1. During the course of 2021 various governments around the world have taken action to restrict the use of cryptocurrencies or to restrict the activity of organizations involved

in producing or dealing in cryptocurrencies. One of the justifications for this is the risk that criminals may use cryptocurrencies to launder money.

To what extent could compliance management tools and techniques have a role to play in mitigating the risk of money laundering?

2. Al Fresco Tunes Limited (‘Tunes’) is a production company which specialises in openair corporate hospitality events. Tunes has three directors, Paul, Tony and Adrian, each of whom owns 1,000 £1 ordinary shares in Tunes. There are no other shareholders. On the basis of Tunes’ recent accounts, the company’s accountants have suggested that it can be valued as a going concern, at £1.2 million. This means that each £1 ordinary share is currently worth £400.

The directors have expansion plans for Tunes, but it has never been in a position to generate sufficient cash reserves for it to fulfil those ambitions. The board has been

seeking funding from a number of possible sources and has been in discussions with Jerry, who is keen to invest.

All of the parties have agreed, that Jerry will invest a sum of £600,000 into Tunes and will become a non-executive director.

A further £40,000 will be invested by each of the current directors of Tunes in return for each of them receiving an additional 100 £1 ordinary shares.

It is undecided as to which form Jerry’s investment should take but it is considered that the possible options are: ordinary shares; preference shares or a loan, or a combination of some or all of those.

Required

Propose a financing structure for Jerry’s investment in Tunes, taking account of the following issues:

1. Control of the business

2. Tax

3. Financial resilience – the ability to survive an economic downturn. It is important that you explain your reasoning behind the structure you propose above and how the three named issues have been addressed in it.

Answer rating: 100% (QA)

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