Corporate Law 2016 VOO
CorporateLaw
2016
VOO
Week1–RegulatoryFramework&Registration................................................11TodaysLecture............................................................................................................11Lipton,HerzbergWebsite........................................................................................11Assessments.................................................................................................................12Whyiscompanylawimportant?...........................................................................12Theroadtocompanylawharmony...............................................................................13Section51(xx)oftheAustralianConstitution...........................................................14Historyofcompanylaw.......................................................................................................14JointStockCompanies..........................................................................................................14CompanylawincolonialAustralia.................................................................................15QuestforCth/StateUniformity........................................................................................15QuestforCthControl............................................................................................................16NSWvCth(1990)....................................................................................................................16Cases............................................................................................................................................16Regulators.................................................................................................................................17TheAustralianSecurities&InvestmentsCommission..........................................17Whatisacompany?...............................................................................................................18ConceptsofaCompany........................................................................................................19SalomonvSalomon&CoLtd[1897]AC22................................................................20LeevLee’sAirFarmingLtd[1961]AC12...................................................................22MacauravNorthernAssuranceCoLtd[1925]AC619..........................................23CEPUvQueenslandRail[2015]HCA11......................................................................23
Piercingthecorporateveil.....................................................................................24a)Wherecompanyusedtoavoidexistinglegalduty.............................................25b)Insolventtrading...............................................................................................................26c)Liftingthecorporateveilofgroupcompanies.....................................................27d)Corporateliabilityforcrimesandtorts..................................................................27Thecompanycomparedwithotherformsofbusinessorganisations............29
TypesOfBusinessStructures.................................................................................29Factors.........................................................................................................................................29Company....................................................................................................................................30SoleProprietor/Trader.......................................................................................................30Partnership...............................................................................................................................30JointVenture............................................................................................................................31Trust.............................................................................................................................................31CompanyorAlternativeBusinessStructure?............................................................32
TheProcessofRegistration(orIncorporation)..............................................33HowToCreateACompany................................................................................................33Theeffectofregistration.....................................................................................................33SeparateLegalEntity–SoWhat?....................................................................................34
Revision.........................................................................................................................34Benefitsofincorporation....................................................................................................37Whatmakesacompanytheperfectinvestmentvehicle.......................................37
Week2–Companies,ConstitutionandReplaceableRules..............................38TodaysLecture............................................................................................................38
CompanyTypes.......................................................................................................................38CompanydefinedbyTwoCharacteristics...................................................................38Companylimitedbyshares................................................................................................39Companylimitedbyguarantee........................................................................................39Unlimitedcompany...............................................................................................................39NoLiabilitycompany............................................................................................................39
Public&ProprietaryCompanies..........................................................................40Distinction.................................................................................................................................40ProprietaryCompanies........................................................................................................41Test(2>Requirements)......................................................................................................41
ASXListedCompanies...............................................................................................42HoldingandSubsidiarycompanies......................................................................43Testinfindingacompanyasubsidiaryofaholdingcompany:.........................43Controlledentities.................................................................................................................44
CONSTITUTION&REPLACEABLERULES............................................................45InternalGovernanceRules.................................................................................................45WhenaCompanyisUsingOldorNewRegime.........................................................46
ReplaceableRules......................................................................................................46Constitution..................................................................................................................47Adoption&alterationoftheconstitution....................................................................48Limitsonrighttoalterconstitution:CorporationsAct..........................................48LimitsonrighttoalterConstitution:Commonlaw.................................................49GambottovWCPLtd(1995)ACLC342.........................................................................50(1)Testifalterationdoesnotinvolveexpropriationofshares.....................51
Gambotto’scase:Test...........................................................................................................51(2)Testifalterationdoesinvolveexpropriationofshares.............................51
NonComplianceWithInternalGovernanceRules..........................................52StatutoryContract......................................................................................................53Limitationsonenforcementofthestatutorycontract...........................................53Singledirector&shareholdercompanies...................................................................54
Revision.........................................................................................................................54TutorialQuestion,Chapter3,Question2....................................................................55TutorialQuestion,Chapter4,Question2....................................................................55TutorialQuestion,Chapter4,Question3....................................................................56
Week3–ThirdParties&Pre-RegistrationCTs...................................................58Today’sLecture...........................................................................................................58Companycontracts....................................................................................................58Twowaysofacompanyenteringintoacontract:...........................................59(2)ContractingthroughanAgent...................................................................................60ActualAuthority.................................................................................................................60
ApparentAuthority...............................................................................................................62ThirdPartyarguingaCTisvalid:...............................................................................63
CorporateLiabilityforCrimesandTorts...........................................................68PromotersandPre-RegistrationContracts.......................................................69PromotersandtheirDuties...............................................................................................70Whoisapromoter?..........................................................................................................70DutiesofPromoters.........................................................................................................71Conflictofinterest&disclosure..................................................................................71Remediesforbreach........................................................................................................71
BeforeRegistration................................................................................................................72AfterRegistration...................................................................................................................72Liabilityforpre-registrationcontracts.........................................................................72Ratification&Elements........................................................................................................73Person’sliabilityinabsenceofratification(S131(2))..........................................73Person’sliabilityevenwithratification(S131(4)).................................................74
SummaryofPre-RegistrationCTs........................................................................74FundraisingbyIssuingShares...............................................................................75Whenismemberapprovalrequired?............................................................................75Ch6DDisclosureRequirements......................................................................................76Whyisdisclosureneeded?............................................................................................76DisclosureDocuments.....................................................................................................77Exceptions–DoNotNeedDisclosure......................................................................77Consequencesofbreachofdisclosurerequirements........................................77Defences................................................................................................................................78
Revision.........................................................................................................................78TutorialQuestion,Chapter5,Question3....................................................................78Answer...................................................................................................................................79
TutorialQuestion,Chapter7,Question3....................................................................79Week4–Shares,Memberships&Dividends........................................................81Today’sLecture...........................................................................................................81Shares.............................................................................................................................81Whatisashare?......................................................................................................................81Classesofshares.....................................................................................................................82Variationofclassrights.......................................................................................................86CorporationsActs.246(c)..............................................................................................88
Challengingavariationofclassrights...........................................................................88ShareCapital................................................................................................................89Whatissharecapital?...........................................................................................................89Maintenanceofsharecapital:...........................................................................................89ReducingShareCapital........................................................................................................90Permittedsharecapitalreductions(s.256B)........................................................90Permittedsharebuybacks(s.257A).........................................................................93Permittedfinancialassistance(s.260A)..................................................................94
Membership(9)..........................................................................................................97Liabilityofmembers.............................................................................................................99
Dividends(10)...........................................................................................................100Whataredividends?...........................................................................................................100Canshareholdersforcepayment?.................................................................................100Remediesforimproperdividendpayments........................................................102
Revision.......................................................................................................................103Week5–Debentures,PersonalPropertySecurities&Directors................106Directors.....................................................................................................................106FinancingCompanies..............................................................................................106PartB–DebtFinance..............................................................................................108TypesOfDebtCapital.........................................................................................................1091. Loan..............................................................................................................................1092. Debenture..................................................................................................................109
Debentures..............................................................................................................................110
DebentureElements:.....................................................................................................112CompanyCharges(SecurityInterests).......................................................................113PersonalPropertySecurities......................................................................................113RegistrationOfSecurityInterests............................................................................116PriorityRules....................................................................................................................117Summary:PPSADefaultpriorityrules...................................................................118Circumstanceswheresecurityinterestsmaybeinvalidatedandchallenged...........................................................................................................................118
Directors.....................................................................................................................119TypesOfDecisions...............................................................................................................119TwoOrgans.............................................................................................................................119Directors’Decision-MakingPowers.............................................................................120Members’“Reserved”DecisionMakingPowers.....................................................121TheRoleOfCompanyOfficers:Directors..................................................................121WhocanbeaDirector?.................................................................................................122Functions.............................................................................................................................122
TheRoleOfCompanyOfficers:Secretary..................................................................122WhocanbeaSecretary?...............................................................................................122Appointment&Function..............................................................................................122
TypesofDirectors................................................................................................................123Whocanbeappointedasadirector?......................................................................124Howaredirectorsappointed?...................................................................................124Howaredirectorsremoved?......................................................................................124Howcanadirectorbedisqualified?........................................................................125
BoardMeetings.....................................................................................................................125Canboardsdelegatetheirpowers?.........................................................................125Responsibilityofdirectorsforactionsofdelegate...........................................125
Week6–CorporateGovernance&DutiesofDirectors...................................128CorporateGovernance...........................................................................................128DirectorsDuties........................................................................................................134CategoriesofDuties.................................................................................................136DifferencesbetweenGeneralLawandStatutoryDuties....................................138WhoOwesTheDuties........................................................................................................139WhoAreTheDutiesOwedTo.........................................................................................140DutyToIndividualShareholder................................................................................140
WhoEnforcesTheDuties.................................................................................................140ConsequencesOfBreachingADuty.............................................................................140
DutiesOfCare,Skill&Diligence..........................................................................140DutyOfCare:s180;Law;CT...........................................................................................140WhoOwesTheDuty.......................................................................................................141WhatStandardOfCareIsExpected.........................................................................141TheReasonablePersonStandard.............................................................................143WhenAppointedBecauseOfAParticularSkill..................................................145
BreachOfDutyOfCareWhere:......................................................................................145Defences...................................................................................................................................146(2)Delegation&Reliance............................................................................................147
DutyToPreventInsolventTrading:s588G....................................................149S588G:4Elements..............................................................................................................150WhoOwesTheDuty............................................................................................................150
TypesOfDebtsThatCanBeIncurred.........................................................................150WhenADebtIsIncurred..............................................................................................151
WhenACompanyIsInsolvent........................................................................................152RebuttablePresumptionsOfInsolvency...............................................................153ReasonableGroundsForSuspectingInsolvency...............................................153
DefencesforInsolvency.....................................................................................................154(1)Reasonablegroundstoexpectsolvency.........................................................154(2)Reasonablerelianceoninformationprovidedbyothers.......................155(3)Absencefrommanagement.................................................................................155(4)Reasonablestepstopreventincurringofdebt...........................................156
Revision.......................................................................................................................156Week7–CorporateGovernance&DutiesCont................................................1591)DutiesOfLoyalty&GoodFaith:S181(1)(a)..............................................159
‘GoodFaith’Meaning.....................................................................................................160Stakeholders......................................................................................................................160WhatAreTheCompany’sInterests.........................................................................160
Summary..................................................................................................................................1622)DutyToExercisePowersForAProperPurpose:s181(1)(b).............162i)WhatPowersDoDirectorsHave...............................................................................162ii)ProperPurposeTest/Elements..............................................................................163Example:PowerToIssueShares26:14.................................................................163MixedPurposesAndThe‘ButFor’Test................................................................164
iii)OtherExamplesOfImproperPurpose.................................................................164ConsequencesOfBreach:DutyToActInGoodFaithAndForProperPurpose........................................................................................................................165DutyToRetainDiscretion.....................................................................................166DutyToRetainDiscretion................................................................................................166
ConflictsOfInterestAndDisclosure–Ch13.3...............................................166CommonLawDuties...........................................................................................................167i)WhoOwesTheCommonLawDuties?...............................................................167ii)CommonLawConflictRule...................................................................................167
DutynottoMisuseConfidentialInformation.................................................173ConstitutionEffectsOnDuties.............................................................................173StatutoryDuties:CorporationsAct....................................................................174(1)DutyToDiscloseMaterialPersonalInterest:S191......................................174a)WhatIsTheStatutoryDutyOfDisclosure......................................................174b)MaterialPersonalInterest.....................................................................................174c)ExemptedInterests...................................................................................................175d)Standingnotice–onewaythatthisnoticecanbegiven..........................175e)Entitlementofinteresteddirectortovote......................................................175f)ConsequenceofBreach............................................................................................176
(2)DutyNotToMisuseInformationOrPosition–Ss182And183..............176a)Whoowestheduty?..................................................................................................176b)Whenisthereimproperuseofpositionorinformation?........................176c)Togainadvantageorbenefit.................................................................................177ConsequenceofBreach.................................................................................................177
(3)RelatedPartyTransactions-Ch2E......................................................................178a)Financialbenefitstodirectorsofpubliccompanies...................................178b)Howtosolvearelatedpartytransactionproblem.....................................178
c)Definitions.....................................................................................................................178d)Exemptions...................................................................................................................179e)Memberapproval(finalstep)...............................................................................180f)Consequenceofbreach.............................................................................................181
RemediesAndPenaltiesForBreachOfDuty:Ch.13.6................................181WhoEnforcesTheDuties.................................................................................................182EnforcementOfDirectorsDutiesByASIC.................................................................182(1)PrescribedOffences................................................................................................182(2)CivilPenaltyProvision...........................................................................................183
ExonerationAndReliefFromLiabilityForBreachOfDuty:Ch.13.7.....186WhenCanReliefFromLiabilityBeGivenByTheCourt......................................186WhenCanABreachOfDutyBeRatifiedByTheCompany(Shareholders)186WhenCanBreachOfDutyNotBeRatifiedByTheCompany............................186InsuranceForBreachOfDuty.........................................................................................187ProhibitionOnIndemnificationForBreach.............................................................187
Week8–Shareholder’sMeetings...........................................................................189TypesOfMember’sMeetings(Members=Shareholders).................................189WhoCanRequestAMembers’Meetings....................................................................1891)Board...............................................................................................................................1902)SingleDirector............................................................................................................1903)Members........................................................................................................................1904)ACourt............................................................................................................................190ProperPurposeRequirement....................................................................................191
WhatIfProperNoticeIsNotGiven..............................................................................192WhatAreTheNoticeRequirements............................................................................192Whomustbegivennotice?.........................................................................................192Howmuchnotice?...........................................................................................................192Whatmustbeincluded?...............................................................................................192
WhatIfProperNoticeIsNotGiven..............................................................................194ConductingMeetings..........................................................................................................194Chairperson’sresponsibilitytoconductmeeting.............................................195PeopleintheMeetings..................................................................................................195ConductingMeetings.....................................................................................................196MemberVoting.................................................................................................................196
Week9–Shareholder/MemberRemedies..........................................................198Part1:Members’StatutoryRightsAndRemedies........................................198MembersStatutoryRights................................................................................................198(1)StatutoryDerivativeAction:s236...................................................................198
Member’sStatutoryRemedies.......................................................................................207ShareBuy-Out...................................................................................................................207ReplacementofDirectors............................................................................................208AppointaReceiver..........................................................................................................208AuthorisationofLegalActionbeCommenced...................................................208DirectornottoParticipateinManagement.........................................................208AlterationofConstitution............................................................................................208Winding-Up........................................................................................................................209StatutoryInjunction.......................................................................................................210StatutoryRightToInspectCompanyBooks........................................................210OtherRights.......................................................................................................................211
ShareholderRemediesinAction...................................................................................211PartB:Member’sPersonalRightofAction.....................................................212Member’sPersonalRightofAction..............................................................................212
TutorialQuestions...................................................................................................212Week10–ASICInvestigations;CorporateInsolvency;Receivership........216ASICInvestigationPowers(Ch.21)....................................................................216SourceOfASICInvestigatoryPowers..........................................................................216PowersToQuestionPersons..........................................................................................217PowersToInspectCompanyBooks.............................................................................218ConsequencesOfInvestigations....................................................................................218
CorporateInsolvency..............................................................................................218TypesOfExternalAdministrationForInsolventCompanies...........................2191)Receivership.....................................................................................................................220Revision...............................................................................................................................223
2)VoluntaryAdministration...........................................................................................2243)Liquidation/WindingUp.............................................................................................232Members’VoluntaryWindingUp.............................................................................234Creditors’VoluntaryWindingUp.............................................................................236CompulsoryWindingUpInInsolvency.................................................................237CompulsoryWindingUpOnGroundOtherThanInsolvency......................240
Deregistration...........................................................................................................251RevisionLecture.......................................................................................................252ExamRevision...........................................................................................................254AbouttheExam.....................................................................................................................254PracticeExams......................................................................................................................255
Week1–RegulatoryFramework&Registration
Ø RegulatoryframeworkØ RegistrationanditsEffects
TodaysLecture• Introduction&coursedetails• HistoryofCompanyLaw• Whatisacompany?
o Separatelegalentityo LimitedLiabilityo Perpetualsuccession
• Liftingthecorporateveil• Thecompanycomparedwithotherformsofbusinessorganizations• Companyregistration
o Howcompaniesarecreated
Lipton,HerzbergWebsite• Theauthorsofthetextbookalsohaveawebsiteathttp://www.lipton-
herzberg.com.au/index.htm.• Youwillfindpracticequestionsandothermaterials,including
informationonnewdevelopments,onthesesites.• Pleasenote:
o Usageofthesesitesisoptional.Theysupportthepersonallearningprocessesofstudents.MLL221lecturerswillnotreferencetheseinlecturesorassessments.
Assessments
Whyiscompanylawimportant?• Companiesareessentialactorsintheeconomy–theyaretheentityof
choiceforbusinessandcommerceinAustraliaandinternationally.• “Thelimitedliabilitycorporationisthegreatestsinglediscoveryof
moderntimes.Evensteamandelectricityarelessimportantthanthelimitedliabilitycompany”.
• NMButler,PresidentofColumbiaUniversity,quotedbyALDiamondinOrhnial(Ed),LimitedLiabilityandtheCorporation(1982)at42.
• “Wemaythinkthisisaratherextravagantclaim,butitsgeneralthrustisclear,andtelling:theimportanceofthecorporateformandoflimitedliabilityoverthepastcenturyandahalfhasbeenimmeasurable;thegreaterpartofthecommercialexpansion,thescientificdevelopmentandthemanyotherachievementswhichhavechangedtheshapeofsocietyduringandsincetheindustrialrevolutionhavecomeaboutthroughthemediumofthelimitedcompany”
o LSSealy,CompanyLawandCommercialReality(1984)at1.• ItIsanimportantinstitution,entityandconcepttograsp.
Theroadtocompanylawharmony
• Today,companiesareregulatedbyCommonwealthlegislation,theCorporationsAct2001(Cth)
o Hasnotalwaysbeenthisway.Prefederationandtheyearsfollowing1901,companiesinAuswereregulatedbyStatestatues.
o Thismeansthattherewereatleast7bitsofstatelegislationsayingwhatacompanywas/whatitcouldtoetc.
o WhataregulatoryburdenthiswouldhavebeentohaveacompanyoperatinginMelbourne,alsootherstates,andalsomustbeconcernedwithlawsnotjustinitshomejurisdictionbutothersaswell.
o Statesagreedtoadoptsimilarlegislation.Howeveraftertimeinvariablytherewerechangesanditnevergottoasysteminwhichtherewasonecompanylawacrosstheboard.
o Thisdidn’thappenuntil1989.• In1989theCommonwealthtriedtotakecontrolandlegislateforall
States(sotherewouldbejustonepieceoflegislation)• Problem:s.51(xx)oftheAustralianConstitution
o Constitutionalvaliditywaschallengedin1989onthebasisthatCthdidnothaveauthorityunders5120tolegislateinrelationtocompanies.
• HCinNSWvCth(1990)saidtheCommonwealthdidnothavethepowerunders.51(xx)oftheConstitutiontolegislateinrelationtothe‘incorporation’ofcompanies
• Afterthis,theStatesallagreedtorefertheirpowersinrespectofcompaniestotheCommonwealth
• CommonwealththenpassedtheCorporationsAct(2001)Cth
Section51(xx)oftheAustralianConstitution• s.51(xx)empowerstheCommonwealthParliament(i.e.nottheStates)to:
o “Makelaws...withrespectto...foreigncorporations,andtradingorfinancialcorporationsformedwithinthelimitsoftheCommonwealth”
• HChadacloselookatthissectionandheldthislegislationwasinvalidandtheCthhadnolegitimaterighttolegislateinregardstothis.
• Question:o WhywouldthissectionoftheAustralianConstitutionpreventthe
CommonwealthParliamentfrommakinglegislationinrelationtocompaniesforthewholeofAustralia?
§ Theword‘formed’,meaningthatCthcouldonlylegislatewithregardstocompaniesthatwerealreadyinexistence.
• http://www.austlii.edu.au/au/legis/cth/consol_act/coaca430/s51.html• http://www.aph.gov.au/About_Parliament/Senate/Powers_practice_n_pr
ocedures/Constitution/par5cha1
• Thislegislation(1)setouttheprocessofincorporationbyregistration–theprocessthatwewillgothroughingroupassignment–ofcreatingacompany.
Historyofcompanylaw• 15thCenturyà
o CorporateAggregatescreatedbyRoyalChartergrantedtomonasteries,boroughsandtradeguilds
• Revolutionof1688o CompaniescreatedbyPrivateActsofParliament
JointStockCompanies• 17thCentury
o JointStockCompanieso Unincorporatedentitieso Basisofthemoderndaycompany:o Sharestransferableo Votingrightsattachedtoshareso Profitsdistributedthroughdividends
à• BubbleAct1720(UK)
o Speculationinjointstockshareso SouthSeaCompanyo BubbleAct–confinestradingtothesaleofsharesinformally
incorporatedbodiesà
• 1825o BubbleActrepealed
à
• 1844–Incorporationbyregistrationo i.e.notbyRoyalCharterorActofParliamento DistinctlegalentitywithperpetualsuccessionBUTshareholders
didnothavelimitedliabilityo “...legislativeancestorofmoderncompanylaw.”(Ford,p41)
à
• LimitedLiabilityAct1855o Liabilityofinvestors‘limited’totheamounttheyagreedtoinvesto Catalyst:largeamountofcapitalrequiredtofinancenewrailwayso Limited’atendofcompany’snamewarnedofshareholder’s
diminishedliabilityo Today:o Ltdo PtyLtd
CompanylawincolonialAustralia• CompaniesAct1862(UK)
o AdoptedbyAustraliancoloniesastheircompanylawà
• Late19thCVictorianDevelopmentso NeedforcapitaltofundgoldminingprompteduniqueVictorian
companylawdevelopmentso 1871–noliabilityminingcompanyo 1896–failuresinthe‘landboom’leadtorestrictionson
‘proprietarycompanies’–compulsoryauditandannualpresentationoffinancialstatements
à• 1901-Federation
o s.51(xx)Constitutiono TheParliamentshall...havepowertomakelaws...withrespectto:
-...Foreigncorporations,andtradingorfinancialcorporationsformedwithinthelimitsoftheCommonwealth
o EachStateretaineditsowncompanylegislation
QuestforCth/StateUniformity• 1961–62cooperativeregime
o Statesenacteduniformcompanieslegislationo ButtheStateActswerenotuniformandvariationsincreasedwith
time• CompaniesAct1981(Cth)
o CthParlenactedCompaniesAct1981(Cth)(lawinACTandNTpers.122ofConstitution)
o EachStateenactedaCompaniesCodethatwasuniformwiththeCthCompaniesAct
QuestforCthControl• CorporationsAct1989(Cth)
o CthlegislatedindependentlyoftheStatestointroduceanationalscheme
à• NSWv.Cth(1990)
o HCheldthattheCthlackedpowerundertheConstitutiontomakelawsabouttheincorporationofcompanies
NSWvCth(1990)• Doess.51(xx)oftheConstitutiongranttheCommonwealththepowerto
makelawsinrelationtothe‘incorporation’ofcompanies?• s.51(xx)empowerstheCthParlto:• “makelaws...withrespectto...Foreigncorporations,andtradingor
financialcorporationsformedwithinthelimitsoftheCommonwealth”• MajorityoftheHighCourt(6:1)• Theword‘formed’isusedinthepasttensetorefertocompaniesthat
havealreadybeenincorporated.• ThismeanstheCommonwealthcannotrelyons.51(xx)tomakelaws
aboutbringingnewcompaniesintoexistence(i.e.theprocessofincorporatingcompanies)
• “Thepowerconferredbys.51(xx)tomakelawswithrespecttoartificiallegalpersonsisnotapowertobringintoexistencetheartificiallegalpersonsuponwhichlawsmadeunderthepowercanoperate.”(para8)
Cases• 1991Cooperativescheme–CorporationsLaw
o CthamendedtheunconstitutionalCorporationsAct1989–calledthe‘CorporationsLaw’
o EachStateenactedlegislationwhichadoptedtheCorporationsLawtobeitsCorporationsLaw
o CthauthorisedtheASC(nowASIC)toexercisepowersconferredbystatelegislation
o Cross-vestingofjurisdictionincorporationslawmattersintheFedCtandstateSupremeCourts
• ReWakim(1999)o HCheldthecrossvestingofjurisdictionwasunconstitutionalto
theextentitconferredjurisdictionontheFederalCourtwithrespecttomattersunderstatelaw(i.e.theCorporationsLawofeachstate)
• Rv.Hughes(2000)
o HCcastdoubtontheconstitutionalityofaschemebecauseitinvolvedthestates(undertheirrespectiveCorporationsLaws)conferringpowersonCommonwealthofficers
• CorporationsAct2001(Cth)o StatereferralofpowertotheCommonwealthunders.51(xxxvii)
Constitutiono Actcommencedoperationon15July2001
• RecentDevelopmentso Whatisa‘corporation’forthepurposeofs.51(xx)ofthe
Constitution?o Consideredin2015bytheHighCourtinQueenslandRailcase
Regulators• TakeoversPanel
o Publiccompaniesinatakeoversituation,lookingtocomplywithrulesinCorporationsAct.
o Ifthereisadisagreementintowhatonecompanyisdoinginatakeover,regardlessofbeingregulatedbytheASIC,theydonotgotoCourtstoresolvethedisputebutgotoatakeoverspanel.
§ Apanelof5membersgenerallycorporatelawyersinlargefirms,andtheirroletositasabodyandlooktowardscompaniesaredoinginatakeoversituation.Iffindinganissue,theyhavethepowertodeclareunacceptablecircumstancesandthroughthismechanism,thecompaniesarebroughtintoline.
• AustralianStockExchangeo Acompany.o WhenapubliccompanywantstolistonASX,oneofthethingsthey
mustdoisagreeasacontracttocomplywiththelistingrules.§ Anotherimportantsourceofregulating,whatpubliclylisted
companiescanandcannotdo(thisisoverandabovetheCorporationsAct).
§ Adsalayerofprotectiontoshareholdersforpubliccompanies.
• AustralianSecuritiesandInvestmentsCommissiono Companywatchdogandregulatorresponsibleforregulationof
companiesandCorporationsActinAustralia.o ASICbringsprosecution
TheAustralianSecurities&InvestmentsCommission• CommonwealthAgency(b/creferralofStatepower)• ResponsibleforensuringtheCorporationsActiscompliedwith• Legislativeauthority:• ASICAct2001(Cth)• CorporationsAct2001(Cth)• Powersinclude:• InvestigatebreachesoftheCorpsAct
• Instigatecivilproceedingsandcriminalprosecutions(concurrentwithDPP)
• AdvisesministersonnecessarychangestotheCorpsAct• Educationalrole• Morethan2millionAustraliancompanies• 99%ofthesearecompanieslimitedbyshares• http://www.asic.gov.au/asic/asic.nsf
Otherregulators
• AustralianStockExchangeo PrivateCompanyo Publiccompaniesthat‘list’onthestockexchange‘contract’with
theASXthattheywillcomplywiththeListingRules• TakeoversPanel
o Apeerreviewbodywithatleast5memberso Importantpartofthemachineryforthecontrolofcompany
takeovers(formerly,thesepowerswereheldbytheCourts)o Haspowertodeclare‘unacceptablecircumstances’
Whatisacompany?
a)SeparateLegalEntity
• Onregistration,acompanybecomesaseparatelegalperson• (s.119)Acompanycomesintoexistence…
• (s.124)Legalcapacityof:o Naturalperson
§ Ownproperty§ Contract§ Sueandbesued
o Bodycorporate§ Issueshares§ Grantacharge
• QueenslandRailCase
ConceptsofaCompany
Consequencesoftreatingthecompanyasaseparatelegalentity
1. Company’sobligationsandliabilitiesareitsown,andnotthoseofitsparticipants
o Shareholdershavelimitedliabilityo Liabilityofshareholdersislimitedtotheamounttheyhavenot
paidontheirshares.o Soifashareholderhasfullypaidfortheshares–hehasnoliabilityo Ifonlypaid$1onasharethatwasissuedbyacompanyatthe
priceof$3–theshareholder’sliabilitywouldbelimitedtotheamountunpaidontheshare-$2
2. Companycansueandbesuedinitsownname3. Companyhasperpetualsuccession4. Company’spropertyisnotthepropertyofitsparticipants5. Companycancontractwithitsparticipants• Discuss3caseswhichdemonstratetheseconsequencesofbeinga
separatelegalentityorhavingseparatelegalpersonality
Debt&Equity• Debt
o Shares,Bank• Equity
o Stocks,property• Asinvestors/shareholders,therearerisks
àLimitedLiability
• Limitedliabilityo Acompanyisaseparatelegalentityandnaturalpersonbutits
obligationarethecompaniesobligations,andnottheobligationsoftheotherparticipantsofthecompany.Ifthegoldminecollapsesandcausesdeathsandinjuriestolotsofpeoplebecauseofthecompaniesnegligence,thecompanyhasliabilityandcanbesueditself.
o Itisnottheliabilityoftheparticipantsofthecompanyorshareholdersbutthecompanyinitself.
o Not‘unlimited’butlimited–thelimitontheshareholdersislimitedtotheamountunpaidontheirsharecapital.
§ Sharescanbepartlypaidandthecompanycancallonanyremainingunpaidshares.
§ Limited–shareholderscannotbesued.
SalomonvSalomon&CoLtd[1897]AC22[EXAM]
• Facts
o MrSwasthesoletraderofashoeandleatherbusinesso CoAct1862(UK)required7shareholderso Salomon&CoLtdincorporatedo MrS99%shareholderandmanagingdirector
§ Wantedtoretaincontrolofthecompany,heissued20,000tohimselfand6sharestohissons.
§ Inaddition,MrSisstillmanagingdirectorandsonsontheboard.
§ Thereisnotmuchchangefromoperatingasasoletraderthanabusiness.
o Businessoperatesforawhilebutthengoesintoliquidation.§ Liquidatorrecoupsdebtsowing.
o MrSsoldbusinesstoCoforcashandsecureddebt§ ThecompanyisjustacharadeandisstillSolomon–the
liquidatorcansueSolomondirectlyforthedebts.o Businessfailed,assetsofCoinsufficienttorepaysecured(MrS)
andunsecuredcreditors
• Argumentso Liquidatorarguedthatbecausethebusinessoperatedbythe
CompanywasthesameasthatoperatedbyMrS,andbecauseMrShadeffectivecontroloftheCompany,thecourtshouldholdMrSliableforthelosssufferedbytheCompany
• HouseofLordso Acompanyisaseparatelegalentityeventhoughasingleperson
managesandcontrolsito Acompanycancontractwithitscontrollingparticipants
“Thecompanyisatlawadifferentpersonaltogetherfromthesubscriberstothememorandum[shareholders];and,thoughitmaybethatafterincorporationthebusinessispreciselythesameasitwasbefore,andthesamepersonsaremanagers,andthesamehandsreceivetheprofits,thecompanyisnotinlawtheagentofthesubscribersortrusteeforthem.Norarethesubscribersasmembersliable,inanyshapeorform,excepttotheextentandinthemannerprovidedintheAct.”(LordMacnaghtenat51)
o Inrejectingtheagencyargument,LordHalsburyLCobserved:“Iobservethatthelearnedjudge(VaughanWilliamsJ)heldthatthebusinesswasMrSalomon’sbusiness,andnooneelse’s,andthathechosetoemployasagentalimitedcompany;andheproceededtoarguethathewasemployingthatlimitedcompanyasagent,andthathewasboundtoindemnifythatagent(thecompany).Iconfessitseemstomethatthatverylearnedjudgebecomesinvolvedbythisargumentinaverysingularcontradiction.Eitherthelimitedcompanywasalegalentityoritwasnot.Ifitwas,thebusinessbelongedtoitandnottoMrSalomon.Ifitwasnot,therewasnopersonandnothingtobeanagentatall;anditisimpossibletosayatthesametimethatthereisacompanyandthereisnot.”(31)
o HELD:LiquidatorwasunabletosueSolomonseparatelyasthe
companyisaseparatelegalentity.
LeevLee’sAirFarmingLtd[1961]AC12
• Factso Companyoperatedacropdustingbusinesso MrLeewasthemainshareholderandmanagingdirectorofthe
companyo MrLeewasalsoanemployeepiloto Whileworking,MrLeewaskilledinaplanecrasho MrsLeeclaimedshewasentitledtoworkerscompensation
becauseMrLeewasanemployeeo InsurerarguedMrLeecouldnotbeanemployeeandemployer
§ SaidthatthecompanywasjustMrLee,heowned99%oftheshares,wasthedirectorandthusyoucannothaveacontractwithyourself.Cannotbebothemployerandemployeeatthesametime,andhedoesnotfallundertheprovisionoftheWorkersCompensationScheme.
• PrivyCouncilo Acompanyisaseparateentityfromitscontroller–whomayalso
beitssoleemployeeo Acompanyisaseparatelegalentityandapersonmay
concurrentlyhaveavarietyoflegalrelationshipswiththatcompany
MacauravNorthernAssuranceCoLtd[1925]AC619
• Facts
o MacauraassignedrighttotimbertoaCompany,receivedsharesinconsideration
o Createdacompanyandsoldforestingrightstothecompany.§ Beforehedidthis,hehadaninsurancepolicyoverthetrees
tocoverthingslikefiredamage.§ Hesoldtherighttologtreesandrightstocompany,but
keptinsurancepolicyinhisname.o Timberdestroyedinfireo Macauraclaimedinsurance–policywasinhisindividualname,
notinnameoftheCompany• HouseofLords
o Shareholdersdonothaveaproprietaryinterestinacompany’sproperty
§ Itneedstobe‘yours’o Insurancelegislationrequiredpolicyholdertohavean‘insurable
interest’inthepropertyo Thecompanywastheownerofthetimber,notMacaura(meaning
hedidnothavean‘insurableinterest’andsocouldnotclaimontheinsuranceforthedamagedtimber)
• HELD:Company’spropertyisnotthepropertyofitsparticipants.Thecompanyisaseparatelegalentity,whateveristhepropertyofhisisnotthecompany’s,andvisaversainnoinsurableinterestinthesoldtrees.
CEPUvQueenslandRail[2015]HCA11• Whatisacorporationforthepurposeofs51(xx)oftheConstitution?
o Consideredin2015bytheHCinQueenslandRailCase.
• http://www.austlii.edu.au/au/cases/cth/HCA/2015/11.html• Facts
o WantstoexemptLaborcompanyfromCommonwealthIndustrialRelationsLegislation(FairWorkAct?)
§ TooeasyonemployeesandNewmanwantedthisauthoritytoadviserailwayemployeessubjecttoStateIndustrialRegulationslaw.
§ Wantedtocreateacompanyprovidinglaborhigherservicebutcannotbeacompanybecauseifso,itissubjecttoCommonwealthworkplacerelationslaw.
• QRTAAct2013(Qld)o GovtcreatedapieceoflegislationthatestablishedtheQueensland
RailTransitAuthority(theentity).§ Allthepowersofanindividual.
• SpecificallyincludingtoenterintoCTs,acquire,hold,disporeof,anddealwithproperty,employstaff,appointagentsandattorneys,andengageconsultants.
§ Maysueandbesuedinthenameitisgiven.§ “Notabodycorporate”
o Why?§ IfQueenslandRailisnota‘constitutionalcorporation’it
wouldnotbesubjecttoCommonwealthindustrialRelationsLaws(FWAct)
o UnionunhappyandchallengeitintheHC.§ QuestionwhethertheAuthoritywasaconstitutional
corporationandthussubjecttoCommonwealthindustriallaw.
§ Looktowardss51(20)§ Wasitatrading/financialcorporation?
o Whatisa‘corporation’?§ Isitacompanyornot?§ Factorslookingattomakethisdecision…
• HELD:hasessentialfeaturesofacompanyandthefactthestatutessaidotherwisewasirrelevant.Theylookedtowardsthesubstance.Itisatradingcorporation.ThestatutorydeclarationthattheRailwayisnotatradingcorporationisincorrect.
o Ifyouwanttocreateanentitythathasallthefeaturesofacompany,butnamedasacorporationtheyfailed.
o Isonly‘some’featurestomakesureitwasn’tacompany,sufficient?
• Looktowardsthejudgement:GagelerJetc.
Piercingthecorporateveil• Acompanyisaseparatelegalpersonality,Alltherulessettingitoutis
referredtoasthe‘veilofthecorporation’thatconfinedtheobligations/rights/liabilitiesofthecompanyonly,andnottotheparticipants.
o Inwhatcircumstance,ifany,canwepiercethecorporateveiltoattachliabilitytootherparticipantsinthecompany?
• MoneybagsPtyLtd/Assets=$2
o MoneybagsPtyLtdnegligencecausesinjurytoMrBump($1,000,000damages)
• MrMoneybags(Shareholder)/Assets=$2,000,000,000o MoneybagsPtyLtdhasinsufficientassetstopayMrBump.CanMr
Bump‘piercethecorporateveil’andrecoverdamagesfromthewealthyshareholder,MrMoneybags?
• Question:howdidhepiercethecorporateveiltorecoverdamagesfromtheshareholderMrMoneybags?
o Acompanyisaseparatelegalentityandyoucannot.o Havingsaidthat,inexceptionalcircumstancesunderthecommon
lawandlegislation,therearesomesituaitonswhichthelawpiercesthecorporateveilandallowscompanyliabilitytoattachtosomeparticipants.
• Corporateveilo Legalrulesthatgrantthecompany‘separatelegalpersonality’and
separatethecompanyfromitsparticipants(e.g.shareholders,directors)arereferredtoastheveilofincorporationorcorporateveil
o Salomon’scaseestablishedthatacompanyanditsparticipantsmustbetreatedseparately–i.e.thecorporateveilprotectsthecompany’sparticipantsfromliability
o ThisisthegeneralruleinAustralia• Onlyinexceptionalcircumstanceswillacourtpiercethecorporateveiland
disregardtheseparatelegalpersonalityofacompany• Commonlawexceptions
o Wherecompanyusedtoavoidexistinglegaldutyo Wherecompanyusedforperpetuatingafraud
• Statutoryexceptionso Insolventtradingo Debtsincurredastrustee
a)Wherecompanyusedtoavoidexistinglegalduty• Corporateveilmaybepiercedwherecompanyformedforsoleor
dominantpurposeofavoidinganexistinglegaldutyo OKtoformacompanytolimitpersonalliabilityforfuture
obligations,butnottoavoidexistingobligationGilfordMotorCoLtdvHorne
• Companyformedforsoleordominantpurposeofavoidinganon-competeclause
• Factso Operatedbusinessassoletraderandsoldmechanicsworkshopto
aTP.
o IntheCTofsale,wasarestraintoftradeclause.Clausetriedtoprotectthegoodwillthatthepurchasercquired–doingsobymakingsurethatassoonaspurchaseracquiredtheworkshop,thefirstwouldnotopenupasimilarbusinessinthelocalarea.
o Havingsoldthebusiness,hewantedtogetaroundthelegalobligation.
§ Heincorporatedacompanyandoperatedanewmechanicsbusinessthroughthenewcompany(asacompanyisaseparatelegalentity,andthenewbusinesswasthecompany’sbusinesstowhichhewasanemployeeto,andnot‘him’perse).
§ Whenthecompanywassuedbythepurchaser,hesaidhewasprotectedbythecorporateveil.
o Courtsaidhehadanexistinglegalobligationandcreatedacompanyinordertoavoidtheexistinglegalduty.Thus,inthiscasethecorporateveilisallowedtobepiercedandpreventthecompanyfromoperatingthatbusiness.
JonesvLipman• Companyformedforthesoleordominantpurposeofavoidingacontract
forthesaleandpurchaseofland
b)Insolventtrading• Insolvency=companycannotpayitsdebtsastheyfalldueforpayment• CorporationsActliftsthecorporateveilwhenacompanytradeswhile
insolventandimposespersonalliabilityondirectorsforthecompany’sdebts(s.588G)
• s.588G:o Directorsbecomepersonallyliableifthefailtopreventthe
companyincurringadebtwhentherearereasonablegroundstosuspectthecompanyisinsolventorthedebtwillrenderthecompanyinsolvent
o Defences–s.588Ho Topic5
• ImportantissuefortheDirectors–iftheygetthiswrong,thentheCorporationsActthrowstheveilawayandattachedthecompany’sliabilitytowardstheDirector.
o Ifthedirectorsallowthecompanytocontinuetradingifthecompanyisinsolventandcontinueincurringdebts,theDirectorsareliableforthedebtsincurredbythecompany.
•
c)Liftingthecorporateveilofgroupcompanies
• Companyowningsharesinothercompanies(subsidiarycompanies
underneathitetc.andlotsofdifferentcompanieswiththeParentatthetopofthehierarchy).
• Isaparentcompanyliablefortheobligations/debtsofthesubsidiary?No.Thecorporateveilcontinuedtooperateeveniftherearegroupcompanies.
• “…ThecourtisnotfreetodisregardtheprincipleofSalomonvSalomonmerelybecauseitconsidersthatjusticesorequires.Ourlaw,forbetterorworse,recognisesthecreationofsubsidiarycompanies,whichthoughinonesensethecreaturesoftheirparentcompanies,willneverthelessunderthegenerallawfalltobetreatedasseparatelegalentitledwithalltherightsandliabilitiesthatwouldnormallyattachtoseparatelegalentities:AdamsvCapeIndustriesPLC
• BHP–enteredintoaJVwithBraziliancompanyoperatingamine.Tragicaccidentthathaltedminegrowthandseverelydamagedtheenvironment.Itwasn’tBHP,butasubsidiaryofBHPintheJV.
o Usedasubsidiarytominimizerisk,andlimitliabilityoftheparentcompanyandalsogetprotectionofthecorporateveil.
Exceptions:LegislationthatliftsthecorporateveilofgroupcompaniesTotreatallentitiesinsidethecorporatetreeasoneentity:
• Holdingcompany’sliabilityforinsolventtradingbysubsidiary• Consolidatedfinancialstatements• Taxationconsolidation• Thebenefitofthegroupasawhole• Poolinginliquidation
d)Corporateliabilityforcrimesandtorts• Canacompanybeliableforacrimeornegligence?
• Howdowefindacompanyliable,canwelooktowardstheparticipantsofthecompany?
o Twomechanismsusedbythelawtotacklethisproblem:1) VicariousLiability2) DirectLiability
VicariousLiabilityAcompanyisaseparatelegalentitybutisliableforitsemployee’sactions:
• Legislationmayprovidethatcompanymaybeconvictedfortheactionsofitsagentswithouttheneedtoimputeaguiltyintenttothecompany
• Undercommonlaw,anemployer(i.e.Company)isvicariouslyliablefortheactsofitsemployeesinthecourseofemployment
• ActorispersonallyliableandcompanyisvicariouslyliableDirectLiability:OrganicTheoryTheemployeesintentislikelytorepresenttheintentofthecompany’s:
• Identifythewillofwhatacompanyisandthusyoufinditsintention.• Companymaybeprimarilyliablewhentheact/intentofapersonare
takenunderthe‘organictheory’tobetheact/intentofthecompanyitself• Companyliablefortheact/intentofemployees“whorepresentthe
directingmindandwillofthecompany,andcontrolwhatitdoes.”HLBolton(Engineering)vTJGrahamandSonsLtd[1956]
• Whetherpersonconstitutesthemindandwillofthecompanydeterminedoncase-by-casebasis
• SeniorityiskeyfactorTescoSupermarketsLtdvNattras[1972]AC153
• Facts
o Radiantwashingpowderadvertisedatsalepriceo Saleitemsallsold,shopassistantrestockeditems,butatfullprice
o Shopmanagernotawareofthiso Offenceunderlegislationtosellproductsathigherpricethanas
advertisedo Defenseavailableifduetoactoromissionofanotherpersono Tescoarguedthattheshopmanagerandshopassistantwere
‘anotherperson’§ Cannotattachtheactionsandmistakesofashopassistant
tothecompany.Itwasnotthedirectingmindandwillofthecompany.
• HouseofLordso Courtappliedthe‘organictheory’totheshopmanagerandshop
assistantandheldthatneitherrepresentedthedirectingmindandwillofthecompany
o Accordingly,theactsoftheshopmangerandshopassistantwerenottheactsofthecompany
Thecompanycomparedwithotherformsofbusinessorganisations
• Forfurtherdiscussion,followthelinkinNavigatortothelecturebyDanSimondson‘Choosinganappropriatebusinessstructure’
• Q:Whyarewetalkingaboutthis?• A:Thecompanystructureisthemostpopularstructureforoperatinga
business,butitisnottheonlyoption.Youneedtoknowwhatthealternativesareandwhentousethem.
TypesOfBusinessStructures• JointVenture• Trust• Company• ‘Separatelegalentity’• Soletrader• Partnership
Factors• Liability• Risk&Liability• Tax• Purpose• Size• Costs• Flexibility
Company• Pro
o Separatelegalentityo Limitedliabilityo Perpetualsuccessiono Flexibilityo Shareclasseso Liquidityo Finance
• Cono CorporationsActcomplianceo Establishmentandongoingcostso Shareholderslessinvolvedinmanagemento Publicdisclosurerequirements
SoleProprietor/Trader
• Individualconductshis/herownbusinesso Proo Simpleo Minimalestablishmentcostso Minimalregulatorycomplianceissueso Highlevelofcontrol
• Cono Nolimitedliabilityo Smallsizemakesraisingfinancedifficulto Limitedlifespan
Partnership• Carryingonabusinessincommonwithaviewtoprofit(s.5Partnership
Act)o E.g.alawpartnershipandputtogetheranoralorwritten
agreementtosetthebusinessstructureup.• Pro
o Minimalestablishmentcosts:onlyneedmeetdefinitionofpartnership
o Minimalregulatorycomplianceissueso Activeintheconductofthebusiness
• Cono Noseparatelegalentity:partnerscontractpersonallyforthe
partnershipo Risk:partnersincurdebts/obligationsonbehalfofotherpartners
i.e.jointandseveralliability.§ Withregardstothequestionofliability,ifthereare3
partnersandonebuysthingsonbehalfofthepartnership,
allhisfellowpartnersbecomeliableforthatdebt.Allthreearejointandseverallyliableforadebtofonepartner.Youdon’thavethisproblemwithalimitedliabilitycompany.
o Sizelimitedto20partners(subjecttoexceptions)
JointVenture• JVbetweentwocompanies/individualsregulatedbyonecontracttowork
togetherononeproject.• Notaseparatelegalentitylikeacompanyandthusdoesnotreceiveall
thebeenfitsthatgoalongwiththat.• Contractualrelationshipsimilartopartnershipbutrelationshipisnota
businessincommon
• Pro
o Severallyliability:i.e.obligationsandliabilitiescanbeindividualised(unlikepartnership)
o Inexpensivetocreateandmaintain• Con
o Nolimitedliabilityo Noperpetualsuccession
• AreJV’stransactional?o Typically,yes.o CompaniescanjointogetherforaJVandhighlighteachcompanies
strengthstocreateanadvantageousJV.
Trust• Arelationship,notalegalentity• Trustsareusedalotinbusinessstructures
o E.g.atrustee.• Manytypes
• Pro
o Beneficiarieshaveanequitableinterestintrustproperty;contrashareholderswhohavenolegal/equitableinterestincompanyproperty
o Ifyouwanttoshieldyourassets,putthingsintodiscretionaryorunittrusstotreatbeneficiariesdifferently.Thusthetrustcannotbesuedandassetsareheldbythetrust.
§ Beneficiariesmoneyisheldinthetrustandtrustofficersmanagethemoney
o Incomesplitting–butmaybecontrarytoanti-taxavoidance§ E.g.alargefamilyoperatingabusinessandthroughatrust
structuretheirscopetopayproceedstodifferentfamiliesreducesthetax
§ Taximplications–tryingtogetawayfrompayingtax• Con
o Maximumlifespanof80years(lawagainstperpetuities)o Beneficiarieshavelimitedpowers(unlikeshareholders)o Noseparatelegalentity;trustcannotholdproperty,contract,sue
orbesuedo Trusteepersonallyliable(mayhaverightofindemnityfromtrust
assetsandbeneficiaries)
CompanyorAlternativeBusinessStructure?Allabovebusinessstructures(besidescompanies)areallrelationshipsbuttheyarenotaseparatelegalentitythatreceivesbenefitsalongwithit.Insettingupacompany,thereareongoingregulatoryrequirements(e.g.CorporationsActcompliance).Largepubliccompanieshavealotmoreregulatoryrequirementsthanothersetc.Ongoingcostsrequirementsassociatedwithsettingupacompany.Theymustbeweighedup.Butultimately,thebestbusinessstructureisdebatablyreceivemorebenefitsthatanyabovebusinessstructure.TherearelargebenefitswithLimitedLiabilityCompanies,despiteongoingregulatoryrequirementsandregistration.
TheProcessofRegistration(orIncorporation)
HowToCreateACompany1. Lodgeapplicationform201withASIC&payfee
o HistoricallycompanieswereincorporatedbyKingsandQueens,butnowaredonethroughASICinarelativelystraightforwardprocess.
o Now,applicationforregistrationasanAustralianCompany.2. S117CAsetsouttheprescribedcontentsoftheapplication:
o Whethercompanyproprietaryorpublic,limitedliability,noliability,unlimitedetc.
o Proposeacompanynameo Members,numberofsharesandshareclasseso Directors
§ Pty–oneordinarilyresidinginAustralia;§ Public–minof3,2ordinarilyresidinginAustralia
o Secretary§ Public–musthave
o Consentsofmembers,directorsandsecretaryo Addressofregisteredofficeo Constitutionorreplaceableruleso Companyname
3. ASICregisterscompany,allocatesACN,issuescertificateofregistration
o ACNdifferentfromABN.ABNisataxnumber.4. Companycomesintoexistencewhenregistered(s119)
• Sharesissued
• GothroughASICform201• http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/201.pdf/$fil
e/201.pdf• Alternativeistobuya‘shelfcompany’
o Acompanyalreadyregisteredandsittingtherewithnominaldirections/shareholders.
o Detailscanbechanged.o Rulesforhowlongacompanycanstayinactive.
Theeffectofregistration• (s119)Onregistration,acompanybecomesaseparatelegalperson• (s124)Legalcapacityof:
o Naturalperson§ Ownproperty§ Contract§ Sueandbesued
• Bodycorporate
o Issueshareso Grantacharge
• S119:Acompanycomesintoexistenceasabodycorporateatthebeginningofthedayonwhichitisregistered
SeparateLegalEntity–SoWhat?• Company’sobligationsandliabilitiesareitsown,andnotthoseofits
participants• Companycansueandbesuedinitsownname• Companyhasperpetualsuccession• Company’spropertyisnotthepropertyofitsparticipants• Companycancontractwithitsparticipants• Apersonmayconcurrentlyhaveavarietyoflegalrelationshipswitha
company(e.g.director,shareholderandemployee)• Canchangetheattributes(shareholders,directors,type,nameetc.)ofthe
companyonceestablished.o ACNremainsthesame.
Revision• Tutorial
o Chapter1:§ Questions1to6
o Chapter2:§ Question1§ Question5
• Mentoro AttempttheMCQforChapters1&2inMentor
Question1:
•
Question2:
• Companyenteredinto3transactions,nowunabletopaydebts.