I have a case study where I need to use laws such as director duties, limited liability , veil of incorporation wrongful trading and winding up. Could you help identify it for my upcoming exam ( Struggling like madd)
The Case Study ( if you could help identify where these laws would go it would mean the world to me):
Sally knitted bobble hats for a hobby. She used to give them away to her friends, some of whom encouraged her to turn her hobby into a business. Sally decided to set up a stall in the covered market in town for 4 days a week, and paid the local council £100 rent per week for the stall.
One day Zanye, a local man who was an internationally recognised celebrity, bought one of her bobble hats from her stall. He loved it and put a picture on his Instagram account of him wearing it, telling his followers to get one. Sally was inundated with requests for her bobble hats.
Sally could not meet the demand, so she spoke to a friend Barry who had some savings and had run businesses in the past. Barry suggested that they went into business as co-directors of a new company. He would take 50% of the shares in the business and put £20,000 into setting it up. They incorporated their business, Cool 4 Hats Ltd. They bought a van for £6,000, rented a warehouse for £4,000 and put £10,000 into buying new equipment.
The company started to meet the orders. A large sportswear manufacturer contacted Sally to ask for a delivery of hats branded with its logo. This offer was never communicated to Barry, and Sally subsequently set up a new company to fulfil the order.
After a short period of success, Cool 4 Hats Ltd started to face financial trouble. The orders had dried up, and they had £10,000 worth of stock which they could not sell. Sally took out a loan for £10,000 in order to try to advertise the business and build a website. They tried to contact Zanye, but his agent told them that he had contracts with other designers and fashion houses which meant that he could not help them with more promotion.
Against the advice of their accountant, Sally and Barry decided to take out a loan of a further £20,000 from the bank. The business continued to lose money and they defaulted on repayments to the bank. The administrators were called in and they began the process of winding up the company.
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