Written Group Project Report and Oral Presentation

Case Study for Written Group Project Report and Oral Presentation

Krisp Ltd ("the Company") is a company limited by shares incorporated in Hong Kong. The Company has a wholly owned subsidiary, Eagle Ltd ("Eagle"). The directors of the Company, Andy, Ben, and Colin, are also directors of Eagle. 75%of the issued shares of the Company are held respectively by Andy, Ben and Colin in equal share. The remaining 20% of the issued shares is held by Uncle Tom while the remaining 5% is held by a passive investor, Sam. The Company produces and sells organic herbs and fruits.

Cultivation of herbs and fruits for the Company's business has been carrying on a  land site owned by Eagle in the rural area in Yuen Long. By way of the recent government policy in redevelopment of land use in the North Western part of the New Territories, many major land sites, including the land site belonging to Eagle are being compulsorily purchased by the government. The amount of compensation has not yet been agreed.

In light of expansion of future business, the Company recently entered into a joint venture agreement with an investment company in Taiwan for production of a special type of organic soft drink. The Company needed extra funds and thus created a fixed charge on a self-owned office unit valued at HK$6 million. It also created a floating charge on its book debts in total sum of HK$3 million. Both charges are created in favour of Lend-All Bank.

The Company has been making huge profits recently due to bloom in market demand for organic soft drinks. Thus, the Company has reserved a large proportion of its profits as capital reserve for future redevelopment.Andy, Ben and Colin intend to use part of the capital reserve to purchase an old office unit at an overvalued price from Uncle Tom. The purpose of such overvalued transaction is to provide funds for Uncle Tom to purchase the shares from Sam.Rachel is the Company Secretary and she is new to the job. She decided to call a Board of Directors' meeting to approve the purchase of the old office unit from Uncle Tom.

Unknown to Ben and Colin, Andy is one of the two directors and a majority shareholder of another company registered under the name of Undercover Ltd ("Undercover") which carries on the same business as the Company. The Company had been negotiating a high-valued contract with a major client. Andy knew all the proposed contract terms. The contract, if entered into, would bring in a lot of profit to the Company. Andy secretly transferred all the details about the negotiation of the contract to Fred, the other director of Undercover. Fred then negotiated on behalf of Undercover, with the same major client for the same high-valued contract. Undercover then obtained the contract with the major client. Ben and Collin later discovered the conduct of Andy and were very angry with him.

Required:

PART I

Prepare a written Group Project Report containing your answers to the following questions and according to the instructions given in this assignment:

Questions

(a) Give a detailed account of thenature of a company limited by shares by reference to (i) related provisions in the Companies Ordinance (Cap 622) and (ii) doctrine of separate legal entity to the board of directors of the Company. Also advise the Company on whether it could claim compensation for business disruption when the land on which on it has been carrying business will be compulsorily purchased by the government if the case was to be judged under the "single economic entity"theory mentioned in DHN Food Distributors Ltd v Tower Hamlets London Borough Council [1976] UK.(10 marks)

(b) With the assistance of relevant legal cases, explain to the board of directors of the Company the distinction between a fixed and floating charge. Why is the distinction between the fixed charge created on the office unit and floating charge on book debts important?(10 marks)

(c)  Explainwith reference to relevant case(s), the concept of capital maintenance and state the restrictions and exceptions provided in the Companies Ordinance (Cap. 622) which prohibit a private company to provide financial assistance for acquisition of its own shares.(10 marks)

(d)  Do you agree or disagree that the Board of Directors' meeting to be called by Rachel is appropriate to approve the purchase of the old office unit from Uncle Tom? Explain your views in detail by reference to relevant sections in the Companies Ordinance Cap. 622,if applicable.(10 marks)

(e)  Analyse in detail whether Andy has been in breach of any of his duties to the Company after having disclosed details on the negotiation of the high-valued contract between  the Company and the major client to Undercover. Also explain briefly the possible remedies to the Company for such breach of duty, if  applicable.(10 marks)

[End of Assignment 2]

Appendix to Assignment 2

Guidelines for Group Oral Presentation for LAW B333F

(1) Attend the scheduled presentation punctually. No latecomers would be allowed to conduct the presentation except for very special circumstances.

(2)  All presentation should be conducted in English.

(3)  Bring your OUHK Student Identity Card when you attend the oral presentation section.

(4)  Your tutor will randomly choose the part to be presented by each student at the start of the presentation session. 

(5)  Mere reading the answers from the written group project report is strictly forbidden and no marks shall be given to students who conduct the oral presentation in contravention of this rule.

(6)  Formal dress is required.

(7)  Every student would be required to present.

(8) Power-points are optional.  If you have power-point, please assign helper to assist you in advance.  Submission of hard copies of power-points is not required.

(9)  Eye contact is very important in effective presentation.

(10) You are strongly advised to write down your bullet points in small cards.

(11) You may consider practising your presentation before a mirror at home so that you can remove unnecessary and odd body language e.g. hand shaking, leg shaking.

(12) Have appropriate smile throughout the whole presentation since this would lead the tutor to have the impression that the presenter does have the necessary confidence.

(13)  Make sure your hair, tie and clothing are in good shape immediately before your presentation.

(14) Do conduct a mock presentation before your group mates before the real presentation.  Ask for comments from your group mates for further improvement.

(15)  The time available for each student's presentation would be not more than 3 minutes. A student's presentation may be stopped at any time when the tutor is satisfied that he/she has got enough for marking purpose.

(16)  Your tutor may ask question suddenly. You should be prepared for this.