PROBLEM:

Anita, Liam, Mohammed and Xiare friends and graduated from Carleton University together in 2012.They started a movingbusiness.The business is incorporated, and they are equal shareholders, so each owns 25% of the voting shares. Each of them invested $50,000 into the business for a total of $200,000. They are also the company's only four directors on its board.

The company is in the business of supplying moving vans and people to help customers who are moving from one home to another within the Ottawa area.

The corporation now owns 4 moving vans debt free and leases 2 more on long term leases. So far, the business deals only with local moves in Ottawa and only residential moves. The business has been profitable since 2015 and is debt free. It employs six drivers and 12 other people who literally "do the heavy lifting" during moves.Some of the workers have been putting in overtime hours to address the workload.

Liam is very ambitious and wants to expand the business to include commercial moves and moves from Ottawa to Montreal, Toronto, or any other location within a 700-kilometre distance from downtown Ottawa. He has done a marketing study which shows that the business could triple its revenues if all goes well. He has gone to the corporation's bank and has a loan proposal from them. The bank is prepared to lend the corporation a five-year term loan of$750,000 and provide aline of credit of $250,000 backed by a personal guarantee from each shareholder.

Mohammed loves the idea but suggests that he would rather get equity and find new investors. He suggests looking for new investors online and though social media.Liam does not like the idea of diluting the ownership and would rather borrow the funds. Mohammed does not like the idea of borrowing funds from a bank on both practical and religious grounds.

XI is horrified. He points out that they would have to hire more employees and buy or lease more trucks. Two movers have hurt their backs over the last year and are disabled for now, with two new workers having been hired on one-year contracts to replace them temporarily.The Ministry of Labour recently conducted an audit and found that there was inadequate training of the movers on lifting techniques. Some of the equipment used was found to be inadequate and the provincial investigator commented that somebody could be killed if a harness breaks while a piano or something heavy is being moved. He issued a warning to get the equipment upgraded.But the board has been too busy to address this.

One van had a bad motor vehicle accident two months ago, and a criminal investigation is pending against their driver.He has been suspended with pay for now and a replacement driver has been hired. In another move, one employee dropped a lit cigarette in a customer's garage after a quick smoke and the customer's new $850,000 home was totally destroyed.

XIsays that this is the wrong time to be expanding the business with all of these issues going on. Liam says that there are always risks and there will never be a good time if they are too cautious. Entrepreneurs take risks!

Anita is undecided but is leaning against any expansion at this time. She is pre-occupied with her pending marriage to Jamie and would rather wait one year before doinganything bold with the business.

All four of them still get along very well in spite of the difference of opinion.They ask Liam to develop a legal risk management plan so they can consider the options. They understand the benefits - successful execution of the expansion would increase profits by 100% in one year according to the marketing survey obtained by Liam, and 300% in the longer run. But they do not have a handle on the legal risks. They do not have a shareholder agreement.

Answer the following question, based on the problem provided above.

Questions:

1.Develop a legal risk management plan for Liam.

2.Identify all of the legal risks and issues(there are 12 legal issues), as well as develop a strategy to manage these risks and make a recommendation on how to proceed with Liam's idea.

3.Identify possible solutions to those risks and issues

4.How can they avoid those risks and issues?