Question 1:

Nicola and May are partners in a business which operates a second-hand bookshop. They have two employees working for the business. The shop is located in leased premises. The business is doing well and has been profitable for them.

An opportunity has arisen to purchase two second-hand book shops in nearby suburbs. Nicola and May are keen to expand their business. They will need a large injection of funds to purchase the additional businesses. They will need to appoint a manager to at least one of the shops, as they will be fully occupied by the other two.

Nicola is concerned about her potential liability for the debts and liabilities of the partnership. Also, she is concerned about the future of the business if one of them should decide to leave, as the lease is in both of their names.

Advise Nicola on the advantages and disadvantages of incorporating. If you recommend incorporation, what form of incorporation would be the most appropriate? Why?

Question 2:

Although the doctrine of separate legal entity was affirmed in the leading case of Salomon v Salomon & Co Ltd [1897] AC 22, the court would lift the corporate veil in order to prevent a substantial injustice in some circumstances. Discuss. Your answer must refer to the relevant case law and Corporations Act 2001 (Cth).

Question 3:

The main business of Property Investment Pty Ltd is acquisition, development and selling of properties. There are three directors. At a meeting of the board of directors on 1 June 2012, a proposal was presented by David, a director of Property Investment Pty Ltd, for the purchase of a site adjoining a rubbish dump for $3 million from a vendor namely Seaview Pty Ltd. Seaview Pty Ltd acquired the site for $2 million on 1 June 2010. David is the sole shareholder and his wife and son are directors of Seaview Pty Ltd. David did not disclose his personal interests in the site and the proposal was finally approved at a meeting of the board of directors of Property Investment Pty Ltd on 10 July 2012

Advise David of any potential breach of directors' duties to Property Investment Pty Ltd. Support your answer by reference to the relevant case law and Corporations Act 2001(Cth).