THE CLIENT MEETING The client and issues: Metrix Pty Ltd (Metrix) is a large private company established in 1976 by Mario Le Mesurier and Stephen
THE CLIENT MEETING The client and issues: Metrix Pty Ltd (Metrix) is a large private company established in 1976 by Mario Le Mesurier and Stephen Adam. The two were carpenters and built up the company to be the preeminent home building company in Australia. The company focuses only on building residential homes. They do not build commercial buildings. The company has the following directors and senior officers: Mario Le Mesurier Chairperson Stephen Adam: Managing director Li Ma: Chief Financial Officer Suren Chandra: Construction director Victoria Moser: Design director Joshua Leong: Purchasing director Ali Ahmed: Senior safety and welfare manager Kathy Di Mella: Senior architect Mario, Stephen and Li have asked for the meeting because they have the following issues, they would like advice on.Issue 1: The company since January 2021 has been losing money on housing contracts due to the increase in building materials, the labour shortage and the nature of the contracts with customers. Currently to complete 58 housing contracts the company would make a loss of $3,653,000 in total. The reason for this was that these contracts were xed price contracts and did not envisage the impact of COVID on supplies and labour. The nancial statements prepared by Li show that this would result in the company for the year ended 30 June 2022 making a trading loss of $1 1 ,200,000. Other factors attributing to the estimated loss are rental costs, operating expenses and the cost of funding the construction of a new head ofce building in Mitcham. The company currently has retained earnings as at 1 July 2021 of $15,864,372 and after the estimated trading losses of $1 1,200,000 for 30 June 2022, this would leave Metrix with accumulated prots of $4,664,372. Metrix is also facing pressure from its contractors to pay them for their materials and services. The outstanding creditors are $18,328,789. Some are secured over the new head ofce, building supplies but many are unsecured. The shareholders funds of Metrix consist of: Authorised share capital (ordinary) $12,000,000 A class preference shareholders $8,000,000 Retained earnings $4,664,372 Total shareholders funds of the Metrix as at 30 June 2022: $24,664,372 The directors are mindful of the need to retain funds for working capital and estimate the company needs working capital of at least $6,500,000. Issues they seek advice on: 1. Is there a prot at law from which the directors of Matrix can pay a dividend if they wish to do so? The board of directors of Metrix has had a history in the past of paying dividends each year of approximately 15% of the retained earnings of the company at the end of the year. 2. If they do decide to pay a dividend of 15% of retained earnings, would you recommend it or not? Issue 1: Answer all the questions raised identifying the issues raised from your understanding of the facts, apply the relevant law (case law and legislation) to the issue and come to a conclusion. Your response must be supported by case law or legislation. Your conclusion in respect of each query raised by the client
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