Client Memo Writing Assignment
[Total: 25 marks]
Please advise for the following propositions provided by your client: (Please adhere to the word limit specified).
(A) The defence procurement (division of defence ministry) issues a 10 years’ tender for manufacture and purchase of certain ammunitions. Anita and Basit (brother and sister) wish to bid for the tender. However, to fulfil the tender, they would require more funds, both by way of loans and investments, and workers. To this end, they wish to take a loan of INR 40 lakhs from the ABI Bank against a charge on the assets, and a further INR 10 lakhs from friends and families. Two angel investors Kapil and Rati are also willing to invest in the business, but they would not want to take up any additional risks (of loans) in their personal capacities, as they would not be involved in the management or decision-making of the business. In addition, they would want an exit option to sell their stake at a later date without having to seek approval from Anita and Basit. In view of the above, Anita and Basit approach you for legal advice. Advise them as regards what could be the optimum form of business that they could incorporate, and why.
[6 marks; word limit: 200 words]
(B) Assuming that a company “Defco” is incorporated later after two years, Anita advances a loan to the business for which debentures are issued to her, upon a charge created on the assets of the business. Following this, there arises a dispute with the ABI Bank in relation to non-payment of its loan, and ABI Bank seeks a liquidation proceeding. The friends and families who had lent to the business claimed that their dues must be repaid first, before any payment is made to Anita for her debentures. Also, they demand that Anita and Basit’s residence building and personal cars must be used to repay the loans, as she (with her brother) owns, controls and manages the business.
[5 marks; word limit: 150 words]
(C) In the meantime, “Accurate Bullet”- a Canadian company offers to buy-out all the four investors (Anita, Basit, Kapil and Rati). The 4 existing shareholders ask for a price of $100 million [of which $60 million is attributed to the government tender valuation]. Accurate Bullet engages you as its lawyer to advice and negotiate the deal. Advise Accurate Bullet as regards its proposed acquisition and the price consideration above.
[6 marks; word limit: 200 words]
(D) When Anita and Basit are not able to exit “Defco”, they undertake a private placement to issue shares to Accurate Bullet, which also acquires the shares from Kapil and Rati. Accordingly, Anita and Basit continue to own 15%, while Accurate Bullet owns remaining 85%. The company “Defco” then seeks to raise further capital by way of a public offer. (i) What is the minimum contribution that Anita and Basit must own in the post-IPO capital of the company, and for how long? (ii) Can Accurate Bullet sell its stake in “Defco” after 8 months from the IPO? [4+4 marks; word limit: 150 words each]
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