LAWS305-16Y Corporate Entities: Report Writing Assignment

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Internal Code: MAS1023
Report Writing Assignment:

FACTUAL SCENARIO:
Fancy and Flamboyant Furniture Limited (‘Fancy’), is a duly incorporated company under the Companies Act 1993(CA 1993). It has 5 shareholders/directors, who each respectively hold a fifth of the shares in Fancy. The shareholder/ directors are Jim Jones, Dion Dunstan, Sam Swindle, Anton Archibald and Collin Crooks. Fancy operates a furniture manufacturing business and supplies items of premium household furniture, to furniture retail outlets in Hamilton city and the wider Waikato. The furniture is produced at Fancy’s workshop based at industrial premises, which it owns in Frankton, Hamilton. The profitability of Fancy’s operations over the last ten (10) years has exceeded expectations.
Despite this, Dunstan and Swindle have expressed serious reservations at numerous company board meetings, about the lack of a clear long-term strategic direction for Fancy, in the premium furniture market. Both Dunstan and Swindle have consistently and persuasively argued at board meetings that Fancy should capitalise on its formidable reputation as a supplier of premium quality furniture. Accordingly, they argue, Fancy should expand its customer base to include the Bay of Plenty, South Auckland and Hawkes Bay. Further, it should begin manufacturing custom-made furniture for supply to commercial customers such as businesses, schools, rest homes and private hospitals. In addition, Dunstan and Swindle argue that Fancy’s healthy balance sheet, would ensure that the proposed expansion could be funded partially from the company’s reserves and the balance funded through debt. Fancy’s board finally resolves to commission, first, a comprehensive appraisal of the expansion and diversification proposal and secondly, a thorough report of the findings and recommendations to the board. For these purposes, it engages the professional services of Waikato Strategic Business Planning Ltd (WSBPL), a firm of highly reputable business consultants. WSBPL prepares a comprehensive report which is submitted to Fancy for consideration by Fancy’s board of directors. The report concludes, that Fancy’s business is projected to remain profitable in the medium to longer term, provided it can continue to both retain and expand the number of retail outlets, it supplies furniture to, in the wider Waikato. The report also examines the prospects of expanding the business beyond the Waikato and
diversifying into supplying furniture to commercial customers. While it concludes that there are significant advantages in the proposed expansion and diversification of Fancy’s business, it also highlights significant risks. Some of the risks include a weaker than expected demand in a number of North Island provinces excluding the Waikato, a significantly higher level of debt needed for the diversification of the business and the great difficulty in securing a bigger site for Fancy’s expanded furniture manufacturing operation.

Question:
You are requested to prepare a legal opinion of no more than EIGHT (8) pages in length, providing advice to the respective parties in respect of the particular scenario outlined below. A bibliography must be furnished but will NOT be counted as part of the EIGHT (8) page length of the opinion.

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Posted on : January 15th, 2018
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