Answer the Case Study Qustion in the Coursework Guide

BUSINESS ENTITIES
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Discussing the legal issues in this scenario and advice James, Nick, and William as to their legal position
Introduction
The issues raised in the JNW partnership case study vary depending on the legal aspect and possible solutions to be realized. In a partnership, a code of conduct is explained of which it provides possible outcome depending on the scenarios. Partnership Act gives elaborated laws essential in guiding formation and dissolution relating to the partner’s code of conduct. In the case study, there are various issues regarding a partnership that was not complied and hence making it a legal agreement among the members. Some of the legal issues that James, Nick, and William never adhered to include; not registering the firm, lack of partnership contribution scheme or mechanism, and engagement of unlawful business out of the partnership by Flora.
Legal issues
It was illegal for the JNW Partnership firm to operate for a long period in business and tender operations without being formally registered. The members of the firm were supposed to have registered the firm to comply with the Partnership Act. A formal agreement is an essential part of the partnership whereby roles, position, and contributions are clearly elaborated (Geddes, 2016, p.66). The James, Nick, and William were supposed to have engaged in a formal agreement showing the organizational mandate and clearly indicating the formal engagement as a company.

Partnership Act requires a registered firm to have a clear and elaborated membership contribution and stakeholder proportions mechanisms. With proper contribution mechanism, the partnership members have the mandate to control the firm depending on their stakeholders. The major stakeholder with over 50% of the shares is the key to the decision making and hence showing leadership (Wilkinson, et al., 2014, p. 740). In the JNW Partnership, there is no clear leadership mechanism as the Partnership Act does not recognize the firm. Furthermore, the firm lack legal backing of the managerial and leadership as the partnership law requires the registered firm to give directors depending on their stakeholder proportion.
Flora is also admitted to the partnership without clear legal approach and hence taking a position in the firm from nowhere. The management of the firm assigns duties without following proper mechanism and hence making her control all the official engagement as others supervise the projects (Bressers & de Bruijn, 2005, p. 248). Admitting Flora into the partnership without legal approach such as contribution to shareholding in the firm and having clear rules governing her roles in the firm created room for her to engage in illegal activities. Misrepresentation and illegal activities by Flora arise due to lack of legal binding that would stop her from engaging in other personal activities with the name of the JNW Partnership. As the firm gained popularity by undertaking timely projects within the budget, then Flora is busy seeking to establish her firm from the order inquiry being made. If the firm was registered, it was morally illegal for Flora to engage in other activities that are illegal and misrepresenting the partnership.
Ethics and behavioral conduct of directors in a partnership is the key as they represent the face of the firm. During the end year party, James, Nick, and William notice that Flora is somehow misbehaving and hence tarnishing the firm’s reputation. This shows that Flora does not care about the firm’s reputation as she has already established her exit plan. Unethical and misbehavior conducts of a partner can lead to dissolution depending on the other partnership members’ decision (Milliman & Grosskopf, 2013, p. 54). Therefore, James, Nick, and William are supposed to ensure ethics and behavior of the members portray positive image of the firm.
Advise on the legal position
As the firm is not registered, the management should initiate a mechanism that would ensure the firm is recognized as a business entity. In registration, the management should ensure members agree on different aspects such as leadership, management, and operation of the firm. The registration approach should be undertaken after the four members agree upon taking legal action to identify the firm. This should start by engaging one another in finding the business name that would incorporate the four individual’s interests. James, Nick, William, and Flora are the major shareholders and hence should develop membership through contribution proportion to the firm’s interest. As an initial step, the four members are supposed to show their interest through acknowledging the need for the legal existence of the firm.
Through the urge of registration of the firm, the partnership members would understand the position of Flora as the firm’s partnership member. This would help in understanding whether she is willing to be a legal member and determine her existence as one of the directors. Due to her misrepresentation and engagement of the illegal activities, the show might not be willing to be part of the firm’s membership. This would help in eliminating her from the managerial positions and hence ensuring she does not have much control over the organizational orders, management, and leadership (SCHACHTER, et al., 2017, p.648). If she is willing to comply with the legal approach, then it would be easier for the James, Nick, and William to ensure she complies with the Partnership Act. Therefore, in seeking legal registration of the firm, it would shed light on the willingness of Flora complying with the firm’s objectives and missions.
Rules and regulations in the operations, management, and leadership of the firm are essential components that help in ensuring order. The JNW Partners should consider engaging in a forum that would establish independent positions and develop a mechanism for their contribution to the firm performance. In every business entity, terms and conditions are supposed to be set to determine the operational procedure that complies with the law as well as the duties and responsibilities (Wollenburg, et al., 2013, p. 142). Prescription of the rules and regulations governing every position and operations in the firm would help in ensuring Flora never again engage in illegal activities. In addition, it would be clear when one is acting according to the organizational regulations. The repercussion of illegal activities and misrepresentation should be clearly indicated to prevent one from proceeding to violate or misuse their position in the firm.
Roles and duties of every position should also be clearly identified depending on the qualification and shares in the firm (Lashley & Stickl, 2016). This helps in ensuring one is responsible for the activities and actions regarding the interest of the firm’s performance. According to the case study, Flora found an established firm and has little to lose even if the firm collapses or performs poorly. Due to lack of the interest in the firm, then she engages with the illegal activities and misrepresentation of the firm. Her actions amount to fraud as she is using the firm’s reputation to get orders and clients to start her firm. Having clear roles and duties established depending on the position, then the firm management would be in a position of understanding the source of failure or poor performance. Therefore, it is advisable for the firm’s management to consider developing appropriate mechanism expressing the roles and duties of every position in the organization.
Code of conduct among the management is essential in determining their ethics and behavioral approach while in the organizational welfare. It is evident that Flora was not in a good conduct as she was not worried about the organizational reputation (Ensthaler, et al., 2014, p. 134). Every director has the mandate of expressing the organizational reputation and hence showing the greater image brand of the firm. In the presentation of the firm, it is advisable for the management to consider the code of conduct that would comply with the organizational performance. Furthermore, it is essential for the organizational management to relate the personal presentation and how they should consider the interest of the firm. More so, if the firm had underlined code of conduct, Flora would be barred from undertaking certain conducts as she would realize she was implicating her reputation as a director of an established organization.
Establishment of the organizational goals, principles, and visions is another approach to formalize the code of conduct of every member in the partnership. The organization as an entity was supposed to have principles that would govern the code of conduct and how every person should work toward formulating and achieving the goals. Principles are the key aspects that ensure the firm complies with the set rules and regulation whereby consequences are also clearly outlined. Firm’s principles are guided by the mission and visions as they articulate what is intended to be undertaken and mechanism of achieving the goals. The management is supposed to have developed a clear roadmap that guides the process of the inquiry, tendering and approval of the tender (orders). This would have prevented Flora from engaging in illegal activities of diverting the orders to her personal interests. Therefore, code of conduct and organizational principles would ensure every action of the firm complies with the set rules and regulations as well as roles and responsibilities without breach.
Would your advice vary if this partnership had a formal partnership agreement?
James, Nick, and William should consider starting by establishing a legal approach to their JNW Partnership establishment. Registering the partnership is the first approach toward seeking the solution to the legal challenges they are facing as firm. This would ensure the firm is legally established and hence as a business entity, all the directors and workers to be under the Partnership Law (Limited Liability Partnerships Act, 2000, p. 3). Partnership Act has clear rules and conditions that explain all the procedures that are supposed to be followed to deal arising issue in the firm. This can be legally abiding if the JNW Partnership is registered. Therefore, as the directors of the firm, James, Nick, and William together with the Flora, if she is willing, should consider seeking legal consideration of the firm through registering as a business entity.
As the Partnership Act requires, the directors of JNW Partnership should consider establishing their stakeholder’s proportions. This will help in determining their contribution toward the firm in terms of directorship, leadership and management (Li, et al., 2013, p. 507). As the members of the firm express their interests in contribution toward the firm’s operation, then they would understand whether Flora is also interested in firms’ activities. The Partnership Act requires a documented stakeholder’s position as it established profit sharing as well the proportion of the contribution to the firm. The major stakeholder has the mandate to control the firm’s operations and hence having a say in the financial activities. Furthermore, the proportion of the stakeholder also helps in establishing dividend sharing in percentage. In addition, the partnerships are required to have developed a clear outline of duties and activities of the firm. This would ensure every director in the firm has specific roles to play and hence reducing overlapping or repletion of the duties. More so, this would ensure all the workers and especially the directors stick to their established positions and roles without engaging in illegal activities and misrepresenting the firm.
Misrepresentation and engagement on the illegal activities are the major reasons for partnership dissolution. The members can decide to vote in respect of seeking majority position to dissolve partnership with one of the partners (De Frutos & Kittsteiner, 2008, p. 186). In this case, Flora has been engaging in illegal activities whereby she has developed the interest of starting her own firm. Partnership Act has provided criteria for membership dissolution for fraud and misrepresentation (Partnership Act 1890, Article 34, p.10). Flora has been engaged by her interest in starting her business entity and hence not devoted to the interest of partnership. Therefore, under legal circumstances, the firm’ director can consider dissolving their partnership contract with Flora through majority voting.
The established business entity has the mechanism of dealing with the dissolution process as articulated in the Partnership Act. The JNW Partners would consider undertaking appropriate action against one of their member Flora. This would consider the appropriate channel of dissolution whereby the majority vote would have been used. With an established organization, it is easier for the firm to consider using legal approaches such as Court proceeding and agreeing on the premium. Premature dissolution indicates that one of the member partners is voted out due to misconduct and misrepresentation.
Partnership contract is essential in setting the grounds of responsibilities and accountability every action is undertaken. Fraud or misrepresentation by one member, dissolution is supposed to be undertaken without prejudice to any right of the member. This indicates that one is entitled to retain his or her shares. Any surplus resulting from the partnership assets and the principal amount of the purchased share is supposed to be refunded.
In conclusion, Partnership Act provides guiding grounds for partnership in business entity development. JNW Partnership was supposed to be legally and formally established in order to set proper ground of being legal biding. The firm was supposed to have clear guidelines expressing introduction of other shareholders in the business through the legal platform. Organizational principles, code of conduct and rules and regulations are some of the internal management should consider ensuring the directors and employees understand their contribution to organizational growth. More so, dissolution of the partnership members is clearly articulated in the Partnership Act and hence guiding on how fraud and misrepresentation in the partnership should be undertaken. Therefore, the legal partnership helps in guiding the members on how to undertake firm’s affairs as they are protected by the Partnership Act.
Bibliography
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Ensthaler, L., Giebe, T. & Li, J., 2014. Speculative partnership dissolution with auctions. Review of Economic Design, 18(2), pp. 127-150.
Geddes, M., 2016. Making Public-Private Partnerships Work: Building Relationships and Understanding Cultures. New York: Routledge.
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Limited Liability Partnerships Act 2000
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Partnership Act 1890
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