Law of Organisation and Liability Incurred by Mary with Barry Bench

Running head: LAW
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Table of Contents
Law of Organisation........................................................................................................................4
Part A...........................................................................................................................................4
Parties of the Two Contracts framed in the Trade Fair...........................................................4
Attributes of Law.....................................................................................................................4
Liability Incurred by Mary with Barry Bench.........................................................................5
Part B...........................................................................................................................................6
Forms of William’s Investment...............................................................................................6
Advantages and Disadvantages of Different Forms....................................................................7
Legal Stock Form....................................................................................................................7
Legal Investment Funds...........................................................................................................7
Liquidity Claim by William.....................................................................................................8
Part C...........................................................................................................................................8
William as a Director...............................................................................................................8
Level of Care and Skill to Perform Duties..................................................................................9
Part D.............................................................................................................................................10
Task 3.............................................................................................................................................12
Case Overview...............................................................................................................................12
Major Parties Involved in the Case................................................................................................12
The Major Elements of the Case...................................................................................................13
List of Evidence and Documents Date Wise.................................................................................14
1st December 2017.....................................................................................................................14
7th January 2018.........................................................................................................................14
11th January 2018.......................................................................................................................14
4th June 2018..............................................................................................................................14
27th June 2018............................................................................................................................14
7th February 2019.......................................................................................................................15
September 2019.........................................................................................................................15
List of Documents and its Related Amendments and Additions of Document-F.........................15
Transactions...................................................................................................................................18
Question 1......................................................................................................................................18
Question 2......................................................................................................................................21
Question 3......................................................................................................................................23
References......................................................................................................................................26
Bibliography..................................................................................................................................30
Appendix........................................................................................................................................32
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Law of Organisation
To: 123 OK LLP
From:
Subject:
Date: 29.12.2018
Part A
Any inappropriate action, which is being carried by any member or any action taken by a
member against the LLP is further referred to as a breach of contract. In case if this happens, the
damage caused to the LLP must be paid by the member (offender). In addition, the rights and
position of the member in the LLP held by the member (offender) can be withdrawn1.
Parties of the Two Contracts framed in the Trade Fair
The parties associated with the two contracts at a trade fair are Mary Mowlar, Kerry Kaynine,
Eric Seathrew, and Barry Bench. In this context, these four parties have agreed on a trade fair
business. The oral agreement is a contract made between the two business parties orally and not
in written form. This agreement as per the UK law is considered to be legal. However, it is
observed that oral contract encompasses written agreements2. Agreed terms and conditions made
through the oral process are stated under the contract terms and conditions in a written form3.
Attributes of Law
The case scenario portrays the same story but in this case, 123 OK is referred to as the LLP,
whereas the members, in this case, are Mary Mowlar, Kerry Kaynine, and Ishtiaq Insiza. Thus,
1Russell Crooke, “LLPs and Personal Duties and Liabilities of Members,” Solicitors, (2012): 1.
2Raymond L. Sweigart, R. L. ‘English Contract Law and Oral Contracts your word may still be your Bond’, Global
Legal Post, (2012): 1.
3Lawdit Solicitors. “Limited Liability Partnership Agreement,” Limited Liability Partnership Agreement, (2014): 19.
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by considering the Company Act, Ishtiaq Insiza is not informed and is unfamiliar with the LLP
agreement, which is being set out between Mary Mowlar, and Kerry Kaynine with Eric
Seathrew, who is the sole trader. Mowlar and Kaynine purchased the dental x-ray unit at £4,000
on the basis of the agreement set out between these two parties. Based on the LLP Act, the
parties associated with the two contracts of trade fair are responsible for business transactions
that are held between the agreed partners. Every action taken by the parties against or on behalf
of the trade fair agreement portrays that they are responsible for all the damages and
compensation made against/for the company. Hence, focusing on the trade fair agreement
between Mary Mowlar, Kerry Kaynine with Eric Seathrew, they are responsible for their actions
along with the damages incurred against or in the favor of the agreement between them. Under
the second trade fair oral agreement, Mary Mowlar and Barry Bench are also responsible for the
action as well as damages incurred against/in favor of the agreement between them4.
Liability Incurred by Mary with Barry Bench
According to the LLP Act 2000, it is understood that any oral agreement between the two parties
must involve a written application or any sort of evidence. This is for the purpose of making a
future business decision in case of any illegal act or damage caused to the other party. A partner
has a higher chance of claiming compensation or damage caused to them when they are able to
provide evidence such as the written agreement application form of the oral contract. The LLP
Act 2000 also states that any fraudulent activity that is being taken by a party after the agreement
is highly liable for claiming any sort of damages or compensation. On a similar note, Barry
Bench has performed a fraudulent action by charging £10,000 for the dental chair to Mary
(another party). In addition, Barry Bench has charged an excessive amount of £5,000 by selling
4 Russell Crooke, “LLPs and Personal Duties and Liabilities of Members,” Solicitors, (2012): 1.
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the dental chair, which was easily available at an actual price of £5,000. Thus, Mary is highly
liable for receiving compensation of £5,000 from Barry Bench5.
Part B
Forms of William’s Investment
Since William seeks to invest in the new 123 OK Limited Company for a better future of the
company and directors, he must invest in a legal form of stock as well as investment funds. With
this, an additional working capital can be generated along with the prospective advertising as
well as marketing expenses along with expanding its business at the same time6. This legal form
of investment made by William must adhere to the legislation and norms stated under the
Companies Act 2006. Thus, making an investment in the business of 123 OK Ltd can enable the
company and William to seek greater returns. This can also help in building a better future of the
business with respect to the expansion. Higher loss due to any sort of business issues in the
future can be reduced. This outcome is guaranteed if the investment is made through a legal form
of stock and legal form of investment funds by William. In addition, William can also be a single
shareholder of the company by investing through a legal form with a total of £200,000 in the
company7. The best decision for William is to invest in a company’s fixed assets such as land or
buildings, as they are meant for a longer duration. This also ensures a continuous growth of the
income as well as profits for the company and William.
5Legislation, “The Limited Liability Partnerships (Application of Companies Act 2006) regulations,” Limited
Liability Partnerships, (2009): 10.
6Types of investments, 2018 (accessed December 30, 2018); available from http://www.finra.org/investors/types-
investments>.
7 BIS, “A Guide to Legal Forms for Business,” Department for Business Innovation & Skills, (2011): 5.
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Income or any sort of profit can only be acquired by William. The growth of 123 OK Ltd
indicates the creation of additional working capital as well as expenses to be made for the
company’s advertisement and marketing purpose8.
Advantages and Disadvantages of Different Forms
Legal Stock Form
The advantage of investing in the company through a legal stock form is that it provides an
assurance to the investor for being a stock or shareholder of the company. In addition, it has
further been observed that this form of investments favors in long-term as well as short-term
growth of the company. Financial goals set by the investors through this form of investment
focuses on setting goals such as generating higher values on the basis of the certain time period
as well as making savings at the same time. In case, loss the company experiences loss, the
investor will only lose the amount, which has been invested by him during the same phase. The
investors with the support of legal stock form can avoid most of the risks that are associated with
making an investment in the company9. On the other hand, the disadvantage of this form of
investment is that the Federal Deposit Insurance Corporation (FDIC) never ensures an investor to
receive a greater return from their stocks purchased or invested. Contextually, the past results in
the stock market do not hint or give an opinion on the current result of the stock market. Thus,
some of the stocks in the market may cost higher but generate a lesser return10.
Legal Investment Funds
The benefit associated with legal investment fund is that it incurs the lower cost of funds,
especially when there is a single investor. Through this form, an investor can access a vast range
8eGyanKosh, “Unit 5 Methods of Raising Finance,” Financing Business, (2011): 13.
9SEC SEC, “Saving and Investing,” A Roadmap To Your Financial Security Through Saving and Investing, (2017):
12.
10SEC, “Mutual Funds and ETFS,” A Guide for Investors, (2017a): 22.
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of market along with the market securities. In addition, this can further help the investors to
make a decision on investment easily. Investments risks are not present in this form of
investment. In addition, liquidation of the funds that are open-ended has been observed to be
possible on a daily basis. Some of the disadvantages to be faced by the investor include a change
in fund prices due to the fluctuation of the investment securities. A return from the mutual fund
is not always guaranteed. In some cases, a higher investment may not be allowed to the investor
by the funds. Investment on funds is also stated to be an inappropriate solution or option for an
investor to choose for attaining a better return11.
Liquidity Claim by William
If a liquidation of the company occurs, then the single investor or a single shareholder has certain
rights on the basis of the Insolvency Act 1986. This Act states that if a company has a single
investor, then he/she has every right to claim the overall invested amount through various
actions. Thus, among these actions, selling of assets is often initiated by the investors for the
purpose of gaining their invested amount back from the company. On a similar note, William has
every right to take an action on his basis, which may be through selling the assets of 123 OK Ltd.
Selling these assets of the company will favor William in gaining the invested amount of
£200,000 from 123 OK Ltd12.
Part C
William as a Director
123 OK Company has been identified as a limited company with three recently appointed
directors who are Mary, Kerry, and Ishtiaq. In addition, William further holds an equal ordinary
11Eurobank, “Advantages and Disadvantages of Mutual Funds,” Open Architecture, (2014): 1.
12The Insolvency Service, No date (accessed December 31, 2018); available from
https://www.gov.uk/government/organisations/insolvency-service.
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share of £25,000 similar to that of the other three directors and has been appointed for taking
actions for several areas on the behalf of 123 OK Ltd. He further takes initiatives such as making
business decisions, managing business activity, the decision on insurance, finance, personnel,
and marketing for the company. Similar to the other three directors, William also performs the
duty of the directors as stated above. This further indicates that the rate of risk is also equally
faced by William. In addition, the other three directors may experience a loss through reduction
in equal ordinary shares. As the directors have set their main objective of achieving the long-
term success of the company, this objective is also shared by the newly appointed performer
(William). The major problem in this scenario is that the actual three directors are not present
and the decision is never taken under their absence. Understanding the responsibilities and duties
assigned by the three directors under their absence in the 123 OK Ltd along with adhering to the
Companies Act 2006, the court cannot assign William as a director of 123 OK Ltd13.
Focus on the Members’ Voluntary Liquidation (MVL), it is understood that the Court can further
liquefy 123 OK Ltd to have three directors of the company is absent and the remaining director
(William) is unable to make a decision due to the financial loss of the company. Additionally,
William is unable to generate the idea as well as apply any effective financial strategy to cover
the losses by paying liabilities on behalf of the 123 OK Ltd14.
Level of Care and Skill to Perform Duties
In the UK, the directors of a limited company follow a principle of higher care, diligence, and
skills in order to perform various duties of a director. This type of reforms is witnessed in the
legal companies and is essential, as a director is the major body of a company, who is
13Chivers, “The Companies Act 2006: Directors’ Duties Guidance,” Corporate Responsibility, (2013): 14.
14Insolvency, No date (accessed December 31, 2018); avaialable from
http://www.hse.gov.uk/enforce/enforcementguide/investigation/identifying-insolvency.htm#Liquidation.
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