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Corporate law Master - Case Study Example

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All the facts of this case clearly points points out to a close corporation that was entered in by spouses Paul and Mary Scott. First the intention to keep the business as a family corporation involving the spouses and the three children is at once evident (Organisation For Economic Corporation and Development 2006, p…
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Corporate law Master Case Study
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Download file to see previous pages Thus, from all appearances the corporation is indeed a close one.
If it was not stated that the spouses Paul and Mary had registered the company in 1980 with the name Scott Enterprises PTY. Ltd., the first thing that would come to the mind is that the spouses must have formed a partnership instead because the business originally involved only the two of them i.e. the spouses. Most partnerships involve only two business partners (Clifford 2006, p.7). But such is not the case here, although if I were the spouses' adviser at the time they contemplated to form a business entity, I would have suggested a partnership instead because a partnership is simpler and entails no further elaborate requirements to satisfy the requirements
of the Corporation Act. Besides, it entails less expenses than incorporating and gives them more leeway and freedom of action than incorporation, which puts one to the reins of government control. If the spouses chose partnership instead, either Paul or Mary can bind the partnership by any legitimate contract in the ordinary course of business of their manufacturing concern.
But probably, the spouses had in mind the future of the company. ...
ey might be forced to retire from the business due to old age, debility, sickness, incapacity or even worse death to any or both of them (Humphreys 1998, p.6-1). Corporation provides more stability because it affords the right of succession, in which case if any of the above occurs, they can safely ensconce the corporation in the hands of the three children - Suzy, Peter and Sam (Dine 2000, p.101). A corporation ensures continuity and permits transfer of shares of their stocks to the three children if any of the above happens. Perhaps, the spouses want to see the company they laboured hard to put up go a long way and they desire to experience the fruits of their hard work when this company is already in the hands of their children. A corporation just cannot be dissolved voluntarily because it requires a vote of two thirds of the stock and its dissolution can only take place by some judicial or administrative act of the government ( Davis 2000, p.6).
The form of corporation can only be a close corporation because all of the corporation's issued stocks are held of record by only 5 persons, with the three children holding each 30% of the shares and the 10% share being retained by the spouses. Although the case is silent about any action to make a public offering of the shares of the corporation or to enlist the corporate shares in any stock exchange, yet the tenor of the case strongly suggest that the spouses never did any of these acts nor have any intention to make one in the future (Moye 2004, p.209). The resolve to keep the business within exclusive family control is so strong we can just surmise that the ...Download file to see next pagesRead More
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