LLB

BUSINESS LAW 2 COURSEWORK

DEADLINE FOR SUBMISSION: 16:30 [UK time] 19 January 2023

On submitting this Assessment you will be deemed to have completed the

following declaration: “I declare that this is my own unaided work and if this
statement is untrue I ACKNOWLEDGE that I have cheated.”

INSTRUCTIONS TO CANDIDATES

 Type your candidate number on each page of your answer and follow
the submission instructions as directed by The University of Law.

 Your submitted work must be in Word. You must state your word
count at the end of your answer. The total word count for all questions
must NOT exceed 2000 words.

 You must reference your work using OSCOLA even if you would not
normally do so for the types of matter in question (such as producing
a client letter or e-mail).

 The assessment is marked out of 100. There is no specific allocation

of marks to the separate questions. At Level 6, it is a matter for your
judgement as to the relative weight you give to each question, so you
will not receive any guidance on how to allocate your wordcount
between the different parts of it.

For this Assessment you will be assessed against these Learning Outcomes:

 Demonstrate knowledge and understanding of principles relating to the

finances of business entities, financial regulation, and the insolvency regime,
and the broader context within which the law operates.
 Critically analyse complex actual or hypothetical problems and evaluate a
range of solutions in the light of the legal issues raised and make critical
judgments on the merits of particular arguments.
 Utilise and evaluate data presented in numerical form and derive appropriate
conclusions.
 Undertake directed and self-directed research to retrieve and evaluate
accurate, current and relevant information from a range of sources.
 Devise and sustain a legal argument, recognising ambiguity and synthesis,
using tailored evidence in writing and be able to communicate these to
specialist and non-specialist audiences.
 Communicate clearly and concisely, using correct grammar and spelling, and
using appropriate technical legal language where necessary.

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The contents of this Assessment are confidential. You must not disclose,
discuss or express an opinion on the contents of this Assessment or your
answer to it to any other person, by any means.

In particular, you should note that you may not consult any member of The
University of Law staff nor any other person on any aspect of the content of this
Assessment. If you are in any doubt as to how to interpret any word or phrase in
this Assessment you should decide for yourself which interpretation to adopt.

By submitting this Assessment you are confirming that you are fit to sit, in
accordance with the Assessment Regulations.

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CASE STUDY

Your firm acts for Lumineuse Ltd (‘Lumineuse’), a small private company that
manufactures luxury organic skin serums, made from 100% natural ingredients. The
company was set up four years ago by Gabrielle de Galais, Sadiq Damani and Denis
McGee. The company has an issued share capital of 150,000 ordinary £1 shares.
Details of the directorships and shareholdings are set out below.

Name Directorships Shareholding

Managing Director 50,000 ordinary £1 shares
Gabrielle de Galais
and Chair
Sadiq Damani Finance Director 50,000 ordinary £1 shares
Elisabeth Allen Sales Director
Denis McGee 15,000 ordinary £1 shares
Emmanuel Cole 35,000 ordinary £1 shares

Lumineuse has adopted the Model Articles for Private Companies Limited by Shares,
without amendment.

The popularity of eco-friendly beauty products has contributed to the success of the
company, which is embarking on an expansion plan. Elisabeth Allen was appointed
as Sales Director last year and Elisabeth’s father, Emmanuel Cole, was persuaded to
contribute additional investment of £70,000 in return for 35,000 ordinary £1 shares.
Emmanuel takes an active interest in the affairs of the company and will always
attend shareholder meetings. Denis, on the other hand, is far less pro-active.

To further fund the expansion, it is now proposed that the company issue 50,000
ordinary £1 shares to Elisabeth, who recently received an inheritance from a great
aunt. Elisabeth has submitted an application to purchase the shares for £2.50 each,
which represents the market value of the shares. This will enable the company to
purchase new premises and equipment.

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QUESTION 1

Gabrielle now wants to call a board meeting in two weeks’ time, when she knows
both Sadiq and Elisabeth will be available. At the meeting, the board will consider
Elisabeth’s application. She knows that Sadiq opposes the idea as he considers that
Elisabeth is very close to, and influenced by, her father. He does not want Emmanuel
to have any more influence in the company than he already has. However, the
directors do not want to introduce an outside investor and none of the shareholders
are in a position to invest any further in the company, and would not want to
purchase any of the shares.

Emmanuel lives in France and Denis and his wife are on a world cruise. so the
directors want to minimise shareholder involvement in the decision-making process,
and usually avoid obtaining shareholder resolutions on the issue and allotment of
shares, which is something they wish to continue, if possible. However, should
shareholder resolutions be required, the directors usually use the written resolution
procedure.

Your supervisor, Sarah Swann, has asked you to prepare a memorandum,

explaining:

(a) Why Sadiq might be opposed to the proposal to allot the shares to
Elisabeth;

(b) Whether or not any shareholder resolutions are required to implement

the proposal to allot the shares to Elisabeth;

(c) The procedural steps to be followed to allot the shares to Elisabeth.

Where appropriate, your plan should also explain, with reference to the
facts, whether the procedural requirements will be satisfied and the
administration necessary to implement the decisions;

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QUESTION 2

Assume for the purposes of this question that it is now May 2024.

At the end of 2022, in the light of the company’s success, the directors of Lumineuse
proceeded with their expansion plans. In December 2022 the company purchased a
new state of the art manufacturing facility and equipment and took on more staff. To
do so, the company took out a bank loan of £500,000 from Enterprise Bank plc. In
February 2023, they borrowed £100,000 from Gabrielle’s mother, Anushka de Galais,
to help purchase a second larger warehouse for £250,000. The bank loan was
secured on the manufacturing facility, but Anushka did not take any security for her
loan.

However, it soon became clear that the directors had misjudged the market. The cost
of living crisis, rising inflation and interest rates began to impact on sales as
customers cut down on luxury cosmetics. The substantial overheads on the new
premises, rising wages and the interest payments on the bank loan began to
outweigh the income generated by sales.

During 2023, the company was badly affected by the continuing uncertainty caused
by the economic climate. The cost of the high-quality ingredients, packaging and
transport costs continued to rise. Although internet sales remained fairly steady, in
March 2023, one of the company’s retail outlets cancelled an important contract.
These factors impacted severely on the company’s profits.

The company’s accounts and other financial documents showed that in the year
ending December 2023 the company made a loss. In an attempt to generate more
sales, Elisabeth spent the last of the company’s cash on an expensive and
unsuccessful marketing campaign. By the end of 2023, the company had resorted to
buying all its raw materials on credit.

The company’s fortunes did not improve in 2024. The directors decided to scale back
and concentrate on internet sales. In March 2024, the company sold the larger
warehouse which the company had bought in 2023 to the first buyer who showed an
interest for £150,000. They paid £50,000 of the sale proceeds to a trade creditor who
had been threatening to take legal proceedings and used the remaining £100,000 to
pay off the loan from Anushka.

In recent weeks the company has come under increasing pressure from its creditors.
One of the creditors petitioned for the company’s liquidation and the winding up order
was made last week.

Your supervisor has asked you to prepare a report on which she can base a
letter of advice to the client, explaining what action(s) the liquidator may be
able to bring to challenge the transactions made by the company in order to
achieve the best possible return for the company’s creditors.

[Note: assume for the purposes of this question that there have been no
changes to the Insolvency Law since December 2022.]

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For all questions, please provide footnotes which indicate any relevant primary
sources in support of your explanations.

You are a trainee and your own name must not appear in your memorandum.

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