Question

    Please answer all questions in question 1 and question 2.

    Your submission must include a bibliography.

    The word limit for question 1 and 2 combined is 1500 words.

Question 1

Angus is a 44-year-old high school teacher who wishes to invest his savings of $100,000 by building up a blue-chip share portfolio. Angus was a keen observer of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry in 2019 and has strong views about corporate ethics and the remuneration of directors. Angus wants to exercise his vote as a shareholder to ensure that company directors are not being overpaid. He is also keen to ensure there is proper corporate governance and the directors are managing the company efficiently and ethically. Angus is unsure whether he should buy shares in a public company or a proprietary company. He is also unclear about what class of share/s would best suit his particular investment interests. Angus seeks your professional advice. Required

Answer the following questions for Angus. Support your answer with relevant statute law and/or case law.

a) What is a share and what class, or classes of shares would be most suitable for Angus?

b) On what issues do shareholders have a right to vote and how many votes do they have?

c) How are shares purchased or acquired in a public/proprietary company?

d) Should Angus buy shares in a public company or a proprietary company? Why?

Question 2“

If a company is in financial difficulty, a secured creditor or the court may put the company into receivership.” REQUIRED

Answer the following questions in relation to receivership. Please support your analysis with relevant legislation and/or case law.

a) Who/what is a receiver? Who appoints a receiver and why?

b) What is the effect of the receiver’s appointment on

· the company;

· the directors;

· shareholders;

· secured creditors; and

· unsecured creditors?

Answer 1

Answer 1(a):- A share is an indivisible unit of capital, expressing the ownership relationship between the company and the shareholder. The denominated value of a share is its face value, and the total of the face value of issued shares represents the capital of a company, which may not reflect the market value of those shares.

A class of shares is a type of listed company stock that is differentiated by the level of voting rights shareholders receive. For example, a listed company might have two share classes, or classes of stock, designated as Class A and Class B. Owners of companies that have been privately owned and go public often create class A and B share structures with different voting rights in order to maintain control and/or to make the company a more difficult target for a takeover. Two of the primary types of stock are common shares, representing the majority of shares available across the market, and preferred stock, which typically guarantees a fixed dividend but does not have voting rights.

(b) A person has voting rights in case of equity shares and if he buys class A shares he will have 5 voting rights and in case of class B share he will have 1 voting right

(c) If the company is making the issue for the first time in the primary market he could buy the shares through IPO otherwise shares are bought in the secondary market in case of a public company. In the case of private companies, shares could be bought through private placement.

(d) Since person wants to complete financial data of the company, accountability, transparency, and insure corporate governance then he should buy shares of a private company.

Answer 2 (a) Receivership is a court-appointed tool that can assist creditors to recover funds in default and can help the troubled company to avoid bankruptcy. The receiver is the person who is appointed to manage its assets and make sure that creditors are being paid making financial and operating decisions.

The receiver can be appointed by private players to act for some creditors or if appointed by the court to act on behalf of all creditors. He should not have any prior business to company borrower or lender and can never act for the benefit of one party.

(b) 1 - Company: A company is a legal entity formed by a group of individuals to engage in and operate a business—commercial or industrial—enterprise. A company may be organized in various ways for tax and financial liability purposes depending on the corporate law of its jurisdiction. All financial decisions and operating decisions will be taken by the company with a receiver having Power of sale

2- Directors: A director is a person from a group of managers who leads or supervises a particular area of a company. Companies that use this term often have many directors spread throughout different business functions or roles (e.g. director of human resources). They will be asked to give increased security as a personal guarantee

3- Shareholders: A shareholder must own a minimum of one share in a company's stock or mutual fund to make them a partial owner. A shareholder may get money if anything is left after paying the creditors

4- Secured Creditors: Secured creditors have a first-order claim on the payouts of a distressed credit investment. Able to receive their debts with interest payments

5- Unsecured creditors: An unsecured creditor is an individual or institution that lends money without obtaining specified assets as collateral. This poses a higher risk to the creditor because it will have nothing to fall back on should the borrower default on the loan. Mayor may not receive money if anything is left after paying secured debtors