Question

The directors of Happy Trails are keen to purchase a block of land next door to the company’s business premises for $150,000 which will allow the company to expand. They set up a subsidiary company to purchase the land with the intention that Happy Trails would become the sole shareholder of the subsidiary. Happy Trails contributed $10,000 capital as a deposit to the subsidiary with the intention that the balance of the purchase price would be raised by way of a bank loan. However, the bank wanted $40,000 deposit and Happy Trails did not have enough cash to make up the shortfall. The three directors of Happy Trails decide to contribute $10,000 each personally in order for the sale to proceed. By doing so, they became shareholders of the subsidiary. One year later Happy Trails decides that they don’t need to expand, and the land is sold for $300,000 and the directors who had put in their own money to finance the deal made a large profit. Miss Eli and Mr Wu argue that the whole of the profit belonged to Happy Trails and that the three directors should not be allowed to keep their profit. Advise Miss Eli and Mr Wu. a) (b) The three directors recently had a serious disagreement about the direction the company should take and as a result they are hardly speaking to each other. This means that it is very difficult for any business decisions to be made and the company is suffering financially. Mr Wu is very concerned as a shareholder. Advise Mr Wu.

Answer 1

Answer:-

(a) :-

• In given inquiry it is plainly made reference to that three chiefs of the cheerful trails setup an auxiliary organization for acquiring a land to extend business and hold every one of its offers.
• Assist they contribute $10,000 each to buy arrive as Happy trails did not have enough money thus they are additionally turns into investor's of the backup.
• According to legitimate arrangement regrading it organization has a different entity& particular from investors and any benefit made by the organization is the arrival on capital of the organization .
• Presently when an organization ends up, subsequent to satisfying the obligations to untouchables, the organization disperses remaining benefits among the proprietors as indicated by their particular offer in the organization .
• In the given case organization sold the land for $300,000 and made a vast benefit in the wake of deducting the deal from the expense in which arrive was bought .
• Benefit from offers of land is conveyed among the investors i.e , Happy trail and three chiefs of it .
• In this way the alternative of Miss EI and Mr. Wu that entire benefit has a place with the holding organization Happy trails isn't right rather it ought to be conveyed by the offers they hold among the executives and Happy trails.

(b):-

• It is given that there is not kidding differences among chiefs of Happy trails and they barely each other and likewise organization experiencing money related issues , Mr. Wu is worried as an investor.
• The understanding and trust among chief is urgent for development and achievement of any business on the off chance that they are broken it undermines the eventual fate of company.
• In arrange for a business to work viably there must be a solid and trust commendable connection between proprietor's and administration.
• At the point when that relationship separates, and a debate happens between the executives enduring harm should be possible to the business.
• This can influence the benefit of the business and its capacity to trade.Dispute between executives require prompt activity with the end goal to achieve reasonable goals.
• The sooner this goals can be come to, the littler the negative effect the debate will have on organization. In this we exhort Mr.Wu that successful correspondence between chiefs may defeat the above circumstance notwithstanding, if this correspondence separates , then a debate may arise.
• For contradiction among executives, it might be conceivable to utilize intercession or another from of community law to settle this question, by giving the two sides the chance to give their perspectives and their complaints, previously an answer is reached.
• Finally, If the above arrangements not worked i.e, question or difference not settled and stay even after legitimate prompt then windup is the last answer for spare the organization from future misfortune and harm.
• Along these lines, looking for pressing gathering and last directives might be one answer for avoid harm to the organization.