Legal Implications for Misrepresentation of Company Accounts


Internet Services Limited (“ISL”) was incorporated on 1 April 2012 without a constitution. It has three shareholders -

  1. Sarah Jones (who owns 40 shares)
  2. Timothy Jones, Sarah’s husband (who owns 30 shares)
  3. Paul Bailey (who owns 30 shares)

All three are also directors.

 Sarah works fulltime in the business, supplying customers with specialist internet and computer advice. Timothy helps Sarah with the book keeping and general advice (amounting to approximately 3 hours per week). Timothy is otherwise a full time sharebroker. Paul is a passive investor, who turns up to the annual meetings of shareholders, and to directors’ meetings.

Benjamin receives a letter from Timothy regarding company accounts. Ben tell Paul that Sarah took out monthly drawings, totaling $100,000 for the year, when she needed. He further informed that Sarah and he would draw a further $20,000 for both their services. Paul was furious that Sarah and Timothy had withdrawn money without his permission. Paul was hoping to receive a dividend for the year, which would have been the first since the company began.

Assume that you are Kim Smith, an employee of Benjamin Hutchinson’s accounting firm. Ben has asked for your help before he writes a reply to Tim’s letter. Write a memo to Ben setting out the legal implications of the withdrawal of money out of ISL by Sarah and Timothy, and what action (if any) that Paul could take. Specify possible remedies in your memo.

Summary: This question belongs to corporate law and discusses about actions and remedies to be taken against a firm for misrepresentation of company accounts.

Total word count: 1513


Download Full Solution


  • HWA

    this is a very good website

  • HWA

    I have 50 questions for the same test your page is showing only 28

  • HWA

    hi can you please help or guide me to answer my assignments. thanks

  • HWA

    hi can anyone help or guide me to my assignments. thanks

  • HWA

  • HWA

    This solution is perfect ...thanks

  • HWA

    Hello Allison,I love the 2nd image that you did! I also, had never heard of SumoPaint, is something that I will have to exolpre a bit! I understand completely the 52 (or so) youtube videos that you probably watched. Sometimes they have what you want, sometimes they don't! However, it is always satisfying when you are able to produce something that you have taught yourself. Great job!Debra 0 likes

  • HWA

    Perfect bank of solution. 

  • HWA

    great !

  • HWA
    Paul Brandon-Fritzius

    thanks for the quick response. the solution looks good. :)

  • HWA
    tina Johnson

    thnx for the answer. it was perfect. just the way i wanted it. 

  • HWA

    works fine.