Aaron Autoking Has Inherited a Garage and Car Repair Business from His Father Which Operates

ISLP/LAZ Commercial Law Training Course

Case Study – ZAMBIA

September 2013

AutoAfter Care Inc.(“AAC” or the “Company”) operates a chain of automobile parts stores and repair centers throughout the United States and Canada. The Company is incorporated in Delaware and has its international headquarters in Cleveland, Ohio. The Company’s shares are publicly traded on the New York Stock Exchange. The point of contact atAAC is Endi Piper, its Executive Vice President and General Counsel.

AAC is looking to expand into markets that have a rapidly growing middle class. For a variety of reasons, AAC has picked South Africa as its firstinternational market outside of the Americas. Through its professional contacts, AAC has been introduced to Sandile Mtirara (“Mtirara”), who it believes to be an up-and-coming South African businessman. AAC wants to explore a business relationship with Mtirara to introduce the AAC brand into Sub-Saharan markets, starting with Zambia. At this stage, the Company has determined that its best option is to acquire an existing Zambian business through either a stock or asset purchase transaction.

You are being engaged by AAC to assist it in its due diligence efforts to further investigate, design, and, if appropriate, execute a business transaction or series of transactions to achieve AAC’s objectives. Ms. Piper will instruct you, among other things, to provideguidance and assistance to Mtirara (and the local counsel he will engage for this transaction) in “getting his act” together to become a trusted AAC business partner.

Mtirara currently operates a carrepairbusiness in Lusaka with his elderlyfather underthename“Bobby Coolwheels”. Mtirara’s fatherstartedBobby Coolwheels manyyearsagoandhasneversoughtany legaloraccountingadviceaboutthe business. Hecontinuestohelp Mtirara “keepthebooks” of the business using Microsoft Office and Quickbooks, each of which hedownloaded without a license. Mtirara does not have formal papers regarding the deal between him and his father regarding the ownership of the Booby Coolwheels.

Bobby Cooolwheels islocated inLusaka’s central business district on a lot consistingofa garageand smallparkingarea, each of which are owned by Mtirara’s father and leased to Bobby Coolwheels under oral leases. Inadditionto Mtirara and his father, Bobby Coolwheels has two additional employees whoarepaidtheirwagesincashattheendofeveryweek. Mtiraraessentiallypayshimselfashiswageswhatevercashisleftoveraftertheemployeesandotherexpensesarepaid.

Bobby Coolwheels sells some new and used spare parts to retail customers and servicescarsofcustomers (mostly from the local neighborhoods) aswellas a fleetof100 vans and carsownedby the government of Zambia. This fleetisservicedforanannualfixedrate. Mtirara has plans to expand his business to include the fleets owned by private companies, other ministerial offices of the national government. Every day customers pay cash for parts bought and upon the rendering of services. Fleet customers are typically billed monthly.

Bobby Coolwheels buys its parts from a number of different suppliers and usuallypays cash on delivery. Coolwheels would prefer normal commercial terms but negotiations on this point have been slow. Bobby Coolwheels has some enginediagnosticequipmentandothermachinery and equipment but is behind industry standards and what AAC normally offers its customers. Some of Bobby Coolwheels equipment was bought by the company and some by Mtirara’s father; the latter is titled in his name and is “rented” to Bobby Coolwheels under oral leases. Bobby Coolwheels does maintain insurance on its property and equipment.

Currently, neither Bobby Coolwheels nor Mtirara have formal arrangements with a commercial bank.Mtirarahasfinanced Bobby Coolwheels’ operations from the company’s earningsor,ifneeded,byborrowingfromhisfather. He payshisfather5%interestontheamountborrowed. Mtirara wants to grow this business and is excited about his meeting representatives from AAC.

Mtirarahas engaged a Zambian lawyer to represent him but has not yet met with or briefed her. Mtirara is impressed with AAC’s offer to make you available to his team to get his business house in order. //NS//