辽大亚澳公司法期末考试用笔记.doc

Company Law Summary of Topics1.1 Joint VenturesA Joint Venture is where separate entities conduct some combined project or venture, sharing the resulting product, not as a business in common, but as independent operators in their own right. Pursell v NewberryJV advantages Conduct separate business and even compete in different areas with fellow Joint Venturers. Each Joint Venturer is liable only for their own activities. Each Joint Venturer can make their own taxation arrangements and raising of capital. Joint Venturers have a lot of privacy and can keep secret their affairs from another member. Joint Ventures are not subject to any particular regulation other than the business form of their organisation.JV distinguished from Partnerships JV receive a pre-determined share of the enterprise product. JV not subject to the Partnership Act and consequent mutual rights and obligations. JV are responsible for their own individual liabilities and obligations. JV can sell their share to another, subject to the Joint Venture Agreement.1.2 PartnershipsPartnerships are groups of 2 or more legal persons who associate in a mutual business enterprise and distribute the profits amongst themselves.Partnerships are defined in s. 5 of the Partnership Act as the relation which subsists between persons carrying on a business in common with a view to profitAn Association and a Joint Venture are not Partnerships because an Association does not distribute dividends to its members, and the Joint Venture does not carry on a mutual business.Liability of partners for Torts/contracts s 14; Fiduciary duty s 32-34; Relationship b/w partners s 23, s 24; New Partner Lib. s 21Rights & Duty b/w Partner s 28; Partner member No s115Partners Dealings with Outsiders Partners are both Principals and Agents of their Partnership. s9 Partners are liable for the actions of fellow Partners where those actions: are connected to the business. Mercantile Credit v Garrod. are actions done in the usual business manner. Golberg v Jenkins are actions of a type normally carried on by the Partnership,Unless the Partner does not have authority and the outsider was aware of the lack of authority. An outsider on discovering that a person was a Partner cannot hold the Partnership liable, they must have been aware that a Partnership existed.Liability of Partners for Torts and Contracts Joint Liability is where the Partners named in litigation are sued together. No further action can be taken against the partnership. Several Liability allows Partners to be sued individually at any time for the liabilities of the Partnership. Torts, Crimes and other wrongs allow for Several Liability. s14. A Partnership will be liable for wrongs whether they receive any benefit or not. Polkinghorne v Holland. The Partnership Act distinguishes between obligations where Liability is Joint or Joint and Several. Contractual obligations are joint liabilities.2. Introduction to Company LawThe ASIC Executive body - administers Co Law; Reports to the Gov./ disseminates information & advises private sector Acts as a Watchdog , Prosecutes offenders; Advises both the Government and Corporations as to Company Law. Keeps Databases of information and Registers for the Public. (ASCOT) Registers newly incorporated companies. Corporate Law Reform Program Act 1999: introduce a statutory business judgment rule; introduce a statutory derivative action for shareholders clarification of directors duties: care and diligence, good faith subsidiaries director able to make decisions in good faith (favouring the parent); Changes to civil penalties applying to directors fundraising easier and more options, outside of just the prospectus; change accounting standards Takeovers become easier; right of ex directors to inspect the books indemnity of legal costs of company officers and auditors 2.1 Concept of the Company Form an entity in its own right s119, has a legal personality to do what a human can do s124 shareholders liability is limited to the paid value of their share s515 517; co. can call up the unpaidamount s254MAdvantages of the corporate Form shareholders/managers separate entities from the company itself. Limited liability of members. can sue and be sued in its own right; Continual existence, transfer ownership. Tax advantages; A useful means of raising capital ; A means of risk taking and entrepreneurship Disadvantages of the Corporate Form Greater regulation/penalties - registers, accounts and annual returns Less privacy - the ASIC can examine as can members; Application of the Corporations Law legislation s9Different Types of CompaniesCompanies can change Status/coy type. s 162, 162-66 note Pt 2B.7; can incorporate with one member s 1145 types of Company according to their liability. s112: 1. Limited by Shares s 112 (1). Shareholders are only liable for the value of their Shares s516. 2. Limited by Guarantee. Co. do not have Share Capital, members Guarantee a fixed amount if the Co. is wound up 3. Limited by Guarantee and Shares No new Companies in this form can be registered.4. Unlimited Company s112 (1) (d). members personally liable for all the liabilities 5. No Liability Co. Mining Co. under the Mining Act,not guarantee to return any Capital or Debt s.112 (2) & (3).Proprietary Companies must have the following: s113 have Share Capital - includes unlimited Coy but not NL limit its Shareholders 1 to 50 s113. not engage in an activity that requires disclosure to investors s.113 (3).Proprietary Coy: Small Proprietary Companies & Large Proprietary Companies. s45A. Small Proprietary Coy has 2 criteria: Turnover less than $10m Total Assets are less than $5m The Company has less than 50 Employeeshas Advantages not having to prepare financial reports each Year or / have an Audit s292. Small Proprietary Companies replace the old Exempt Proprietary Companies.Large Proprietary Coy is one which does not qualify as a Small Proprietary Company.Proprietary Companies Advantages:1. can have one Director and One Shareholder - take the advantages of a one person company s1142. not hold an Annual Meeting. s250N, 250P. Resolutions signed without a Meeting. s249A3. can make Loans to Directors s207, 208. 4. no upper Age Limit on Directors (72 years) s14335. Auditor can be appointed from the members of a company. s3246. Liquidator can be appointed from the Membership of the Company. s532(1)7. can restrict (pre-empt) the free transfer of its shares s254D.8. can remove a director at any time (subject to its constitution) s203CDisadvantages: limit of shareholders to 50 and the restriction on raising capital.Public Companies1. no limit to their Shareholders but have at least 3 Directors s201A(2).2. can invitate the Public with disclosure statements or a Prospectus to buy its Securities.3. Directors must Retire at 72 year old4. Directors can always be removed from the Company. 5. no restriction on raising capital from the public or issuing securities6. must have a company secretary s204A7. Must hold an annual general meeting s250N8. Must lodge annual financial reports s292 One Person CompaniesAll proprietary companies can form with only one member/ director s114 A sole director may exercise all powers of the company s198E(1) s135 (1) Replace rule not apply single person co. no goverance rule unless adopted constitution Bankruptcy of a sole director/shareholder s201F(3),(4),(5) Death or Mental incapacity of sole director s201F(2),(4),(5) One director can appoint another director merely by signing a record s 201F(1) Resolutions can be passed without a meeting, by placing it in writing s 249B(1) Remuneration of sole director s202C Outsiders dealing with the company can assume that the director acts on behalf of the company s128, 129Other Types of Companies Holding Companies - control a subsidiary Company. special provisions - Group Accounts. Subsidiary Companies are owned by another Majority s46. Foreign Companies are Coy incorporated in another country. Trustee Companies are incorporated trustees - manage peoples estates by licence. 2.2 Registration of a CompanyPre-registration : Registration one application form contain : type of company; proposed company name (if any - reservation of a name s601DA) potential members, shares (numbers and amounts), directors (all details) and address or registered office, office hours (for a public company), place of business s117. If a guarantee co - the amount guaranteed; If a public company with a constitution - a copy of its constitution.ASIC issue a Certificate of Incorporation & ACN s119 and comes into existence s118 from that point.Post-registration: Company must appoint a Company Secretary (if a public company) s204A Use ACN on all Company Documents. Establish Share Registers & issue share certificate s1096, Minute Books s251A, Financial records s286 289 display company name & has regular office hours s144, s145 Invention Finance P/L & Ors v Flavel must lodge within a month of Incorporation all the details of its Address and names and addresses of Directors. Public company must hold an annual general meeting within 18 months of its registration s250N 2.3 Lifting the Veil of Incorporation Incorporation of a Co becomes a distinct Legal Entity/a Legal Person is distinct from its Employees and Members. s119. Coy has the same liability as a Natural Person. s124. Members only liable for the Paid Up Value of Shares. Coy cannot be used to Cover or Veil what is Illegal, Fraudulent, Against Public Interest. If Individuals cover their wrongful activities, Court may Lift the Veil of Incorporation not allow the protection of the Corporation. Green v Bestobell Industries P/LStatutory Piercing of the VeilCL holding individuals responsible for their actions: s131(2) a Promoter is liable until the Company ratifies their Pre-registration Contracts. s254T Directors are Personally Liable for Dividends if there are insufficient profits. s588G A Director personally liable for a debt where there was no reasonable grounds to believe it could be paid. Management is liable for any debt incurred while the co is Insolvent. Statewide Tobacco Services Ltd v Morley s588V-s588Y holding Co. liable for subsidiaries insolvent trading. Income Tax Assessment Act, Environmental Protection Act, Occupational Health and Safety The Common LawCompanies are Separate Entities from their Founders and Owners. Salomon v Salomon.Lee v Lees Air Farming, Macaura v Northern Assurance, Industrial Equity v Blackburn.1. Residence of Company - Malayan Shipping Co v FCT2. Fraud - Used Co to cover a personal fraud/ breach of covenant Gilford Motors v Horne3. Agency - Parent Co & its Subsidiary not be viewed as separate entities. DHN Food Distributors v Tower London Borough Council, Industrial Equity v Blackburn, Pioneer Concrete Services Ltd v Yelnah Pty Ltd & Ors 4. Winding up on Just and Equitable Grounds - court wind up the company Where an incorporation has led to unfairness and inequity. Ebrahimi v Westbourne Galleries. 5. Unfair Consequences of Incorporation -.Where as a result of inc. an Unfair situation arises. Malyon v Plummer6. Insolvency-director allows trade insolvent, the courts will hold the directors liable. Statewide Tobacco Services v Morley3. Company Constitution The Replaceable Rule Co no longer has to have a constitution s134, can adopt the replaceable rules s136 except NL or guarantee Co No needs to have a memorandum of association Co can elect to have replaceable rules (39 different rules), existing constitutions will continue till replaced s1415 Replaceable rules apply to all new coy s134, 135, public coy must inform ASIC if they abolish constitution Replaceable rules may be amended by legislation or the coy changing the provision itself s136Choosing to have a company constitution: have different classes of shares issues part paid shares and potentially may forfeit shares for non payment replaceable rules are considered insufficient for internal control a listed public company ; NL Co can not recover capital by call which refused pay s112 certain provisions must be included in a constitution eg holding a licence, superannuation coy 3.1 Replaceable rule not apply to Single person companies s135(1) and must comply with director may exercise all powers of the Co s198 E director may appoint another director by recording and signing the record s201F director is entitled to remuneration, travel & other expense that co resolve to pay s202C If a single person company does adopt a constitution - then it will be in addition to s224BIf the company become more than one member then it reverts to following the replaceable rules s135(1) and will no longer applyReplaceable Rules in detail a table of rule s1411. some replaceable rules are mandatory for public coy: proxies form s250C2. single shareholder Co not bound by replaceable rules but governed by s198E(1)(2), s201F, s202C 3. replaceable rules apply only to Pty coy not to public coy : s254D pre-emption restrict rights for member transfer shares s254W (2) dividend rights on shares in proprietary companies-when div. Can be paid s1091E additional general discretion for directors of Pty coy to refuse to register transfers 4. s194 director can make decision over contracts in which they personally gainSignificant replaceable rules:Directors1. s201G: company can appoint a director2. s201H: directors can appoint other directors3. s201K: alternate directors: only entitle to notice of directors meeting if the appointing director requires the company to give the alternate director notice4. s198A: powers are widely held by directors5. s198B: negotiable instruments: can be executed by a single director6. s198C, 201J, 203F managing director: have exclusive powers of all directors7. s203C: proprietary company can remove their director8. s203A: directors may resign by giving written notice to the company9. s194: directors may be interested in a contract with a Pty coy if director discloses their interest in the contract10. s202A: remuneration of directors11. s248C: calling a directors meeting: can be called by reasonable notice to other directorDriectors Meetings s248A: circulating resolutions are permitted for directors meetings s 248F: quorum at directors meeting: can be determined by directors and is usually 2Meetings of Members s249C: calling of meetings of members by director s249J(4) notice can be given by fax or electronic means s249T: quorum at a general meeting: can be 2 members s249U: chairing meetings of members s249X: who can appoint a proxy for Pty co only s250E: how many votes a member has s250J: how voting is carried out s250M: when & how polls must be takenCompany Secretary s204F: terms of the secretarys office is determined by directorInspection of Books s247D: company or directors may allow members to inspect booksShares s254D: pre-emption for existing shareholders on issue of shares in Pty coy - they receive first preference in proportion to the shares they hold s254U provisions on the payment of dividends: members not need to vote to approve of dividend declaration - dividends can be paid in other forms cash, shares options and transfer of assets s254W(2) dividend rights for shares in Pty coy: only applies to Pty coy when directors pay dividends as they see fitTransfer of Shares s1091AA: transmission of shares on death s1091AB: transmission of shares on bankruptcy s1091B: transmission of shares on mental incapacity s1091D: registration of transfers s1091E: additional general discretion for directors of Pty co to refuse to register transfer3.2 The Contractual Effect of the constitution and replaceable rules company and each member (shareholder or guarantee member) company and each director and company secretary between members and other members s140(1) can not force members to increase liability: taking up of additional shares s140(2) Hickman v Kent; Rayfield v Hands; Eley v Positive Government Security Life Assurance;Forbes v NSW Trotting Club Ltd3.3 The objects clause s125 A company can limit its activities or set out express objects s 125, Ultra vires means to be acting in an unauthorised way, make a contract outside bound of Obj.C. An exercise of power is not invalid because it is contrary to an express restriction or prohibition s 125(1) No activity is invalid because it is contrary to or beyond any objects in the companys constitution s 125(2). Outsiders are entitled to assume that the company, or its officers, have complied with the company constitution. Directors will not be personally liable for loss suffered by the co when they have engaged in an activity contrary to the objects or restrictions in the constitution. Directors may still be liable for breach of duties under s180-4Breach object clause:1. evidence of an offence s180-42. court may order preventing them from managing the corporation s206E-F3. for an order under s232-233, where the affairs of the co are being conducted unfairly or prejudicially or oppression4. as a basis for a statutory derivative order under s236-2375. for a restraining order under s1324 to prevent co from entering some agreement6.