Richard and Michelle are good friends. They met at the University and after completing their degrees they decided to set up a cake store, called Creamy Creations in partnership with each other. Unfortunately, due to COVID lockdowns, business has not been that good. To keep the business afloat Michelle approached Samuel, who is also their employee, for a loan.

Samuel agreed to lend $20,000 in exchange for him receiving his salary plus a one-quarter share of the net profit (or a one-quarter share of the firms losses). A loan agreement was drawn up and contained, among other things, the following terms:

• The lender will receive his salary plus a one-quarter share of the net profits or losses.
• The money advanced is a loan and the lender is not to be regarded as a partner of the business.

Samuel advanced the loan and continued to work for Creamy Creations and received his share of the profits. Richard and Michelle do not consult him on business decisions.

A few months later, Richard and Michelle decided to expand the business. They approached RentsRus Pty Ltd to lease premises to open up a second store. Unfortunately, business continued to deteriorate and Richard and Michelle start falling behind in their rental payments to RentsRus Pty Ltd. When RentsRus Pty Ltd threatened legal action, Richard and Michelle book a flight to the Bahamas, leaving Samuel to manage the store.

RentsRus Pty Ltd wants to recover the rent owing from Samuel.

a) Can Samuel be considered a partner?

(8 marks)

b) Assuming Samuel is considered a partner, will he be liable to RentsRus Pty Ltd?

(5 marks)

c) Richard and Michelle called their business Creamy Creations. Must Richard and Michelle register the name Creamy Creations? Explain your answer, citing appropriate legislation in your answer

(6 marks)

d) Assume that Samuel also ran his own property construction business using a company struture with him as the sole director and shareholder. The company is registered as SNP Pty Ltd, trading as Samuels Constructions. Samuel owned a car worth $60,000 which he used for work and his house is worth $7500,000. However Samuel has been struggling financially and one of his creditors has threatened to apply to the court to have Samuel declared bankrupt. Explain to Samuel the consequence of his personal bankruptry on (i) whether Samuel can continue being a director of his company, (ii) whether he can continue trading as Samuels Constructions, and whether he can keep his house and car, citing appropriate legislation in your answer.

(6 marks)