Meridian Acoustics: new investor subscription versus fixed-term loan
Email from the supervising partner
Scenario scenario-013 — Legal Writing
From: Senior Partner To: Trainee Subject: Meridian Acoustics — please write to Priya before Friday Our client is Meridian Acoustics Limited, a private company on Model Articles. There are three founder-shareholders: Priya Bhatt (40%), Connor Halsey (35%) and Eitan Wexler (25%). All are directors. The company needs £300,000. A potential investor (Larchfield Capital) has offered two alternatives. Option A: a subscription for newly issued ordinary shares giving Larchfield 30% of the enlarged share capital post-issue. Option B: a fixed-term loan of £300,000 at 9% interest over 4 years, secured by a debenture and a personal guarantee from Priya. Priya has asked our firm to write to her — not to the board — explaining how each option would affect her personal control and her ability to block decisions she does not want. Connor and Eitan are leaning toward Option A. Cover: (1) her exact post-deal voting percentage under Option A and what decisions she could still influence or block; (2) what Option B would change (if anything) about her control and the practical effect of the personal guarantee; (3) a plain-English summary of the trade-off.
What a strong answer looks like
Model answer outline (public summary)
- Compute Priya's post-issue voting percentage under Option A: 40% × 70% = 28% of the enlarged share capital — give her the number, not just a description of dilution.
- Explain in plain English what 28% means for ordinary decisions (she can influence but cannot block on her own) and for higher-threshold decisions (she cannot block a special resolution at 28%).
- Explain that under Option B her shareholding is unchanged — she stays at 40% — but explain the practical exposure of the personal guarantee: her personal assets become a backstop for the company's debt.
- Present the trade-off without recommending an option: Option A protects her personal balance sheet but reduces her control; Option B preserves control but creates personal financial risk.
- No statutory citations (Companies Act, etc.) to a lay client — explain the mechanism in plain English throughout.
Illustrative excerpt. Scenario details are practice material only. The live grader presents the full brief and grades your response against the SRA Performance Indicators.
The criteria the Legal Writing station is marked against.
The Legal Writing station for business scenarios tests whether you can advise a lay client on corporate governance and finance in plain English — without statutory citations — and compute the arithmetic that sits underneath the advice.
Include relevant facts
Addresses the salient facts — the percentage holdings, the dilution arithmetic, the guarantee mechanics — without including irrelevant material.
Use a logical structure
Information is well-organised; the three sub-sections track the partner's three questions; the reader can follow the answer without difficulty.
Advice is client and recipient focused
Demonstrates understanding of Priya's specific concern (control, not just legal mechanism); recognises that she is a lay client with no legal background.
Use clear, precise, concise and acceptable language
Language is appropriate to a lay client; statutory citations (Companies Act section numbers, Model Articles references) are avoided in the letter itself.
Apply the law correctly to the client's situation
Correctly applies share capital and voting mechanics to the specific facts — including computing the post-dilution percentage.
Apply the law comprehensively, identifying ethical and professional conduct issues
Writing is sufficiently detailed; the candidate recognises any professional-conduct point (e.g. acting for a shareholder not the board) and addresses it appropriately.
Performance Indicators quoted verbatim from the SRA’s published SQE2 Assessment Specification. Kellys SQE Examiner grades each attempt against these criteria, indicator by indicator.
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