this is a business law question.

Sub Question A

Joan Smith and Tony Jones - lifelong friends - want to start a computer software business. They are both married and have young children, and their spouses are not working. Both Joan and Tony have computer expertise and want to be actively involved in the business. Both are employed by a very large software company, and each earns employment income of about $80,000. They want to continue with this employment while they get their own business off the ground. Joan has no personal assets, but Tony has just inherited a large sum of investments from his grandfather, and although some of that money will be used as startup capital for the business, Tony does not want to have personal assets at risk in the event the business is unsuccessful. Furthermore, Joan and Tony have prepared financial projections for the business which show projections that it could lose up to approximately $60,000 in the first two years of operations and start making profits in the third year.

Joan and Tony come to you, their lawyer(s), and ask for an opinion letter as to how they should organize their business and any other important issues they should consider before starting their business. Write an opinion letter to them and consider and discuss all possible issues and considerations.

Assume for the purposes of your answer that (1) the business is to be in Nova Scotia (2) if they did incorporate their business it would qualify as a Canadian Controlled Private Corporation.

Sub Question B

It is now four (4) years later. Joan and Tony incorporate their business as Islander Software Consultants (ISC). The authorized capital of the company is 1000 Class A voting common shares and 1000 Class A non-voting convertible preferred shares, and the issued capital is 100 Class A voting common shares. Joan and Tony each own 50 of these issued voting common shares.

The company has started to turn a profit, but as of the most recent fiscal year ISC has retained earnings of only $30,000. Joan and Tony want to get involved in tendering for some provincial government contracts, but in order to do so need additional capital of approximately $200,000. Their Bank already has lent ISC $150,000 and taken a debenture as security but is unwilling to advance additional capital. Joan thinks that they should offer ISC shares to the public. Tony does not think this is necessary.

Tony lost all of his inheritance on bad stock market investments. However, Tony has a rich uncle, Lenny Trump, who is prepared to invest the $200,000 in ISC. Lenny tells Tony that he trusts him to run the company, but the truth is that Lenny is a control freak and if things dont go well Lenny will want to control the company. Both Joan and Tony do not want to lose control over their company unless it is absolutely necessary.

Lenny is a risk taker and rich enough that if he loses his $200,000 it is not the end of the world, and he does not need an annual income or money from ISC. Joan is a bit unsure of the idea of accepting Lennys

capital, but Tony has told them that if he does not go along with the plan in some form then Tony will incorporate his own company and use Lennys capital to develop new spreadsheet software that Tony developed when they were a partnership.

(a) You are ISCs corporate solicitor. From ISCs perspective what is the best way or ways to structure Lennys capital in ISC, AND

(b) You are Joans solicitor. From Joans perspective (i) what is the best way or ways to structure Lennys capital in ISC (ii) what about Joans proposal to sell ISC shares to the public and (iii) what about Tonys threat to incorporate a new company, AND

(c) You are Lennys solicitor. From Lennys perspective what is the best way or ways to structure Lennys capital in ISC.

Sub Question C

It is now thirty (30) years later. Joan and Tony continue to own equal numbers of voting shares in ISC. It is a very successful company valued at $1 million. Joan children are now in their 30s with good jobs. Joans husband, Bill, is still a stay-at-home dad with an empty nest. Joan is worried about estate planning, and she comes to you, an estate lawyer, as to general your general advice and thoughts on future legal strategies.

With respect to the above three questions make sure you consider all possible issues and considerations.