LAW 2629 Semester 1 2025 Individual Assessment SUSS :Singapore Company and Finance Law

This assessment is an individual assessment and is worth 20 marks.

One of your tasks as advisers is to provide advice quickly and within a limited time frame when requested by the client (assessment task 1) The other task consists of where a client comes to you and wants more detailed advice on a range of issues that you may have studied as well as issues you may not have. Again, this information is required within a limited time frame.

This assessment requires you to provide advice to the client that covers issues covered by the due date of the assessment as well as issues that we have not yet covered in the course.

In the business world you are not just always asked about the things you may have studied but about areas of taxation law you may not have considered or been taught.

The written advice will be longer than an email and because of the complexity of the issues that Christopher and Ateemah want you to provide a more formal statement of advice, but still in plain English to the client.

As mentioned before whatever conclusion you come to you need to justify the answer by reference to either legislation, case law or ACRA guidelines.

The due date is Friday 7 March 2025 by 7 pm Singapore time via Turnitin (Singapore time)

The word limit will be 1,200 words plus or minus 10%.

WRITTEN REPORT EXPECTATIONS AND REQUIREMENTS

You have demonstrated your ability to deal with the company and finance law issues of Julie and her family and Bloomingdale Florists Pte Ltd.

Christopher and Ateemah are now confident to allow you to provide to other clients of the practice.

In the written advice that you are to prepare you are expected to demonstrate that you understand the relevant law and how the law applies to the issues raised by the client and come to a logical conclusion. You are also expected to consider alternatives that may be possible for the clients and not merely just state the law.

You are also expected to discuss the law and the circumstances given the current economic environment that Singapore is in and how it may impact on your advice to the client.

In your written advice you must relate the law back to the circumstances of the client. Mere statements of law without relevance to the client facts will be penalised.

You must be able to justify your conclusion by reference to the relevant legislation in the Companies Act, or any other legislation you think appropriate, regulatory guidelines issued by ACRA where relevant and case law.

If you do not justify your answer NO marks will be awarded.

You are to prepare the report based on the fact it is to be presented to the clients who are not lawyers or accountants. They expect to see a concise and justified statement of advice and conclusion based on the issues raised.

Your senior manager Ateemah has high expectations of you and will not accept:

1. any grammatical errors or unsubstantiated statements or conclusions made in your report.
2. Incorrect spelling or references to the client
3. She will not tolerate any material copied from textbooks, google or any other source which you attempt to pass off as your own material, nor the use of artificial intelligence software such as ChatGPT.

You must use the RMIT Harvard System for referencing. See attached link for how to use it.

https://www.rmit.edu.au/library/study/referencing

ChatGPT:

We are aware of ChatGPT as a tool to assist you in preparing your response to the assessment. We are also aware of other sources that you can pay to have people prepare your assessment and for you to pass it off as your own work.

We have put the assessment through the ChatGPT programme and other sources and are aware of the typical response.

If your written report mirrors what ChatGPT or other sources created, we will award NIL marks for the whole assessment 2. The assessment is to be your OWN personal work, and you must all confirm that it is your own work as part of your submission process.

THE WRITTEN ASSESSMENT:

Background information of the clients:

Lorenzo and Fatima are long term clients of the accounting practice and have made an appointment to see Christopher.

Christopher is away in the Middle East on business for another client of TCY and cannot attend the meeting. He will not be back until Monday 7 March 2025. Therefore, he has requested the senior manager (Ateemah) to organise the meeting with the clients. Ateemah has asked you:

1. to sit in on the meeting and
2. take notes on the issues raised and then to
3. prepare a written report addressed to the clients on the matters for review by Christopher and Ateemah. The meeting is scheduled for Friday 18 February 2025 at 9 am. You will be expected to take notes of the meeting and then prepare a draft statement of advice for Ateemah and Christopher to review. You may use the attached template form to prepare your draft statement of advice or use your own format. Once Ateemah is happy with the report, he will send it to Christopher for review.
4. The report you will prepare is to go to the clients so it must be written in an understandable form. The role of Christopher and Ateemah is to check the technical aspects of the report.

DETAILED INFORMATION FROM THE CLIENT MEETING:

Lorenzo Lopez and Fatima Tsui are the directors and run a bio tech business in the development of artificial skin for burn victims). The business is operated through an unlisted public company, which had a mix of shareholders being a venture capitalist company, accredited investors and Lorenzo and Fatima’s own private investment companies. There are 60 shareholders in total. The company is called LTSKIN Ltd.

The company was started with initial capital injected by Lorenzo and Fatima and then the venture capitalist and accredited investors injected further funds through a capital raising. To date the company has raised $80 million.

The percentage shareholding of the company is:

Lorenzo’s private investment company    5%

Fatima’s private investment company      5%

Venture capitalist                                         55%

Accredited investors (57 investors)           35%

Like all startup companies Lorenzo and Fatima need to be careful on what they spend and many investors although they are after a high capital and income return are reluctant to invest more funds in a startup company that do not meet agreed milestones. The cash burn is about $1,200,000 per month. No sales or potential customers have been made or found yet.

However, the company has the following issues it requires your advice on in relation to the basis period ended 31 December 2024 as well as the basis period 31 December 2025.

Issues 1: (Finance)

Required:

Please address the following issues:

1. The company is finding it difficult to get further equity funds from the accredited investors and the venture capitalist. Is there an option to raise debt funds?
2. If the company could borrow funds, what do you think the Bank would want from the directors personally?
3. What could Lorenzo and Fatima potentially lose if the company could not repay the loan?
4. Is there an alternative to debt for the company to raise funds?

Issue 2:

One of the key issues faced by all directors is the obligations to look after the interest of the company. This obligation exists at common law and also under the companies At. However just making profits is not enough.

In the last 6 months there has been a greater emphasis on governance (behaviour) of the senior staff and not just the pursuit of returns.

See the attached article.

Required:

1. In the light of the article, what are your views if Lorenzo or Fatima behave in a similar manner. Do you think that they will have breached their duties under the Companies Act?

Issue 3:

During the current financial year Fatima was under pressure to look for new customers both in Singapore and overseas. A major hospital in the Philippines was interested in the skin product but could not afford to pay the price charged.

Fatima therefore entered negotiations with the Indonesian hospital and signed a contract with them that the company would sell the medical products to the hospital at a 20% discount to market for the first 6 months and then revert to market price thereafter.

Under the rules of the company any discount on the price above 10% had to be approved by the Board being Lorenzo, Fatima and a representative of the venture capitalist.

Fatima did not get their approval.

As a result of the contract the hospital in Indonesia gave a “gift” to Fatima of 50 Trump coins. At the date of the” gift” they were worth $8,000 each. Today they are worth $2,800 each.

Required:

1. What are the consequences for both Fatima and also the company?

NOTE:

You are required to answer the issues raised by the clients and focus on the Singapore Income Tax Issues.

ARTICLE REFERRED TO IN ISSUE 2:

Corporate governance landscape in dire state

COMMENTELIZABETHKNIGHT

It feels almost antithetical to include the words ‘corporate governance’ in the same sentence as the company Mineral Resources.

We now know that the miner and some of those who steward it have been operating in a ‘Wild West’ governance-lite/-free zone for years. The actions of MinRes managing director Chris Ellison and the board’s inaction make a joke of the notion of corporate governance, which has been some what of a recurring theme in corporate Australia.

MinRes and WiseTech Global are two recent examples of governance issues overtaking a board, especially one that has to deal with an influential founder in a position of power – Ellison at MinRes and Richard White at WiseTech.

While White’s downfall was linked to scandals of a personal nature, at MinRes there is a laundry list of problematic behaviours by Ellison that centre on his use of company resources for his personal benefit and that of his friends and family.

05/11/2024, 16:38 Corporate governance landscape in dire state – The Age, 11/5/2024 https://digitaleditions.smedia.com.au/theage-todays-paper/PrintArticle.aspx?doc=AGE%2F2024%2F11%2F05&entity=ar03401&mode=text 1/3

Having been outed by the media in recent weeks, additional ‘aftershock’ details have emerged in what has been an escalating scandal involving Ellison – one of the pillars of Western Australia’s corporate elite.

If a week is a long time in politics, for Ellison and the MinRes board, two weeks must seem like a lifetime. When this scandal erupted late last month, the board issued a statement saying it had ‘‘full confidence’’ in Ellison and his leadership. That ill-judged statement to the ASX is now going to haunt the board for some time.

Since issuing that release supporting Ellison, the board was harangued by shareholders in a series of rapid-fire meetings and made subject to interrogation by the ASX and the corporate regulator. By last weekend it must have become apparent to it that escaping any consequence of what had transpired was no longer an option.

Yesterday, MinRes’ board announced the loose timing for the departure of Ellison and MinRes chairman James McClements, as well as financial sanctions for Ellison of up to $9 million.

While McClements will be out the door by next year’s annual meeting, Ellison could hang around for as long as 18 months. This prompts an immediate question: why allow Ellison such a lengthy exit?

Allowing him to remain – even if that accords with the wishes of some shareholders – further trashes what’s left of this board’s governance credentials. Shareholders may understandably be concerned about the management and strategic void a swift exit of Ellison would cause, but letting him stick around for as long as 18 months sends a dangerous message to corporate Australia.

The financial sanctions on Ellison won’t move the dial for the billionaire entrepreneur. The lion’s share of those sanctions involves the forfeiture of Ellison’s long- and short-term incentives – in other words, his bonuses. The remaining $3.79 million will involve him paying back to MinRes the money it paid to Ellison’s private company in 2006 and 2008 without adequate related party disclosure.

And then there is the $5 million Ellison will donate to charity and his personal mea culpa, which the miner says represents Ellison’s profound sense of embarrassment and his diminished reputation.

The first part of the issue involving Ellison is historical. It centred on a scheme involving a company associated with Ellison selling machinery to MinRes at inflated prices through a British Virgin Islands-incorporated vehicle. The profits from the said scheme were shared by Ellison, former chairman Peter Wade and four other founding executives at the mining company.

This inadvertently sucked MinRes into a tax evasion scandal that was not of its making. The board has admitted to becoming aware of this matter two years ago but argued there was no obligation to disclose it to the market. That call on disclosure is staggering enough, but there’s more.

MinRes’ board admitted yesterday that financial benefits had been given to Ellison’s related parties, including rent relief to entities in which his daughter has an interest. Ellison also used company resources for his personal benefit – getting employees to work on his boat and

05/11/2024, 16:38 Corporate governance landscape in dire state – The Age, 11/5/2024 https://digitaleditions.smedia.com.au/theage-todays-paper/PrintArticle.aspx?doc=AGE%2F2024%2F11%2F05&entity=ar03401&mode=text 2/3

properties and his personal finances, and using the company to procure goods and services for his private use.

The fact the board thought it worth noting this was not financially detrimental to MinRes is bizarre. The use of MinRes as Ellison’s own ATM clearly suggests he viewed the listed company as his own private fiefdom, with the checks and balances any board would have in place sorely missing. And there’s every chance the latest announcements will not put this saga to bed. The Australian Securities and Investments Commission must surely subject Ellison and MinRes to more stringent scrutiny. And class action legal firms will no doubt be limbering up.

TEMPLATE FOR PREPARATION OF WRITTEN ADVICE FOR CHRISTOPHER/ATEEMAH TO REVIEW:

                                                                               Teo Chandra and Yong

                                                                              Memorandum of Advice:

To: Christopher/Ateemah

From: (Your name)

Client: Insert Client name

Date:

Introduction:

Further to the meeting with (insert name of client) on Friday 18 February 2025, I now set out my advice based on my understanding of the matters raised by the client. Where the information from the meeting was not clear to me, I have stated the assumptions upon which my advice is based.

Issue 1:

Answer all the questions raised identifying the issues raised from your understanding of the facts, apply the relevant law (legislation, case law and if relevant ACRA guidelines) to the issues and come to a justifiable conclusion.

Your response must be supported by case law or legislation.

Your conclusion in respect of each query raised by the client.

Issue 2:

Answer all the questions raised identifying the issues raised from your understanding of the facts, apply the relevant law (legislation, case law and if relevant ACRA guidelines) to the issues and come to a conclusion.

Your response must be supported by case law or legislation.

Your conclusion in respect of each query raised by the client.

Issue 3:

Answer all the questions raised identifying the issues raised from your understanding of the facts, apply the relevant law (legislation, case law and if relevant ACRA guidelines) to the issues and come to a conclusion.

Your response must be supported by case law or legislation.

Your conclusion in respect of each query raised by the client.

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