BUS203e Company Law & Corporate Governance Assignment 2 – Group-based Assignment January 2015 Presentation BUS203 Assignment 2 SIM UNIVERSITY Assignment 2 – Page 2 of 5 Group-based Assignment This assignment is worth 30% of the final mark for BUS203e Company Law & Corporate Governance. The cut-off date for this assignment is 12 April 2015, 2359 hrs. This is a group-based assignment. You should form a group of 3 members from your seminar group. Each group is required to upload a single report to MyUniSIM via your respective seminar group. Please elect a group leader. The responsibility of the group leader is to upload the report on behalf of the group. It is important for each group member to contribute substantially to the final submitted work. All group members are equally responsible for the entire submitted assignment. If you feel that the work distribution is inequitable to either yourself or your group mates, please highlight this to your instructor as soon as possible. Your instructor will then investigate and decide on any action that needs to be taken. It is not necessary for all group members to be awarded the same mark. In this assignment, you are expected to:  Apply legal principles to new situations to determine the most appropriate judgement.  Develop the essential knowledge and interpersonal skills to work effectively in a team.  Demonstrate well developed written proficiency.  Practice oral presentations in class in areas related to Company Law & Corporate Governance BUS203 Assignment 2 SIM UNIVERSITY Assignment 2 – Page 3 of 5 Question 1 Tony, Henry and Nick are best friends from university. They are fed up with working for salaries and want to be their own bosses. They want to try their hand at selling handicrafts to children since Tony's 8 year-old daughter is crazy about some colourful looms and there is a lot of money to be made in this industry. Tony has an idea of melting recycled newspapers and magazines and converting them into wearable art piece. He has done the research and experimented on it and thinks that it will be very popular with young children and adults. They want to set up this business together. However, they are not sure what form of business entity is most suitable for them. Tony is the brain behind this, Henry and Nick are happy to invest some money into this venture. If the business takes off, Henry may consider resigning from his corporate communication job to concentrate on marketing and promoting the product. If the business really hits a jackpot, then Nick may use his banking and finance experience to raise more capital and list their busines in the Stock Exchange. For now though, the business is starting small while the dream is big. They want to start the business quickly. However, they don't want to spend too much money on "complex administrative and procedural matters". While they are dreaming about this, they also heard a rumour that the rubber in the colourful loom might contain toxic material and they were worried about being sued for their products. They want to know if they can get out of the business quickly. They come to you for advice. (a) Briefly compare and contrast the different types of business entities in Singapore (5 marks) (b) Analyse in detail, which type of business entity is most suitable for Tony, Henry and Nick, given their aspirations and concerns. In your analysis, discuss each of their aspirations and concerns, listing the advantages and disadvantages of your recommendation; outline the steps required to establish the business entity and how they may get out of the business. Cite the relevant statutory provisions and case law to support your answer. You will need to do additional research on Accounting and Corporate Regulatory Authority (ACRA) website and other sources of information in order to answer this question. (30 marks) Question 2 Kah Teck Hong Ltd (KTH) is a company incorporated in Singapore. It has business interests in real estate, property development, movie production and recently IT products. The board of directors consists of family members as well as independent directors. Angeline is a family member who has just been appointed as a director in KTH. She has just returned from an IT trade fair in the United States and is very keen to expand the IT arm of BUS203 Assignment 2 SIM UNIVERSITY Assignment 2 – Page 4 of 5 the company. She believes that a new product called Ucall will revolutionalise the way people communicate in Singapore. She has engaged various marketing agencies to conduct research on this and is convinced that this product will be a hit in Singapore. She ordered a large shipment of Ucall because she wanted KTH to be the first in the market to take the lion's shares. Unfortunately, the market did not respond positively to Ucall and KTH was stuck with a shipment of unsold stock. Bryan is the marketing director in KTH. He went to Ferrari International to hire a Ferrari during the Formula One week on the pretext that it was used to entertain clients in KTH's movie production sector. Ferrari International was happy to work with Bryan and billed the invoice to KTH. However, Bryan hired the Ferrari to entertain his girlfriend instead. Chris and Davinder are two directors who negotiated a contract to build a hospital in Singapore. In the midst of negotiations, Chris and Davinder incorporated their own company, WoYing Pte Ltd and resigned from KTH. WoYing subsequently won the contract for the construction of the hospital. Edric is the finance director in the company. He has just reviewed the quarterly earnings of KTH and he logged onto Phillip Poems to sell his shares in the company. He also called his father-in-law to dump all his shares in KTH. You are KTH's in house counsel. The Board of Directors requires you to: Identify and describe if there are any legal issues with respect to the various directors listed above. Identify the legal principles relating to each case. You are expected to demonstrate written proficiency by citing the relevant statutory provisions and case law to support your answers. (30 marks) Question 3 Charlie and Kent are founders of a very successful company called CK Pte Ltd (CK). CK started out as a clothes shop specializing in Korean inspired clothing in Ang Mo Kio market. It now has branches all over Singapore and Asia and their product lines have expanded to include shoes and accessories, make up, hair products and skin care – an ALL-IN-ONE beauty stop for girls who want to imitate Korean or Japanese celebrities from top to bottom. The company has been making significant profits in last few years. Their consolidated pre-tax profit in last 3 years has been in the region of SGD 35 million. CK has factories in China and Malaysia to manufacture their products. CK plans to go into agriculture to cultivate plants for skin care and raw materials for their clothes and bags so that they can be in control of the manufacturing process from primary resources to finished products. BUS203 Assignment 2 SIM UNIVERSITY Assignment 2 – Page 5 of 5 Charles and Kent think that they have gone as far as they can as a family-owned company. They would like to raise more funds to go further in their business. They wish to take their business into European and US markets. A European luxury brand company has expressed interest in investing in their company. They are excited about this opportunity but they are worried that they may lose control of their company if the European company buys a large stake in the company. They are also thinking about listing the company on the Singapore Stock Exchange. They have come to you for advice. (a) Analyse how CK Pte Ltd may raise capital to meet their objectives. In your analysis, discuss whether you would recommend issuing new shares to sell to the European luxury brand company or listing the company on the SGX through an IPO. Describe the regulatory framework in relation to listing requirements in the SGX-ST Listing Manual. Explain the general rule and nature of a prospectus and its related issues. (25 marks) (b) Advise and outline how Charlie and Kent may seek to protect their interests in the company, in the event of selling a stake to the European luxury brand company or listing on the SGX. (10 marks) Cite the relevant statutory provisions and case law where appropriate to support your answer. You will need to do additional research on Singapore Exchange (SGX)'s website and other sources of information in order to answer this question. ---- END OF ASSIGNMENT ----