Complete FNSTPB504 Corporations & Trusts Law Assignment Solution
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Homework Assignment
AI Summary
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
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.
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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
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
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)
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)
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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
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
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)
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)
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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
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)
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
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
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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
(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
(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
Corporations & Trusts Law Assignment 1601
Question 3.6
Ruprecht and Lawrence have now filed a positive solvency resolution with ASIC. Why would they have done
so? Under what circumstances are they required to file a negative solvency resolution?
Question 3.7
What is the significance of s601AD(1) of the Corporations Act 2001?
Question 3.8
What is the relationship which exists between a promoter and the company being formed?
Section 601 AD (1) of the Corporations Act 2001 provides for the effect of deregistration of a company.
A company ceases to exist on deregistration. The officers of the company may still remain liable for
things done before the company has actually deregistered. However, the trust property vests in the
Commonwealth.
They have filed a positive solvency resolution with ASIC, because being solvent they are required to do
so under the law.
In case the company undergoes insolvency, the company is required to file a negative solvency
resolution.
A promoter is directly or indirectly responsible for the incorporation of the company. A promoter is in a
fiduciary relationship with the company. The promoters must act in the best interest of the company.
Unit: FNSTPB504
Question 3.6
Ruprecht and Lawrence have now filed a positive solvency resolution with ASIC. Why would they have done
so? Under what circumstances are they required to file a negative solvency resolution?
Question 3.7
What is the significance of s601AD(1) of the Corporations Act 2001?
Question 3.8
What is the relationship which exists between a promoter and the company being formed?
Section 601 AD (1) of the Corporations Act 2001 provides for the effect of deregistration of a company.
A company ceases to exist on deregistration. The officers of the company may still remain liable for
things done before the company has actually deregistered. However, the trust property vests in the
Commonwealth.
They have filed a positive solvency resolution with ASIC, because being solvent they are required to do
so under the law.
In case the company undergoes insolvency, the company is required to file a negative solvency
resolution.
A promoter is directly or indirectly responsible for the incorporation of the company. A promoter is in a
fiduciary relationship with the company. The promoters must act in the best interest of the company.
Unit: FNSTPB504
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Corporations & Trusts Law Assignment 1601
Question 3.9
Prior to incorporation, Claire entered into a contract with Phil to provide computers to a soon to be
incorporated company, Modern Family Services Pty Ltd. Upon incorporation the directors of the company
refused to ratify the contract made by Claire as they can obtain the same services less expensively from
another business. Phil has spent time, expertise and money preparing to perform the contract.
Advise all parties of the issues raised and the likely outcome.
Under section 131 of the Corporations Act, the company is liable to pay for the contract and perform
the same.
Unit: FNSTPB504
Question 3.9
Prior to incorporation, Claire entered into a contract with Phil to provide computers to a soon to be
incorporated company, Modern Family Services Pty Ltd. Upon incorporation the directors of the company
refused to ratify the contract made by Claire as they can obtain the same services less expensively from
another business. Phil has spent time, expertise and money preparing to perform the contract.
Advise all parties of the issues raised and the likely outcome.
Under section 131 of the Corporations Act, the company is liable to pay for the contract and perform
the same.
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 4.1
Outline the responsibilities and functions of the board of directors.
Question 4.2
How does a person become a member of a company?
The board of directors of a company is responsible for stewardship and trusteeship on behalf of the
stakeholder. The board must ensure the viability and effectiveness of the company at present and in
the future. The board is accountable for all matters relating to the organisation.
The ways by which a person can become a member of a company are
To be listed as a member at the time of registration of the company.
Agreeing to become a member of a company, which is already registered.
When a member of a company limited by guarantee becomes the member of a company
limited by shares in case of conversion of the company.
Unit: FNSTPB504
Assessment Activity 4:
Management (Chapter 5)
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 4.1
Outline the responsibilities and functions of the board of directors.
Question 4.2
How does a person become a member of a company?
The board of directors of a company is responsible for stewardship and trusteeship on behalf of the
stakeholder. The board must ensure the viability and effectiveness of the company at present and in
the future. The board is accountable for all matters relating to the organisation.
The ways by which a person can become a member of a company are
To be listed as a member at the time of registration of the company.
Agreeing to become a member of a company, which is already registered.
When a member of a company limited by guarantee becomes the member of a company
limited by shares in case of conversion of the company.
Unit: FNSTPB504
Assessment Activity 4:
Management (Chapter 5)
Corporations & Trusts Law Assignment 1601
Question 4.3
To what level of remuneration are directors entitled? Who has the power to decide on the remuneration of
directors?
Question 4.4
Please read the Case study on ‘Court decisions lift director standards: ASIC'. The case study can be located in
the section titled 'Chapter 5 Review Questions'.
Please answer the following questions in relation to the Case study:
a) What is the prime objective held by ASIC in relation to recent court rulings?
b) List the recent penalties ASIC has secured.
c) Do you believe ASIC plays an effective role as a corporate regulator? Why/Why not?
The level of remuneration that the directors of a company are entitled to receive is any amount fixed by
the shareholders of a company. Shareholders have the power to decide on the remuneration of
directors.
Unit: FNSTPB504
Question 4.3
To what level of remuneration are directors entitled? Who has the power to decide on the remuneration of
directors?
Question 4.4
Please read the Case study on ‘Court decisions lift director standards: ASIC'. The case study can be located in
the section titled 'Chapter 5 Review Questions'.
Please answer the following questions in relation to the Case study:
a) What is the prime objective held by ASIC in relation to recent court rulings?
b) List the recent penalties ASIC has secured.
c) Do you believe ASIC plays an effective role as a corporate regulator? Why/Why not?
The level of remuneration that the directors of a company are entitled to receive is any amount fixed by
the shareholders of a company. Shareholders have the power to decide on the remuneration of
directors.
Unit: FNSTPB504
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Corporations & Trusts Law Assignment 1601
Assessment Activity 5:
Directors Duties (Chapter 6)
Activity instructions to candidates
This is an open book assessment activity.
You are required to read this assessment and answer all 5 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: 3-4 hours
Question 5.1
Do the directors owe the creditors of the company any fiduciary duties? Why or why not?
Question 5.2
Dirk is a member of the board of directors of Seriousbucks Ltd. Just prior to his first board meeting, Dirk agreed
with the Chairman of the board that he would always vote in line with the Chairman's instructions, and he has
done just that throughout his term as a director. Dirk prides himself on being a 'team player'. Discuss the
issues raised by these circumstances.
The directors of the company does not owe any fiduciary duties towards creditors. They only owe the
fiduciary duties towards the company. However, when the company becomes insolvent the directors
owes a duty towards the creditors.
Dirk has breached the duty to retain discretion by voting in line with the Chairman’s instructions. The
directors of a company should cast their vote on their own discretion and should not be biased by any
other person’s instructions.
Unit: FNSTPB504
Assessment Activity 5:
Directors Duties (Chapter 6)
Activity instructions to candidates
This is an open book assessment activity.
You are required to read this assessment and answer all 5 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: 3-4 hours
Question 5.1
Do the directors owe the creditors of the company any fiduciary duties? Why or why not?
Question 5.2
Dirk is a member of the board of directors of Seriousbucks Ltd. Just prior to his first board meeting, Dirk agreed
with the Chairman of the board that he would always vote in line with the Chairman's instructions, and he has
done just that throughout his term as a director. Dirk prides himself on being a 'team player'. Discuss the
issues raised by these circumstances.
The directors of the company does not owe any fiduciary duties towards creditors. They only owe the
fiduciary duties towards the company. However, when the company becomes insolvent the directors
owes a duty towards the creditors.
Dirk has breached the duty to retain discretion by voting in line with the Chairman’s instructions. The
directors of a company should cast their vote on their own discretion and should not be biased by any
other person’s instructions.
Unit: FNSTPB504
Corporations & Trusts Law Assignment 1601
Question 5.3
Nim is a director of Avarice Ltd, a successful multimedia and marketing company. Avarice Ltd is keen to grow
its business and wants to take over another successful marketing business, Marketers Rule Ltd. This is
discussed at a board meeting and it is decided to attempt the takeover in three months. As it happens, Nim's
sister Ann is an executive director of Marketers Rule Ltd, a fact he does not disclose to the board of Avarice
Ltd. Nim informs Ann of the intended takeover and also buys 200,000 shares at $20 a share. Ann also increases
her own shareholding, but prior to the takeover, resigns as a director of Marketers Rule Ltd to set up her own
marketing business. Ann takes with her a wonderful new software marketing package she has developed while
working as a director at Marketers Rule Ltd.
Avarice Ltd proceeds with the takeover, at which point the share price of Marketers Rule Ltd increases to $100
a share. Nim and Ann sell their shares in the takeover and make a large profit. Subsequently, Avarice Ltd and
Marketers Rule Ltd discover Nim and Ann's conduct and demand an explanation.
a) Have Nim and Ann acted properly in fulfilling their duties as directors? If not, why not?
They have not acted in the best interest of the company. They have breached their duties as a director
under section 181. They have also breached the duty to disclose interests in a transaction.
Unit: FNSTPB504
Question 5.3
Nim is a director of Avarice Ltd, a successful multimedia and marketing company. Avarice Ltd is keen to grow
its business and wants to take over another successful marketing business, Marketers Rule Ltd. This is
discussed at a board meeting and it is decided to attempt the takeover in three months. As it happens, Nim's
sister Ann is an executive director of Marketers Rule Ltd, a fact he does not disclose to the board of Avarice
Ltd. Nim informs Ann of the intended takeover and also buys 200,000 shares at $20 a share. Ann also increases
her own shareholding, but prior to the takeover, resigns as a director of Marketers Rule Ltd to set up her own
marketing business. Ann takes with her a wonderful new software marketing package she has developed while
working as a director at Marketers Rule Ltd.
Avarice Ltd proceeds with the takeover, at which point the share price of Marketers Rule Ltd increases to $100
a share. Nim and Ann sell their shares in the takeover and make a large profit. Subsequently, Avarice Ltd and
Marketers Rule Ltd discover Nim and Ann's conduct and demand an explanation.
a) Have Nim and Ann acted properly in fulfilling their duties as directors? If not, why not?
They have not acted in the best interest of the company. They have breached their duties as a director
under section 181. They have also breached the duty to disclose interests in a transaction.
Unit: FNSTPB504
Corporations & Trusts Law Assignment 1601
b)
What are the possible consequences of their conduct?
c) With reasons, explain whether the 'business judgement rule' will be relevant in these circumstances?
Question 5.4
What is ASIC's role when criminal proceedings are brought against a director?
When criminal proceedings are bought against a director, it can investigate the matter and it can be the
plaintiff in the proceeding against the director.
They have breached section 181 and 191 of the Corporations Act and have attracted civil penalty under
section 1317E of the same.
No, there was a conflict of interest, so the business judgement rule will not be relevant.
Unit: FNSTPB504
b)
What are the possible consequences of their conduct?
c) With reasons, explain whether the 'business judgement rule' will be relevant in these circumstances?
Question 5.4
What is ASIC's role when criminal proceedings are brought against a director?
When criminal proceedings are bought against a director, it can investigate the matter and it can be the
plaintiff in the proceeding against the director.
They have breached section 181 and 191 of the Corporations Act and have attracted civil penalty under
section 1317E of the same.
No, there was a conflict of interest, so the business judgement rule will not be relevant.
Unit: FNSTPB504
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Corporations & Trusts Law Assignment 1601
Question 5.5
What are the possible defences a director accused of breaching s588G of the Corporations Act may raise?
The possible defences that are available to a director accused of breaching Section 588H of the
Corporations Act are that the director has reasonable grounds to expect that the company was solvent
and to would remain solvent.
Unit: FNSTPB504
Question 5.5
What are the possible defences a director accused of breaching s588G of the Corporations Act may raise?
The possible defences that are available to a director accused of breaching Section 588H of the
Corporations Act are that the director has reasonable grounds to expect that the company was solvent
and to would remain solvent.
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 8 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 6.1
What is 'equity finance'? What is 'loan finance'? What is the main difference between them?
Question 62
What is share capital? What purpose does the concept of share capital fulfil?
Equity finance is the method of raising capital by selling company stock and providing ownership
interests to the shareholders in the company.
Loan finance is the borrowing form a lender, a fixed sum, with a condition to pay it back with interest.
Equity finance vests percentage of ownership to the whereas loan finance does not vests ownership to
the lender.
Share capital is that part of the capital of the company that comes from the issue of shares.
Share capital is the money invested in a company by the shareholders. Share capital implies long term
source of finance.
Unit: FNSTPB504
Assessment Activity 6:
Share Capital and Fundraising ( Chapter 7)
Activity instructions to candidates
This is an open book assessment activity.
You are required to read this assessment and answer all 8 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 6.1
What is 'equity finance'? What is 'loan finance'? What is the main difference between them?
Question 62
What is share capital? What purpose does the concept of share capital fulfil?
Equity finance is the method of raising capital by selling company stock and providing ownership
interests to the shareholders in the company.
Loan finance is the borrowing form a lender, a fixed sum, with a condition to pay it back with interest.
Equity finance vests percentage of ownership to the whereas loan finance does not vests ownership to
the lender.
Share capital is that part of the capital of the company that comes from the issue of shares.
Share capital is the money invested in a company by the shareholders. Share capital implies long term
source of finance.
Unit: FNSTPB504
Assessment Activity 6:
Share Capital and Fundraising ( Chapter 7)
Corporations & Trusts Law Assignment 1601
Question 6.3
List the rights held by shareholders of ordinary shares.
Question 6.4
Chin Ho has inherited two bundles of shares from her grandmother from two different companies. The first
bundle is cumulative preference shares and the second bundle is redeemable preference shares. Explain what
this means.
Question 6.5
What is reserve capital?
Reserve capital is that portion of the capital of the company that is not used by the company. However,
reserve capital is called upon in case of emergencies.
The rights held by the shareholders of ordinary shares are:
Right to vote
Right to meeting
Right to dividend out of the profits.
Cumulative preference shares are shares in which the unpaid dividends are treated as arrears.
Redeemable preference shares are shares that have a fixed maturity date.
Unit: FNSTPB504
Question 6.3
List the rights held by shareholders of ordinary shares.
Question 6.4
Chin Ho has inherited two bundles of shares from her grandmother from two different companies. The first
bundle is cumulative preference shares and the second bundle is redeemable preference shares. Explain what
this means.
Question 6.5
What is reserve capital?
Reserve capital is that portion of the capital of the company that is not used by the company. However,
reserve capital is called upon in case of emergencies.
The rights held by the shareholders of ordinary shares are:
Right to vote
Right to meeting
Right to dividend out of the profits.
Cumulative preference shares are shares in which the unpaid dividends are treated as arrears.
Redeemable preference shares are shares that have a fixed maturity date.
Unit: FNSTPB504
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Corporations & Trusts Law Assignment 1601
Question 6.6
How is the price for an option calculated?
Question 6.7
Elizabeth owns 20,000 shares in Tudor Ltd. Elizabeth has received from the directors of the company a
renounceable one-for-four rights issue at the discounted price of 5% below market price. Explain what this
means and the choices available to her.
Question 6.8
Why is there a general prohibition to a company purchasing its own shares?
The price for an option is calculated by the following six factors:
Strike price
Current market price of underlying stock
Dividend yield
Prime interest rate
Proximity to expiration date
Volatility of the stock prices.
It means that Elizabeth has got an offer of one share for every four share she owns and price he needs
to pay for each of such share is 5% less than the market price of the shares. She may take the offer or
leave it.
The company is prohibited to purchase its own shares because it will reduce the capital and will result
in the exploitation of the shareholders.
Unit: FNSTPB504
Question 6.6
How is the price for an option calculated?
Question 6.7
Elizabeth owns 20,000 shares in Tudor Ltd. Elizabeth has received from the directors of the company a
renounceable one-for-four rights issue at the discounted price of 5% below market price. Explain what this
means and the choices available to her.
Question 6.8
Why is there a general prohibition to a company purchasing its own shares?
The price for an option is calculated by the following six factors:
Strike price
Current market price of underlying stock
Dividend yield
Prime interest rate
Proximity to expiration date
Volatility of the stock prices.
It means that Elizabeth has got an offer of one share for every four share she owns and price he needs
to pay for each of such share is 5% less than the market price of the shares. She may take the offer or
leave it.
The company is prohibited to purchase its own shares because it will reduce the capital and will result
in the exploitation of the shareholders.
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 6 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: 2-3 hours
Question 7.1
Under what circumstances would directors appoint an external administrator?
Question 7.2
Who may be an administrator?
Whenever a company is insolvent or the company is in financial distress the directors may appoint an
external administrator to manage the affairs of the company.
An administrator must have the registration to become a liquidator. He should not be involved in the
company and he should not be the creditor, director, employee or an auditor of the company.
Unit: FNSTPB504
Assessment Activity 7:
External administration of Companies ( Chapter 8)
Activity instructions to candidates
This is an open book assessment activity.
You are required to read this assessment and answer all 6 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: 2-3 hours
Question 7.1
Under what circumstances would directors appoint an external administrator?
Question 7.2
Who may be an administrator?
Whenever a company is insolvent or the company is in financial distress the directors may appoint an
external administrator to manage the affairs of the company.
An administrator must have the registration to become a liquidator. He should not be involved in the
company and he should not be the creditor, director, employee or an auditor of the company.
Unit: FNSTPB504
Assessment Activity 7:
External administration of Companies ( Chapter 8)
Corporations & Trusts Law Assignment 1601
Question 7.3
List the ways in which property of the company is protected during the administration.
Question 7.4
Yummy Tummy Pty Ltd (Yummy Tummy) is a 44 year old business which manufactures and retails desserts.
Yummy Tummy operates 17 shops throughout Australia which are leased from shopping centres and its
products are also sold through gourmet shops and restaurants. Yummy Tummy employs 400 people, owns two
large commercial bakeries freehold and two commercial bakeries subject to mortgage with the Global
Domination Bank.
Currently, the business is performing poorly. Yummy tummy is 3 months behind in payment to its flour
supplier. So far all employee wages and entitlements have been paid, but the directors are worried about the
financial position of the company.
What is the risk to the directors of Yummy Tummy if they take no action to address the company's financial
problems but instead simply continue to trade?
During the administration of a company an administrator is appointed. The administrator appoints a
liquidator and sells the assets of the company to satisfy the debts owed to the creditors.
The company being poorly performing must be subject to liquidation. In case the directors continue to
trade without taking any action, it might become insolvent.
Unit: FNSTPB504
Question 7.3
List the ways in which property of the company is protected during the administration.
Question 7.4
Yummy Tummy Pty Ltd (Yummy Tummy) is a 44 year old business which manufactures and retails desserts.
Yummy Tummy operates 17 shops throughout Australia which are leased from shopping centres and its
products are also sold through gourmet shops and restaurants. Yummy Tummy employs 400 people, owns two
large commercial bakeries freehold and two commercial bakeries subject to mortgage with the Global
Domination Bank.
Currently, the business is performing poorly. Yummy tummy is 3 months behind in payment to its flour
supplier. So far all employee wages and entitlements have been paid, but the directors are worried about the
financial position of the company.
What is the risk to the directors of Yummy Tummy if they take no action to address the company's financial
problems but instead simply continue to trade?
During the administration of a company an administrator is appointed. The administrator appoints a
liquidator and sells the assets of the company to satisfy the debts owed to the creditors.
The company being poorly performing must be subject to liquidation. In case the directors continue to
trade without taking any action, it might become insolvent.
Unit: FNSTPB504
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Corporations & Trusts Law Assignment 1601
Question 7.5
How may creditors or consumers of Yummy Tummy find out if it has gone into external administration?
Question 7.6
What are the circumstances under which an application may be made for a compulsory winding up?
The circumstances under which an application may be made for a compulsory winding up of a company
are:
In case of insolvency
In case of court’s order
In case of statutory derivative actions of the shareholders.
Unit: FNSTPB504
Question 7.5
How may creditors or consumers of Yummy Tummy find out if it has gone into external administration?
Question 7.6
What are the circumstances under which an application may be made for a compulsory winding up?
The circumstances under which an application may be made for a compulsory winding up of a company
are:
In case of insolvency
In case of court’s order
In case of statutory derivative actions of the shareholders.
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: 1-2 hours
Question 8.1
What is the difference between an unincorporated and an incorporated association?
An incorporated association is a separate legal entity whereas an unincorporated association is not a
separate entity, it is a sole proprietorship or a partnership.
The incorporated association gives protection to its owners. Unincorporated associations does not
provide such an immunity to the owners.
Unit: FNSTPB504
Assessment Activity 8:
Associations ( Chapter 9)
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: 1-2 hours
Question 8.1
What is the difference between an unincorporated and an incorporated association?
An incorporated association is a separate legal entity whereas an unincorporated association is not a
separate entity, it is a sole proprietorship or a partnership.
The incorporated association gives protection to its owners. Unincorporated associations does not
provide such an immunity to the owners.
Unit: FNSTPB504
Assessment Activity 8:
Associations ( Chapter 9)
Corporations & Trusts Law Assignment 1601
Question 8.2
Briefly summarise the matters that should be addressed in the rules of an incorporated association.
Question 8.3
Lewis, the chairman of the committee of the Flemington Football Club Inc has also entered into a two year
contract with GreatGrounds Gardeners, to maintain the football oval and grounds.
All went well for the first ten months, but despite providing their services, GreatGrounds Gardeners have now
not received payment for three months. Who is liable for the debt owed to GreatGrounds Gardeners? Give
reasons for your answer.
Would your answer be different if Flemington Football Club Inc was not an incorporated association? If so,
how and why?
The matters that should be addressed in the rules of an incorporated association are:
The association must be governed in compliance with the law.
The board of directors should perform its duties in accordance with the law.
They must held a meeting annually.
They must present a report in that meeting.
The Flemington Football Club Inc being an incorporated association is a separate legal entity, so the
contracts entered into by the members on behalf of the association will be binding on the association.
Therefore, Flemington Football Club Inc will be held liable for the debts owed to GreatGrounds.
However, if Flemington Football Club Inc was not an incorporated association, the chairman would have
been held liable, as the member of an unincorporated association cannot avail the immunity of the
association being a separate legal entity.
Unit: FNSTPB504
Question 8.2
Briefly summarise the matters that should be addressed in the rules of an incorporated association.
Question 8.3
Lewis, the chairman of the committee of the Flemington Football Club Inc has also entered into a two year
contract with GreatGrounds Gardeners, to maintain the football oval and grounds.
All went well for the first ten months, but despite providing their services, GreatGrounds Gardeners have now
not received payment for three months. Who is liable for the debt owed to GreatGrounds Gardeners? Give
reasons for your answer.
Would your answer be different if Flemington Football Club Inc was not an incorporated association? If so,
how and why?
The matters that should be addressed in the rules of an incorporated association are:
The association must be governed in compliance with the law.
The board of directors should perform its duties in accordance with the law.
They must held a meeting annually.
They must present a report in that meeting.
The Flemington Football Club Inc being an incorporated association is a separate legal entity, so the
contracts entered into by the members on behalf of the association will be binding on the association.
Therefore, Flemington Football Club Inc will be held liable for the debts owed to GreatGrounds.
However, if Flemington Football Club Inc was not an incorporated association, the chairman would have
been held liable, as the member of an unincorporated association cannot avail the immunity of the
association being a separate legal entity.
Unit: FNSTPB504
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Corporations & Trusts Law Assignment 1601
Question 8.4
List five
advantages of becoming an incorporated association.
Activity instructions to candidates
This is an open book assessment activity.
You are required to read this assessment and answer all 8 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: 2-3 hours
Question 9.1
What are the major commercial reasons that people choose to create and operate express trusts?
Question 9.2
Identify the following types of trusts?
a) The trust document confers on the trustee discretion to select who is in the designated class of potential
beneficiaries is to receive any benefit and to decide the amount of any benefit o be paid.
The advantages of
1. Protection
2. Immunity t
3. To sue in t
4. Tax flexibil
5. Deductible
The major commercial reasons that people choose to create and operate express trusts are to
distribute the assets after you die, to reduce taxes and to protect your assets from creditors and
lawsuits.
Discretionary Trust.
Unit: FNSTPB504
Assessment Activity 9:
Trusts ( Chapter10)
Question 8.4
List five
advantages of becoming an incorporated association.
Activity instructions to candidates
This is an open book assessment activity.
You are required to read this assessment and answer all 8 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: 2-3 hours
Question 9.1
What are the major commercial reasons that people choose to create and operate express trusts?
Question 9.2
Identify the following types of trusts?
a) The trust document confers on the trustee discretion to select who is in the designated class of potential
beneficiaries is to receive any benefit and to decide the amount of any benefit o be paid.
The advantages of
1. Protection
2. Immunity t
3. To sue in t
4. Tax flexibil
5. Deductible
The major commercial reasons that people choose to create and operate express trusts are to
distribute the assets after you die, to reduce taxes and to protect your assets from creditors and
lawsuits.
Discretionary Trust.
Unit: FNSTPB504
Assessment Activity 9:
Trusts ( Chapter10)
Corporations & Trusts Law Assignment 1601
b) The trust creates and grants to each beneficiary proprietary interests in the trust property or the income
derived from that property. The trustee has no discretion regarding distribution of income and property.
c) The trust creates and grants to each beneficiary a fixed equitable interest in the capital and income of the
trust calculated by reference to the proportion of units each beneficiary holds in relation to the total number
of units issued.
Hybrid Trust
Unit Trust
Unit: FNSTPB504
b) The trust creates and grants to each beneficiary proprietary interests in the trust property or the income
derived from that property. The trustee has no discretion regarding distribution of income and property.
c) The trust creates and grants to each beneficiary a fixed equitable interest in the capital and income of the
trust calculated by reference to the proportion of units each beneficiary holds in relation to the total number
of units issued.
Hybrid Trust
Unit Trust
Unit: FNSTPB504
Corporations & Trusts Law Assignment 1601
Question 9.3
Peter has been appointed trustee of Nina's testamentary express trust. The trust document states that the
trust applies to "...most of my estate, including my shares and two-thirds of my antique collection." It goes on
to state that "half of the two-thirds of the antique collection is to be held for the grandchildren that loved me
most". Can Peter fulfil the terms of Nina's trust?
Give reasons for your answer.
Question 9.4
What law governs trustees?
Question 9.5
Is there any conduct by the beneficiary which may prevent them being granted an equitable remedy for
breach of a fiduciary duty by the trustee?
Peter cannot fulfil the terms of the trust as the words in the trust is ambiguous. It is not certain that,
which of the grandchildren loved Nina the most as it is a subjective matter.
The Australian trust law governs the trustees. It is mostly derived from the English trust law.
The beneficiary may be prevented from being granted an equitable remedy for breach of a fiduciary
duty by the trustee, if he has acted in bad faith.
Unit: FNSTPB504
Question 9.3
Peter has been appointed trustee of Nina's testamentary express trust. The trust document states that the
trust applies to "...most of my estate, including my shares and two-thirds of my antique collection." It goes on
to state that "half of the two-thirds of the antique collection is to be held for the grandchildren that loved me
most". Can Peter fulfil the terms of Nina's trust?
Give reasons for your answer.
Question 9.4
What law governs trustees?
Question 9.5
Is there any conduct by the beneficiary which may prevent them being granted an equitable remedy for
breach of a fiduciary duty by the trustee?
Peter cannot fulfil the terms of the trust as the words in the trust is ambiguous. It is not certain that,
which of the grandchildren loved Nina the most as it is a subjective matter.
The Australian trust law governs the trustees. It is mostly derived from the English trust law.
The beneficiary may be prevented from being granted an equitable remedy for breach of a fiduciary
duty by the trustee, if he has acted in bad faith.
Unit: FNSTPB504
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Corporations & Trusts Law Assignment 1601
Question 9.6
What are the only circumstances under which a trustee is not bound to carry out the terms of the trust
instrument?
Question 9.7
Elaine is the trustee of a trading trust and enters into a contract with a service on behalf of the trust. The
business of the trading trust is not financially sound and when the service is complete there are insufficient
trust funds to pay the debt.
Giving reasons for your answer, explain who will be liable to pay the outstanding debt.
Question 9.8
How is the existence and continuity of a trust affected by the death of a beneficiary?
The trustee is justified in violating the terms of the trust instrument if it is done in good faith for the
benefit of the trust properties and the best interest of the beneficiaries.
The debts are to be paid by Elaine, as being a trustee he is the legal owner and must pay the debts that
the trust incurs.
In case a beneficiary of a trust dies, the trust gets dissolved.
Unit: FNSTPB504
Question 9.6
What are the only circumstances under which a trustee is not bound to carry out the terms of the trust
instrument?
Question 9.7
Elaine is the trustee of a trading trust and enters into a contract with a service on behalf of the trust. The
business of the trading trust is not financially sound and when the service is complete there are insufficient
trust funds to pay the debt.
Giving reasons for your answer, explain who will be liable to pay the outstanding debt.
Question 9.8
How is the existence and continuity of a trust affected by the death of a beneficiary?
The trustee is justified in violating the terms of the trust instrument if it is done in good faith for the
benefit of the trust properties and the best interest of the beneficiaries.
The debts are to be paid by Elaine, as being a trustee he is the legal owner and must pay the debts that
the trust incurs.
In case a beneficiary of a trust dies, the trust gets dissolved.
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 5 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: 2-3 hours
Question 10.1
What are the advantages of compulsory employer funded superannuation to Australian workers and the
Australian economy? Are there any disadvantages?
Question 10.2
What do you think are the advantages and disadvantages of being a member in a defined benefit fund?
Why are defined benefit funds becoming increasingly uncommon?
Advantages:
Funds are taken care by professionals
Employers are required to make separate contributions.
Disadvantages:
Fund management becomes costly.
In case of defined benefit fund the company is in charge of the same and no effort is required on the
part of the employee. The company is supposed to make contribution regarding the same.
The employee does not have a say in the same and it has limited potential. Hence, the defined benefit
plans are becoming increasingly uncommon.
Unit: FNSTPB504
Assessment Activity 10:
Superannuation Obligations - The Basics ( Chapter 11)
Activity instructions to candidates
This is an open book assessment activity.
You are required to read this assessment and answer all 5 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: 2-3 hours
Question 10.1
What are the advantages of compulsory employer funded superannuation to Australian workers and the
Australian economy? Are there any disadvantages?
Question 10.2
What do you think are the advantages and disadvantages of being a member in a defined benefit fund?
Why are defined benefit funds becoming increasingly uncommon?
Advantages:
Funds are taken care by professionals
Employers are required to make separate contributions.
Disadvantages:
Fund management becomes costly.
In case of defined benefit fund the company is in charge of the same and no effort is required on the
part of the employee. The company is supposed to make contribution regarding the same.
The employee does not have a say in the same and it has limited potential. Hence, the defined benefit
plans are becoming increasingly uncommon.
Unit: FNSTPB504
Assessment Activity 10:
Superannuation Obligations - The Basics ( Chapter 11)
Corporations & Trusts Law Assignment 1601
Unit: FNSTPB504
Unit: FNSTPB504
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Corporations & Trusts Law Assignment 1601
Question 10.3
What is an eligible rollover fund?
Question 10.4
Moe, Larry and Curly are licensed trustees of SensationalSuper, a RSE. The fund has not been performing well
and the trustees are keen to increase investment return to members. Moe and Larry decide that the best
course of action is to invest in higher risk activities where the investment return is greater. Curly points out
that higher risk means higher loss if the investment is not successful. Moe and Larry laugh at him saying 'no
pain no gain'. The trustees invest 50% of the available funds in a digital animation and movie company, whose
first three projects fail. The loss to the fund is massive. It is also revealed that two directors of the movie
company are Larry's daughters from his first marriage.
Discuss the issues and possible consequences raised by these circumstances.
The Australian Eligible Rollover Fund is an eligible rollover fund is registered under the Australian
Prudential Regulation Authority. It is an eligible rollover account, which holds funds from the inactive or
low balance super fund accounts.
In this case, the trustees have not acted in the best interest of the members. They failed to maintain
due diligence and standard of care. Therefore, they must attract civil penalty.
Unit: FNSTPB504
Question 10.3
What is an eligible rollover fund?
Question 10.4
Moe, Larry and Curly are licensed trustees of SensationalSuper, a RSE. The fund has not been performing well
and the trustees are keen to increase investment return to members. Moe and Larry decide that the best
course of action is to invest in higher risk activities where the investment return is greater. Curly points out
that higher risk means higher loss if the investment is not successful. Moe and Larry laugh at him saying 'no
pain no gain'. The trustees invest 50% of the available funds in a digital animation and movie company, whose
first three projects fail. The loss to the fund is massive. It is also revealed that two directors of the movie
company are Larry's daughters from his first marriage.
Discuss the issues and possible consequences raised by these circumstances.
The Australian Eligible Rollover Fund is an eligible rollover fund is registered under the Australian
Prudential Regulation Authority. It is an eligible rollover account, which holds funds from the inactive or
low balance super fund accounts.
In this case, the trustees have not acted in the best interest of the members. They failed to maintain
due diligence and standard of care. Therefore, they must attract civil penalty.
Unit: FNSTPB504
Corporations & Trusts Law Assignment 1601
Question 10.5 Crossword puzzle
Test your knowledge: Complete the following crossword puzzle
Across
1. A holding account for lost members or inactive members with low account balances. (three words).
2. Superannuation was part of a__________ pillar reform package to deal with the aging of Australia’s
population.
3. Who are the trustees in the SMSF?
Down
1. Age before which superannuation savings cannot be withdrawn if a person has retired.
2. Regulated and low taxed savings scheme designed to encourage tax payers to save for their retirement.
3. Fund into which employer will pay superannuation contribution if employee does not choose their own.
4. A superannuation fund run for profit with no restrictions on members and many investment options.
5. The phase during which superannuation is being saved.
6. The person who holds a RSE licence and is responsible for the management of a RSE.
7. The Review which recommended the introduction of MySuper was the _________ Review.
8. The authority responsible for regulating RSE’s is the Australian ____________ Regulation Authority.
9. The phase in which a member is receiving payment from their superannuation savings.
10. In a MySuper product, there may be either a ‘singe diversified investment strategy’ or a ‘___________
investment strategy’.
Unit: FNSTPB504
Question 10.5 Crossword puzzle
Test your knowledge: Complete the following crossword puzzle
Across
1. A holding account for lost members or inactive members with low account balances. (three words).
2. Superannuation was part of a__________ pillar reform package to deal with the aging of Australia’s
population.
3. Who are the trustees in the SMSF?
Down
1. Age before which superannuation savings cannot be withdrawn if a person has retired.
2. Regulated and low taxed savings scheme designed to encourage tax payers to save for their retirement.
3. Fund into which employer will pay superannuation contribution if employee does not choose their own.
4. A superannuation fund run for profit with no restrictions on members and many investment options.
5. The phase during which superannuation is being saved.
6. The person who holds a RSE licence and is responsible for the management of a RSE.
7. The Review which recommended the introduction of MySuper was the _________ Review.
8. The authority responsible for regulating RSE’s is the Australian ____________ Regulation Authority.
9. The phase in which a member is receiving payment from their superannuation savings.
10. In a MySuper product, there may be either a ‘singe diversified investment strategy’ or a ‘___________
investment strategy’.
Unit: FNSTPB504
Corporations & Trusts Law Assignment 1601
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Unit: FNSTPB504
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Unit: FNSTPB504
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