Complete FNSTPB504 Corporations & Trusts Law Assignment Solution

This document contains the solutions to a Corporations & Trusts Law assignment, focusing on key legal principles and their practical application. The assignment covers various topics including the elements of negligence, risk management practices for tax advisors, and the concept of pure economic loss. It also explores different business structures, partnership agreements, and the responsibilities of company directors. Furthermore, the assignment delves into the essential elements of a trust, the significance of separate legal entity principles established in landmark cases, and the formation of companies limited by shares. The document also touches upon scenarios involving company takeovers and businesses facing financial difficulties. Desklib provides a platform for students to access similar solved assignments and past papers for their academic needs.

Corporations & Trusts Law Assignment 1601
Corporations & Trusts Law
Assignment
Submission Instructions:
Key steps that must be followed:
1. Please complete the Declaration of Authenticity at the bottom of this page.
2. Once you have completed all parts of the assessment and saved it (eg. to your desktop
computer), login to the Monarch Learning Management System (LMS) to submit your
assessment.
3. In the LMS, click on the file "Submit Corporations & Trusts Law assignment” in the
Corporations & Trusts Law section of your course and upload your assessment file/s by
following the prompts.
4. Please be sure to click “Continue” after clicking “submit”. This ensures your assessor
receives notification – very important!
Declaration of Understanding and Authenticity*
I have read and understood the assessment instructions provided to me in the Learning Management System.
I certify that the attached material is my original work. No other person’s work has been used without due
acknowledgement. I understand that the work submitted may be reproduced and/or communicated for the purpose
of detecting plagiarism.
Student Name*: Date:
* I understand that by typing my name or inserting a digital signature into this box that I agree and am bound by the
above student declaration.

Corporations & Trusts Law Assignment 1601
Important assessment information
Aims of this assessment
This assessment covers the application of legal principles in corporations and trust law.
It requires the completion of a set of questions in relation to:- choosing a business structure; the
company as a separate legal entity, including management , directors duties and the external
administration of a company.
Share capital and fundraising, along with associations and trusts are covered with practice based
scenarios. The assessment task includes client specific scenarios on a partnership agreement;
changing a business structure; a company takeover; and a business which encounters financial
difficulties.
The significance of case law is explored and a brief ASIC case study is also provided. The relevance
of several sections of the Corporations Act are also explored.
The advantages and disadvantages of incorporated and unincorporated associations which are
common in the community and not-for-profit sector are also analysed.
The framework of the Australian legal system is not assessed in this unit of competency as it is
assessed in unit FNSTPB505 Property Law.
Preparing your responses
Please refer to the beginning of the text and familiarise yourself with the sections on 'Case
Studies, Scenarios and Problem Questions', and 'How to answer a question'. This will assist you to
formulate your response.
Marking and feedback
This assignment contains 10 assessment activities based upon ten chapters of the text book. Each
assessment activity contains specific instructions.
Chapter 1 is not assessed in this unit.
This particular assessment forms part of your overall assessment for the following unit of
competency:
 FNSTPB504 Apply legal principles in corporations and trust law (MCL002)
Grading for this assessment will be deemed “competent” or “not-yet-competent” in line with
specified educational standards under the Australian Qualifications Framework.
Unit: FNSTPB504

Corporations & Trusts Law Assignment 1601
What does “competent” mean?
These answers contain relevant and accurate information in response to the question/s with
limited serious errors in fact or application. If incorrect information is contained in an answer, it
must be fundamentally outweighed by the accurate information provided. This will be assessed
against a marking guide provided to assessors for their determination.
What does “not-yet-competent” mean?
This occurs when an assessment does not meet the marking guide standards provided to
assessors. These answers either do not address the question specifically, or are wrong from a
legislative perspective, or are incorrectly applied. Answers that omit to provide a response to any
significant issue (where multiple issues must be addressed in a question) may also be deemed
not-yet-competent. Answers that have faulty reasoning, a poor standard of expression or include
plagiarism may also be deemed not-yet-competent. Please note, additional information regarding
Monarch’s plagiarism policy is contained in the Student Information Guide which can be found
here: http://www.monarch.edu.au/student-info/
What happens if you are deemed not-yet-competent?
In the event you do not achieve competency by your assessor on this assessment, you will be
given one more opportunity to re-submit the assessment after consultation with your Trainer/
Assessor. You will know your assessment is deemed ‘not-yet-competent’ if your grade book in the
Monarch LMS says “NYC” after you have received an email from your assessor advising your
assessment has been graded.
Important: It is your responsibility to ensure your assessment resubmission addresses all areas
deemed unsatisfactory by your assessor. Please note, if you are still unsuccessful in meeting
competency after resubmitting your assessment, you will be required to repeat those units.
In the event that you have concerns about the assessment decision then you can refer to our
Complaints & Appeals process also contained within the Student Information Guide.
Expectations from your assessor when answering different types of assessment questions
Knowledge based questions:
A knowledge based question requires you to clearly identify and cover the key subject matter
areas raised in the question in full as part of the response.
Good luck
Finally, good luck with your learning and assessments and remember your trainers are here to
assist you 
Unit: FNSTPB504

Corporations & Trusts Law Assignment 1601
Activity
instructions to
candidates
 This is an open book assessment activity.
 You are required to read this assessment and answer all 4 questions that follow.
 Please type your answers in the spaces provided.
 Please ensure you have read “Important assessment information” at the front of this assessment
 Estimated time for completion of this assessment activity: 2 hours
Question 1.1
Explain the elements necessary for negligence to be established.
To establish an act of negligence three elements must be proved to be present. Those elements
are,
1. There must be a duty of care that a person needs to comply with.
2. That duty must have been breached.
3. The consequence of that breach of duty must be an injury, loss or damage to a third
party.
Unit: FNSTPB504
Assessment Activity 1:
Negligence and Risk ( Chapter 2)

Corporations & Trusts Law Assignment 1601
Question 1.2
Jayne is an accountant and business adviser. Christopher and Fleur run a highly
profitable business and sought advice from Jayne as to the best business structure
and practices to legally minimise their rising tax obligations. Jayne did so and
advised Christopher and Fleur to set up a particular kind of trust.
Two years later, following a change in government, the tax laws concerning trusts
were changed significantly. Christopher and Fleur are now obligated to pay 25%
more tax than they would have been under a company structure. They are angry
and believe Jayne has acted negligently. If they were to sue Jayne for negligence,
would they be successful? Why or why not?
Question 1.3
What risk management practices should a tax practitioner/adviser or accountant
adopt to minimise the likelihood of negligence occurring?
In this case, Jayne has maintained the standard of care while discharging his duty as a business
advisor. The loss caused to Christopher and Fleur was a result of subsequent change of law upon
which Jayne had no control. Moreover, at the time of discharging his duty Jayne did not have the
chance of knowing the future changes that might occur. Hence, Christopher and Fleur would not
be successful in suing Jayne for negligence.
The tax practitioner/advisor or accountant should have an exemption clause in the contract and
should avail an insurance to minimise the likelihood of negligence occurring.
Unit: FNSTPB504

Corporations & Trusts Law Assignment 1601
Question 1.4
Give an example of pure economic loss, stating the name of a relevant case.
SHADDOCK V PARRAMATTA CITY COUNCIL (1981) ALR 385 is a case concerning pure economic
loss.
Unit: FNSTPB504

Corporations & Trusts Law Assignment 1601
Activity instructions to candidates
 This is an open book assessment activity.
 You are required to read this assessment and answer all 4 questions that follow.
 Please type your answers in the spaces provided.
 Please ensure you have read “Important assessment information” at the front of this assessment
 Estimated time for completion of this assessment activity: 2 hours
Question 2.1
What kind of matters should be considered when deciding upon an appropriate business structure?
The matters that should be considered when deciding upon an appropriate business structure
are:
1. Control
2. Liability limitation
3. Cost and complexity relating to the formation and legal structure
4. Flexibility and future needs
5. Tax implications
6. Ongoing administration
7. Continuity of existence.
Unit: FNSTPB504
Assessment Activity 2:
Choosing a business structure ( Chapter 3)

Corporations & Trusts Law Assignment 1601
Question 2.2
Steven and Lamont have recently set up an accounting practice in partnership. They have prepared a written
partnership agreement in which it states that any purchase over $1,000 shall only be made after both partners
agree. Steven and Lamont purchased all their office furniture and equipment from Mack at OfficeStuff. Mack
contacted Steven and offered the partnership a great deal on a computer package for $2,000. Lamont is out
seeing clients and cannot be contacted. Steven goes ahead and purchases the computer package. When
Lamont is informed he says the purchase is not valid and wants Mack to take the computer package back and
refund their money. Mack refuses. Discuss the issues raised and the likely outcome of these circumstances.
Both Steven and Lamont are partners. Therefore, the partnership is bound by the acts done by the
partners on behalf of the firm. Here Steven has acted on behalf of the firm so the contract is valid and
Steven and Lamont needs to keep the package.
Unit: FNSTPB504

Corporations & Trusts Law Assignment 1601
Question2.3
Under what circumstances may company directors be held responsible for the debts incurred by the
company?
Question 2.4
What are the essential elements of a trust?
The circumstances under which directors of a company will be held responsible for the debts incurred
by the company are:
1. Insolvent trading compensation claims;
2. Unreasonable transactions by the directors;
3. Tax debts;
4. Personal guarantees.
The essential elements of a trust are:
 the settlor
 the trustee
 trustee company
 assets and income of the trustee
 liabilities of the trustee
 powers of the trustee
 obligations of the trustee
 period of trust
 taxation
 appointer
Unit: FNSTPB504
Assessment Activity 3:
The Company, a Separate Legal Entity ( Chapter 4)

Corporations & Trusts Law Assignment 1601
Activity instructions to candidates
 This is an open book assessment activity.
 You are required to read this assessment and answer all 9 questions that follow.
 Please type your answers in the spaces provided.
 Please ensure you have read “Important assessment information” at the front of this assessment
 Estimated time for completion of this assessment activity: 2 hours
Question 3.1
What is the significance of the cases of Saloman v Saloman (1897) AC 22 and Lee v Lee’s Air Farming Ltd (1961)
AC 12?
Question 3.2
What is the principle on which a company limited by shares is formed?
Question 3.3
Ruprecht and Lawrence are partners in Trident Holdings, a business which manufactures synthetic cork
products. The business is growing and Ruprecht and Lawrence are keen to obtain further capital, export their
products and also reward ten loyal long-term employees who have been with them since they started the
business. They decide to change their business structure to a proprietary limited company and request your
advice as to the following matters:
A company limited by shares is formed on the principle that the liability of the members namely
shareholders or owners, are limited to the balance amount which remains unpaid on the shares held by
them.
The case of Lee v Lee’s Air Farming Ltd (1961) AC 12 is based on the concept of corporate veil and
separate legal personality. A company is a separate legal entity and a sole director of a company is also
an employee of the company.
The case of Saloman v Saloman (1897) AC 22 is based on the doctrine of corporate personality and sets
out the rule that the creditors of an insolvent company cannot sue its shareholders for the payment of
outstanding debts.
Unit: FNSTPB504

Corporations & Trusts Law Assignment 1601
(a)
What is the purpose of the Small Business Guide produced by ASIC?
(b) In what way can a proprietary limited company structure be used to reward employees?
(c) What is the maximum number of shareholders allowed for a proprietary limited company?
(d) Can the business continue to be called Trident Holdings? If not, what changes must be made?
(e) What is the difference between a small proprietary company and a large proprietary company?
Small Business Guide produced by ASIC is an instrument to provide assistance to the small business
directors.
The proprietary limited company structure may reward the employees by giving them shares of the
company.
A maximum of 50 shareholders are allowed for a proprietary company.
No, the business cannot continue to be called Trident Holdings, it must add a suffix of Pty. Ltd. To it.
Small proprietary company are required to pay lesser tax than the large proprietary company. The tax
burden on large proprietary company is much more.
Unit: FNSTPB504

Corporations & Trusts Law Assignment 1601
(f)
How may Ruprecht and Lawrence use the structure of the proprietary limited company to raise capital to grow
the business?
(g) Why is a company structure beneficial for a business involved in export?
Question 3.4
What rules govern the internal management of a company? Can these rules be varied? If so, how?
Question 3.5
What information must appear on every public document signed or published on behalf of the company? On
what other documents must this information appear?
Ruprecht and Lawrence may raise capital to grow the business by selling shares to family and friends.
A company structure is beneficial for a business involved in export because of limited liability and
perpetual existence.
The rules governing the internal management of a company are: replaceable rules of the Corporations
Act 2001, a constitution, and a combination of both. In case a company does not have a constitution, it
can adopt the replaceable rules to govern its internal management.
The information that must appear in every public document signed or published on behalf of the
company are the name of the company, ACN no. of the company, address of the registered office of the
company and the common seal of the company.
Unit: FNSTPB504