The paper "Relationship between Bling Bling Pty Ltd and Good Luck Ltd " is a perfect example of a finance and accounting assignment. Sue started a business, which later on transformed into a company. The change of business structure meant that the ownership and operational requirements also changed. The aspect of debentures was introduced and previous contractual requirements needed to be updated based on the classification of business structure. The incorporated, Bling Bling Pty Ltd, continued to operate effectively but later on, was faced with numerous challenges include theft and financial related crisis.
The business became insolvent and was placed under receivership. The original insurance contract was between Sue when she was a sole trader with Good Luck Ltd, which was not updated to include the new business structure. In addition, the aspect of debentures is raised complications because the statutory bodies do not embrace similar views with Sue. The section discusses whether Sue can enforce her charge against Bling Bling Pty Ltd in terms of debentures and whether Bling Bling Ltd can enforce the claim against Good Luck Ltd. Part A (Enforce her Charge [Security Interest] Against Bling Bling Pty Ltd) Debentures are an important instrument for financial transactions to ensure the business continues to operate smoothly.
Sue charging the corporation means that the company in future is supposed to pay Sue. The charge on Bling Bling Pty Ltd is a floating charge because it deals with changing goods: the stock keeps changing. In Re Yorkshire Woolcombers Association Ltd, the judge listed three features in defining a floating charge. The three characteristics are changing stock over time, charging the company assets for the present situation and in the future, and the company can continue operating seamlessly until the intervention of the charge.
From the Sue situation and changing the business structure, crystallization of the debentures has not been done and therefore, her debentures are still floating. If crystallization occurs, Sue will have right on the corporation and may seek compensation. In addition, section 9 of the Corp Act defines the floating charge and determines the preferential treatment to prevent losses to important assets of the company. For example, the employees have to be paid during liquidation before the creditors and investors can seek payments.
The actions on floating charge are further discussed in Barcelo v Electrolytic Zinc Co, Tricontinental Corporation Ltd v Commissioner of Taxation, and Atkins v Mercantile Credits Ltd, which states that a floating charge is present security that affects the assets of a corporation, but there are conditions to be satisfied before seeking compensation from the company. Based on this case law and common law, Sue has the right to enforce her charge against Bling Bling Pty Ltd.
However, any compensation will be done after some of the individuals in the corporation are paid. For example, the employees’ compensation is considered before the charge. Part B (Enforce the Claim against Good Luck Ltd) Sue insured the business with Good Luck Ltd against certain threats but used her name. Later on, Sue “ sold” the business to Bling Bling Pty Ltd’ . The definition of a “ Pty Ltd” is important and the role of Sue is also crucial in determining whether compensation is appropriate.
Albert Vincent Y. Yu Chang, Andrew Thorson, A Legal Guide to Doing Business in the Asia-Pacific (American Bar Association, 2010)
Alexander Mills, William Woodford, Company Accounting (Pearson Higher Education AU, 2009)
Corporations Law 2001
Dennis Campbell, International Protection of Foreign Investment (2nd Edition, Juris Publishing, Incorporated, 2010)
Roman Tomasic, Stephen Bottomley and Rob IcQueen, Corporations Law in Australia (Federation Press, 2002)