law? [10 marks] While that dispute was ongoing, the Directors of MegaCorp decided to build the business and, among other things, appointed a Company Secretary, Jeremy, The Directors have asked Jeremy to advise them on the important things they need to know about their own position, What do you think should go into a brief list of 'dos and don'ts' for company directors that can form the basis of Jeremy's advice? [15 marks] The Directors also hired a number of key ofcers and staff, including Jonathan, 3 60-year-old retired barrister, who was given the title of 'Legal Director' with a xed salary and a contract of employment Within a short while, the Directors decide that the company would do well to expand and diversify. For this purpose, a business plan is drawn up and it becomes clear that the company nwds to borrow at least 61m. As a relatively new company, it does not have enough assets to obtain a bank loan, so the Directors have begun exploring other options for borrowing money. You are consulted on this issue. What would your advice be about those options, including the pros and cons of each option? For the purposes of your analysis, assume that the company is into manufacturing and has a substantial volume of continuous production of, say, complex chemical formulan'ons, at any given time. [15 marks] Around September 2017, the person to whom John had sold his shares in MegaCorp, Janice, has begun showing a lot of interest in the running of the company, although she does not hold any formal position or job title. With the knowledge and encouragement of the other Directors, she offers a number of suggestions which are soon adopted as policy decisions by the company She is even allowed to give directions to senior officers of the company in certain matters, with the result that many of her memos and telephone calls to the Directors and senior ofcers drive some of the business activities of the company. Jeremy is a little concerned about this development but does not say anything publicly. Do you think Jeremy's concems are justied and, if so, why? [10 marks] In late-October 2017 the company decides to make a public offer of shares so that it is able to strengthen its nancial position. This public offer in on a fairly large scale and Jeremy is asked to advise the Directors on the various steps that need to be gone through to comply with the legal and regulatory requirements If you were to dra a note on this subject for the benet of Jeremy (who will in due course provide an oral brieng to the Directors), what would you include in that note? [10 marks] Around the same time, Jonathan discovers that his wife is seriously ill. He becomes heavily distracted in attending to her needs and is unable to spend as much time and attention on the company's affairs as he used to. He attends ofce fairly regularly, but begins to delegate responsibilities to fairly junior staff. He infortns the four senior Directors that he is happy to let them to exercise their judgment on most matters and to sign off relevant papers based on their assessments. Jeremy becomes quite worried about this development. He is particularly worried that Jonathan's distractedness might have a deleterious effect on a couple of court cases that the company is involved in at the time. if you were in Jeremy's position and you decided to put your apprehensions in writing, how would you go about it? [i 0 marks] Jeremy also discovers another problem which requires serious attention and remedial action, One of the four directors had, on behalf of the company, purchased an expensive car and the invoice for it had been sent to the company. A junior executive in the accounts department who had been dealing with the invoice returned it to the supplier of the car with a remark that since the price of the car was signicantly higher than the authorised limit of any expenditure that a director could incur on behalf of the company (this limit had been set by a board resolution), the company could not honour the invoice. The supplier of the car is now threatening the company with legal action. What should Jeremy do in the face of this threat? [10 marks] MegaCorp has, despite such challenges, been growing from strength to strength. By contrast, the company with which Jim has been associated, MiniCorp, has had limited success and, as a result, the Directors and shareholders of that company have begun making overtures to the Directors of MegaCorp for a possible merger between the two companies. The latter are willing to consider those overtures but they need guidance on how the proposed merger could be effected smoothly and without too much disruption. Write a note explaining the legal provisions in this area. [15 marks] Finally, you have been asked if, following the proposed merger, it is possible for MegaCorp to change its me for rebmdingWI