Business Law and Ethics for Accountants (LAW4006-B)

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FoMLSS LAW SCHOOL Business Law and Ethics for Accountants (LAW4006-B) Alternative Assessment: Submission Date: Before 3pm on 19 May 2020 TYPE OF ASSESSMENT: INDIVIDUAL ASSIGNMENT INSTRUCTIONS TO CANDIDATES Weighting: 60% of the total marks for the module Word Limit: 2,000 words Please submit your assignment electronically through Turnitin in Canvas – failure to submit, or late submissions without an authorised extension, will be considered as non-submission and you will receive a mark of zero. Your assignment will be checked for plagiarism. Please note: at your first submission, you have the opportunity to review your submission – until you have clicked submit you have not submitted. Your second submission will be your final submission and you are therefore strongly encouraged to ensure this is the final and best version of your assignment. When resubmitting ensure that you fill in exactly the same submission data to ensure that your previous submission is overwritten. You should put your UB number on every page of your work. Please note that the assignment will NOT be returned to you and you should therefore keep a copy for your records. The questions are not equally weighted. Question 1 is worth 50% of the marks available for the exam, and questions 2 and 3 are each worth 25% of the marks available. Answer all three questions. Your answers should include a full explanation of the relevant legal provisions and make use of supporting legal authority from statute and case law. University of Bradford- Faculty of Management, Law and Social Sciences 1|Page COVID-19 This coursework is to be completed individually, and is not group coursework. There is no requirement to complete a reflective log for this coursework. The word limit for this individual coursework submission is 2000 words. This applies to the main body of your text but does not include footnotes, bibliographies, appendices and the like. Please note, however, that footnotes should be used for reference purposes with very brief comments only if you choose to use them. The Law School uses the OSCOLA referencing system, which has been specifically designed for referencing legal writing. A guide on how to use OSCOLA is available here.1 You may use this method if you wish, however you may also use the other referencing systems recognised within the Faculty of Management, Law and Social Sciences. General information about referencing styles can be found in the University's Referencing Style Guide.2 1 2 https://www.law.ox.ac.uk/sites/files/oxlaw/oscola_4th_edn_hart_2012.pdf https://www.bradford.ac.uk/library/find-out-about/referencing/ University of Bradford- Faculty of Management, Law and Social Sciences 2|Page COVID-19 COURSEWORK BRIEF Case Study Salvador, Frida, Wassily, Leonardo and Jackson became friends while they were in the same year group at art school. They all graduated in 2015, and together set up a small business selling low-priced arts supplies, initially from a market stall in Bradford before they developed an online shop. The business slowly grew, and they recognised that there was a demand for their competitively priced products. They identified a need for investment in their business in order to reach a wider market through advertising and the opening of shops, and so incorporated their business, Chintz Arts Supplies Ltd. in September 2018. At a trade fair Salvador was approached by a board member of Gigantic Arts Shops Ltd, who told him that Gigantic Arts Shops wanted to sell a shop that it owned on land close to their old art school. The shop however had recently suffered a major fire and Gigantic now did not want to be associated with the location. It had previously been a very profitable shop and could again be economically viable after a significant amount of work to repair the premises had been carried out. At a board meeting Salvador gave an accurate account of the difficulties that would be faced. The four other directors thought the risks involved with this location were too great compared to the potential benefits for Chintz Arts Supplies Ltd and decided not to pursue it. At this same meeting Salvador said he ‘ought to to buy the shop for himself and would run his own arts supplies shop, café and art gallery’. This he has done and it looks as if he will make a significant profit. Chintz Arts Supplies later opened up three shops in the Yorkshire area and their business became very successful both in store and online. The five directors reward themselves with generous salaries as directors. No dividends are paid. Recently, however, tension has arisen between the five as to the future direction of the business. Salvador, Frida, Wassily and Leonardo want to expand the business nationally and propose to increase capital to do so. Jackson is opposed to this, believing that any expansion should be done locally. The other four directors think that Jackson is holding them back and vote at a board meeting, which Jackson does not attend, to go ahead with the national expansion. They begin to call board meetings without informing Jackson and to implement the expansion plans without consulting him. At one of these meetings it is decided to increase the share capital of Chintz Arts Supplies Ltd by issuing another 100 shares in the company at the price of £2,000 per share to reflect the current value of the business. Once Jackson hears of this decision he objects vehemently because, as the other four directors know, he has just purchased a new house and is unable to raise the necessary cash to buy his allocation of shares. Despite University of Bradford- Faculty of Management, Law and Social Sciences 3|Page COVID-19 Jackson’s objections the share issue goes ahead. At the next meeting of all of the board, including Jackson, a proposal to remove Jackson from the board is put to a vote and passed despite his protests. Answer all Three of the Following Questions; 1. Explain the legal background to limited liability and corporate personality and critically evaluate the situations when the court will ignore the veil of incorporation. (50% of the marks available) 2. Frida, Wassily, Leonardo and Jackson have received information on Salvador’s activities at the shop which he purchased for himself and are contemplating bringing legal proceedings on behalf of the Company. Advise Frida, Wassily, Leonardo and Jackson of the legal position. (25% of the marks available) 3. Advise Jackson of his legal position in the light of the above events. (25% of the marks available) - THE END OF THE PAPER – University of Bradford- Faculty of Management, Law and Social Sciences 4|Page COVID-19
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Explanation & Answer

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Running head: BUSINESS LAW AND ETHICS

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Running head: BUSINESS LAW AND ETHICS

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Question 1
Limited liability is the key commercial guide that ensures the running of companies. This
limited liability rule allows the company to raise money for its functions with its shareholders and
the directors not liable for the money received on credit. Therefore when a company is registered
or incorporated it is taken to have a new face with separate legal entities from its owners. These
legal entities allow the company to secure or own property for it functions to take place, join in
the leasing of property this may be a source of income to the company, enter into contracts in its
name despite the shareholders in the company the legal entities allow the company to get into a
contract under its name to take up projects. Another legal function under the Joint Stock Company
is borrowing money to enhance its ability to carry out its activities. Other obligations and rights of
a company include employee recruitment and suing rights making it an artificial person that is
corporate personality, forming of subordinate agencies as well as spreading of information. The
idea of limited liability is that the shareholder is only liable to capital contribution. This means that
if the company fails to meet its obligations on debts the shareholder's assets are not at risk and only
the capital contributions can be used to clear the debt. Due to the corporate person, the company
will be held liable for its obligations and its owns rights (Başçı, A. and Ertemel, A., 2016).
Limited liability is a legal entity that ensures that the owners of the company or the
shareholders do not bear all the risks in the business invested in. Under Limited Liability Company
the management is given to the board of directors and is guided by the act of the company. A
company is completely formed on given objectives. Another legal background of a limited liability
company is that it has a perpetual life that is independent that is death, bankruptcy, or insanity of
a member does not affect its continuity. The registrar of a company should receive the
memorandum of association for the incorporation of the company. The document defines the

Running head: BUSINESS LAW AND ETHICS

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agreement between the company with the stakeholders. It consists of name clause which gives the
company name, the objective clause which gives the objectives of the company, situation clause
which ensures that the company has a registered office, a capital clause which contains the amount
of capital...


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