Essay on Company Law

Submitted By NassarJude1
Words: 1436
Pages: 6

The company idea was initially brought to life by realizing the willingness of hundreds of people to put up their money in advance of receiving their olive oil, it soon became clear that there was a reasonable demand for Middle Eastern products amongst supporters of fair-trade in the UK. Hence the “Shadan” was created. It’s a private partnership that was started between Millie Hammond and John Smith, to relies later on that there are three other people who wants to invest as well and buy equal shares as the founders, accordingly five shareholders have invested the same amount of money in the company; nevertheless some owned preference shares and some owned ordinary shares. Shadan’s main challenge is to find a market place for Middle Eastern produce in the UK. However since the Mediterranean climate, rich fertile soil and use of organic traditional farming methods, makes Shadan’s Middle Eastern olive oil a world outstanding product.

As it was mentioned above the whole idea of the company started when hundreds of people where putting money in order to get olive oil from the middle east, and that’s when the whole partnership idea came up, With a huge initial working capital needed and the difficulty of obtaining a loan, the idea of establishing a private share holding company emerged . In addition to the capital the partnership will add knowledge, skills and contacts that both founders gained through the years. In addition partnerships are cost-effective as each partner specializes in certain aspects of their business. It will also provide moral support and will allow for more creative brainstorming. In the case Khan v Miah [2001] 1 WLR 2123 the parties decided to open an Indian restaurant but had some disputes and issues through the process and it was held that there was no rule of law that the parties to a joint venture did not become partners until actual trading commenced. The true rule was that persons who agreed to carry on a business activity as a joint venture only became partners when they actually embarked upon that activity; hence the partners of Shadan company only become partners when they actually start importing the olive oil from the middle east..
Shadan company have two classes of shares, one is ordinary shares and these shares are the most basic, the people that obtain them have no right of fixed dividends, but on the other hand they have circle profits, they don’t get a percentage of the profit, although if you own an ordinary share you have the right to vote on everything, whether it concerns the person or not. On the other hand there is preference shares, people who owns such shares have priority of the profit, they have a fixed dividends per year, if the company cannot pay you that year then their money will accumulate to the next year and will keep accumulating until they get of their money, nevertheless obtaining this type of share means that you are not allowed to vote on anything that does not affect them in this company.
The shareholders in the company are five, they all have the same number of shares but the class of shares chosen differs from one to another, three shareholders have preference shares and two have ordinary. Millie Hammond and John Smith who have started the partnership with a goal in mind, to realize later that the money they have is not enough for the purpose of the company, so they brought in three more investors that want to invest in this partnership and be part of it, Tom Page and Sapphire Hayen invested in this company as they predicted success for the company in the near future, on the other hand Adam Brinson did not buy the shares they were transferred to him as a graduation gift from his mother, as his mother wanted her son to start his after university life successfully, we can relate in this situation to the following case Sedgefield Steeplechase Co (1927) Ltd, Scotto v Petch [2001] BCC 889 it’s not a very similar case but it does explain the fact that each…