Legal and/or Regulatory Issue
To go public, a firm must register with the Securities and Exchange Commission
(SEC) and file a prospectus. A prospectus is a legally binding document that must be
submitted with the Securities and Exchange Commission (SEC) that contains information
regarding public investment offerings (Murphy, 2022).
The fraud case involving Jane, the daughter-in-law, is one of the three difficulties that
comes to mind. Jane's fraud case may eventually cause potential investors to be wary. Both
Fred and Sally will have to show what internal controls have been implemented in order to
reduce future risks. This, too, will aid in removing any doubts that an investor may have
about financial control, as well as assisting with SOX compliance. Second, Tammy has a
pending sex discrimination complaint that must be reported because she was not offered the
bookkeeping job when she applied, and instead Fred and Sally hired Ted, an experienced
accountant. This claim is covered by Title VII of the Civil Rights Act of 1964, which
prohibits employers from discriminating on the basis of race or religion (EEOC, n.d.).
Tammy must show that she was completely qualified for the bookkeeper position, and Fred
and Sally must provide a valid justification for Tammy's dismissal from the employment.
Tammy must establish cause for discrimination once they can explain why they didn't offer
her the job. Although Fred and Sally may have an easier time proving their case because
Tammy has just worked as a delivery driver for the company and has no prior accounting
skill set. Ted, on the other hand, is a well-known accountant with a solid educational
background, making him a better fit for the bookkeeper role. Third, Fred's presence on a
prominent talk show with doctors could raise questions about intellectual property rights if
the public misunderstands and believes the doctor is the proprietor of the invention. This is
also connected to Bob's online exhibition of Fred's cough syrup formula, which he reverse
engineered.
Legal Test:
To be in conformity with government requirements, Fred and Sally must first file a
registration statement with the SEC, along with an S-1. This will necessitate a full description
of the company's held properties, as well as the disclosure of all financial information and
any previous or ongoing legal concerns. They will be in compliance with requirements after
this is accomplished. Ted's hiring as an experienced accountant will also demonstrate to the
company's investors how the company is attempting to resolve previous financial issues.
Recommendation:
I would advise the company not to go public at this time because they are still
embroiled in a number of legal battles. They can, however, go through the venture capital
process while planning to go public in the next few years. In order to become a public
company, they will also need to convert to a corporation. This will also be a fantastic time for
them to begin the educational process and begin preparing themselves if this is the path they
absolutely want to take.
Resources:
EEOC. (n.d.).Title VII of the Civil Rights Act of 1964. U.S. Equal Employment Opportunity
Commission. (n.d.). Retrieved April 5, 2022, from7https://www.eeoc.gov/statutes/title-
vii-civil-rights-act-1964
Kubasek, N., Browne, N. M., Herron, D., Dhooge, L., & Barkacs, L. (2019). Dynamic
Business Law (5th ed.). McGraw Hill.
Murphy, C. B. (2022, February 8).7What is a prospectus?7Investopedia. Retrieved April 5,
2022, from7https://www.investopedia.com/terms/p/prospectus.asp
SEC. (n.d.). Initial public offering (IPO). Initial Public Offering (IPO) | Investor.gov. (n.d.).
Retrieved April 5, 2022,
from7https://www.investor.gov/introduction-investing/investing-basics/glossary/initial-
public-offering-ipo
