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Business law 2

For the purposes of Question 1, assume that the date is January 2024.

Your client is Garden Designs Ltd (GD). You are a trainee solicitor and your supervising solicitor is Arjun Singh.
GD specialises in garden maintenance and landscaping in Harrogate and the surrounding areas. The business is fairly successful and has grown quite quickly. The company has two office premises- one near Harrogate and the other in York. They employ 10 full-time gardeners, own 6 trucks and a large amount of gardening equipment.

A lot of the work GD gets is low value lawn mowing and hedge clipping, but during the warmer months, they win some profitable landscaping contracts and these tend to be much more lucrative. These would involve working on large gardens, carrying out design and wholesale landscaping, often adding water features, tree houses, climbing frames and the like. Spring and summer are the busiest time for GD, with a real dip in turnover seen through the winter months.

GD was set up by the four current director/shareholders in 2009.
Details of the directorships and shareholdings are set out below.
●Neil Allen Managing Director and Chair 20,000 ordinary £1 shares
●Oluchi Udeze Finance Director 20,000 ordinary £1 shares
●Frances Smith Sales Director 20,000 ordinary £1 shares
●Brad Philips (non-executive director) Marketing Director 40,000 ordinary £1 shares

GD has adopted the Model Articles for Private Companies Limited by Shares, without amendment. All shares are fully paid up. GD’s up to date Balance Sheet is attached at Appendix A.

Recently Brad has informed the others that he wants to leave the business completely, as his partner has a new job in New York and Brad wants to join him. Brad has said that he wants to step down as Director and sell his shares to extract his investment. The remaining Directors are quite pleased about this development, as Brad has been spending quite a lot of time away from the business recently and they feel he has not been pulling his weight. They tell you that Brad has let them down on some obvious marketing opportunities, such as failing to secure a stall at the Great Yorkshire Show, which is usually a very lucrative marketing opportunity for GD.

Brad is temporarily back in Harrogate and keen to get things moving. The Directors have had the GD shares independently valued by an expert and have been told that they are worth £3.25 per share. Neil, Oluchi and Frances have indicated that they do not have the funds to purchase Brad’s shares. Neither do they want to sell the shares to an ‘outsider’- they are a close-knit group of old friends and they feel that bringing a new person in could adversely affect the dynamic within the business.

Separately GD has been in negotiations with Interbank plc for a secured loan for £80,000. Business has been going well and the Directors are keen to capitalise on this and expand into other geographical locations. They have taken advice from the company accountant who is satisfied that the company can afford the new borrowing and that overall the company is in very good financial health.

Your supervisor, Arjun Singh, has asked you to prepare a memorandum for him which sets out:

a. An explanation as to whether GD itself might be able to purchase Brad’s shares and if so, what specific issues the Directors need to consider.
b. A company procedure plan explaining how to carry out the purchase of Brad’s shares, how Brad can effect his resignation and how GD can enter into the necessary documentation regarding the secured loan. GD uses General Meetings to obtain any member’s resolutions required and does not use the Written Resolution procedure. Arjun has asked for a detailed plan, including relevant time periods, contents of documents, requirements of voting methods, percentages required and full statutory references. What is not need at this point is any of the relevant administration that will be required after the procedure is completed.
c. Any implications of the share buy-back for the remaining shareholders, assuming Brad’s shares are purchased.

APPENDIX A
GARDEN DESIGNS LIMITED

BALANCE SHEET AS AT [This week]

£ £
ASSETS EMPLOYED

Non-current Assets
Premises
Machinery and Vehicles 105,000
150,000

255,000

Current Assets
Stock 60,000
Debtors 45,000
Cash 19,500
124,500

Current Liabilities
Creditors 30,000
Tax 10,000
Overdraft 8,000
(48,000)
NET CURRENT ASSETS 76,500

Less:
Bank Loan (30,000)

NET ASSETS 301,500

CAPITAL EMPLOYED
Share Capital
Profit and Loss Reserve (retained profit) 100,000
201,500

301.500

Can someone briefly help me with the question? Thank you

Reply 1

rgrace421

Did you manage to get help with the essay? I'm struggling with it

Reply 2

AMac86

The starting point is to break down the question into the individual legal issues (the question already does this slightly with the a, b, c breakdown - then work through, referring to the relevant sections of the Companies Act.

What part of the question are you struggling with?