Case Study 3: Fred’s Miracle Cough Syrup
Case Study 3
Both Fred’s family and the business have rebounded from their prior issues. Jane sought counseling for her gambling issues and has worked hard to mend her relationships with the family. Prior to cashing the forged checks from Jane, Don was struck by lightning and experienced a spiritual enlightenment. He willingly returned the checks to Fred and Sally and promptly joined the Peace Corps. Likewise, when the church found out the donated check was a forgery, it was immediately returned. Bob’s wife (also Sally’s best friend) found out about Bob’s online sabotage and promptly remedied the situation. Once Fred’s Miracle Cough Syrup was back on track, the company’s growth was exponential. Featured on a widely viewed talk show starring a prominent doctor, online orders and demands from big-box chains nationwide skyrocketed. Fred and Sally have been told that now would be an ideal time to take Fred’s Miracle Cough Syrup public. The only distressing issue at hand involves Tammy, a local girl who had been working as a delivery girl for the company. She applied for Jane’s former job as bookkeeper. Fred and Sally hired Ted, an experienced accountant, instead, and Tammy has filed a claim of sex discrimination against the company and Fred personally. Fred and Sally are seeking your advice regarding Tammy and the possibility of taking the company public. Complete a legal analysis of the given facts, including the following elements.
Specifically, the following critical elements must be addressed:
I. Evaluate three current or potential legal and/or regulatory issues apparent in this fact pattern that might impact a public offering.
II. Determine whether Fred’s Miracle Cough Syrup is in compliance with government regulations involving public offerings by analyzing relevant laws and using the appropriate legal test and facts given.
III. Support your conclusions and provide recommendations to improve compliance and strategies for corporate growth.
Case Study 3: Fred’s Miracle Cough Syrup
The pursuit of Fred and Sally taking their company public features both current and potential legal issues culminating from the pattern on operations that have characterized their business in the past. First, the current issue concerns the sex discrimination lawsuit filed by Tammy. According to the provisions of the Civil Rights Act of 1964, the federal law has the mandate to offer protection to individuals who sue for sex discrimination. Tammy applied for the bookkeeping job at Fred and Sally’s company since she had the confidence and significant experience at the enterprise. The fact that her request was turned down and the vacancy filled with a man warrants her enough basis to claim for sex discrimination (U.S. Equal Employment Opportunity Commission, 2016). Another legal issue features fraud. Fred and Sally’s business have had some unprofessional activities in the past that have affected the growth of the company. Issuance of forged checks and online sabotage lead to very adverse impact on the business. With the company going public, the company will be responsible for the public’s investments and such fraudulent behavior could jeopardize the public offering. Last, but not least, the organization structure of Fred and Sally’s company requires a reconstruction. The current management is from the Fred and Sally family. For the sake of going public, it will be important to incorporate more members outside the family to ensure that the interests of other investors are well represented.
There are relevant indicators that establish the degree of compliance with the regulations involving public offerings that Fred’s Miracle Cough Syrup exhibits. The provisions of the Securities Act require a company to file a registration statement before the sale of its securities commence (U.S. Securities and Exchange Commission, 2016). The essence of the above registration statement is to underline some relevant legal provisions necessary for the public to know before they associate themselves with a particular company. As required in the registration statement, Fred and Sally have provided a substantial description of Fred’s Miracle Cough Syrup. The facts above also exhibit their description of the core business operations featured in the production of the cough syrup, the risk factors, the financial position, the management, and the relevant results of operations. At the moment, the cough syrup is at the center of national exposure with its demand rising as more people learn and appreciate its benefits. It is to conclude that Fred’s Miracle Cough Syrup is in compliance with the required regulations necessary for initiating a public offering but Fred and Sally need to incorporate a few more factors to cement the compliance.
Consequently, here are a few recommendations that Fred and Sally could
apply in their pursuit towards facilitating better compliance with the requirements established for
initiating public offering as well as improving their strategies for their
company’s corporate growth. First, it is important to clearly describe and
analyze the business’s competitive
advantage – including all the risks associated with investing in the above
company. Second, they should identify the officers and directors at the top of
the business and clearly show their due
compensation. In so doing, there should be a straightforward description of all
the core transactions taking place between such directors, officers,
significant shareholders, and the company. Last, but not least, all the
material legal proceedings of the company, involving a description of all its
contracts, should be described and made known to all the stakeholders of the enterprise.
U.S. Equal Employment Opportunity Commission. (2016). Sex-Based Discrimination. U.S. Equal Employment Opportunity Commission. Retrieved 29 September 2016, from https://www.eeoc.gov/laws/types/sex.cfm
U.S. Securities and Exchange Commission. (2016). Small Business and the SEC: A guide for small businesses on raising capital and complying with the federal securities laws. U.S. Securities and Exchange Commission. Retrieved 29 September 2016, from https://www.sec.gov/info/smallbus/qasbsec.htm#ipo