If the business were to operate as a closely held business and Robert was a shareholder, what are his legal rights and obligations? Which of his goals could he realistically achieve? Explain.

Subject: General Questions    / General General Questions

COMMERCIAL LAW – ASSIGNMENT

Your friend Jennifer is excited to start a new business which she is confident will be successful. However, she needs her father’s (Robert) financial assistance for startup costs. Her father is able to contribute $50 000, and is willing to guarantee a loan from the bank for $30 000, but he wants to know that he will not lose more than his investment, he wants a 5% return on his investment and he wants to take an active role in management (since he does not trust Jennifer’s business knowledge or judgment.) He probably cannot achieve all of these goals. Advise Robert of the consequences of the following with regard to his stated goals:

1. If Robert and Jennifer enter into a partnership, to what extent can he achieve his goals?Explain.

2. How could Robert become a limited partner? How would this affect his goals? What would be his legal rights and obligations?

3. If the business were to operate as a closely held business and Robert was a shareholder, what are his legal rights and obligations? Which of his goals could he realistically achieve? Explain.

4. If the business were to operate as a closely held business and Robert lent money to the corporation, without becoming a shareholder, what are his legal rights and obligations?Which of his goals could he realistically achieve? Explain.

5. If the business were to operate as a closely held business and Robert was a share holder and a director, what are his legal rights and obligations? Which of his goals could he realistically achieve? Explain. (Hint: directors have statutory obligations).

6. If the business was incorporated and Robert, as a director, committed the tort of negligence, who is liable? Why?

7. If the business was incorporated, Robert and Jennifer are directors, and the business failed to pay its taxes, who is liable? Why?


 

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