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Law Notes Business Associations 1 Notes

Introduction To The Corporation And Incorporating Under Australian Law Notes

Updated Introduction To The Corporation And Incorporating Under Australian Law Notes

Business Associations 1 Notes

Business Associations 1

Approximately 387 pages

A 243 page bible of cases and materials summaries. Includes all extra cases discussed in 2011 (e.g. ASIC v Adler) and super summaries intended for quick reference in an open book exam. Structure of cases and materials summaries is as follows:

Class 1 - Introduction to 'The Corporation' and incorporating under Australian Law
Class 2 - Separate Legal Personality
Class 3 - Implications of Limited Liability
Class 4 - The Corporate Constitution and Decision Making by the Board of Directors
Clas...

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The following is a more accessible plain text extract of the PDF sample above, taken from our Business Associations 1 Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:

Class 1 – Introduction to the Corporation and incorporating under Australian law

  • [2.05] The TB writers note that the organizational structure of the company as the dominant form of business association was only in the 19th century – 800 years after English law first adopted the notion of corporate entity to solve problems of group relations in religious/social communities

The derivation of the modern company

  • [2.10] Introduction the TB writers summarize some of the major developments in company law

    • The “joint stock company” - a hybrid growth, a partnership invested with the character of incorporation and rules partly referable to both

      • The development of modern company law came from an ancient body of common law, which due to speculative excesses was dissolved by the Bubble Act which prompted the ‘deed of settlement company’

  • [2.15] Recognition of corporate persons – registered companies formed under corporate legislation are the pre-eminent form of corporations. Though legal persons they have different limitations to their legal personality, with not all legal propositions applying to ‘man’ as to ‘companies’ (e.g. marriage)

    • This group of corporate persons was the origins of the modern company

[2.30] W S Holdsworth, A History of English Law

Holdsworth makes a number of points regarding the evolution of corporate law, specifically:

  • How the complex state of civilization, such as the Roman Empire, necessitated the development of bodies to acquire rights, duties and legal obligations by succession of joint holders

    • Hence the law adopted a device of constituting such a group of holders into an “artificial person or ideal subject of legal capacities and duties” – this was received by common lawyers since it supplied a useful explanation for associations which frequently appeared in law courts

    • Churches were vested with such a character and their activities exercised through it – given that they were large property owners this was not surprising

  • The idea of “personae fictae” was just what was needed as lawyers could speculate about their features and lay down rules for their conduct – and they were no longer concealed by the activities of their human representatives. They were persons, immortal and invisible, could commit neither sin nor crime nor tort

    • Being accepted by the canon law it then began to be by the common law which naturally proceeded to apply these theories to groups with nothing to do with the charge (boroughs, universities etc.)

  • But this raised a number of problems - one of which was classifying the incorporate persons – A century before Coke the law divided them into: corporations aggregate and corporations sole – the former consisting of many united into one society kept up by perpetual succession (e.g. communities of a city) and the latter of one person and their successors for the purpose of giving them legal advantages (land in perpetuity etc.)

  • A recognition of the existence of an incorporate person necessarily involves the recognition of:

    • A corporation is a person distinct from its members

    • The property of the corporation is distinct from the property of its members

    • The property of its members cannot be taken in execution for the debt of the corporation and vice versa

  • [2.25] Boroughs and guilds - were the second species of corporate person recognized after religious groups; having been granted royal charters giving them a number of rights and privileges (including those of self-governance) enforced through the borough court

    • The moving forces behind this were the merchants of boroughs as part of their struggle to be free of feudalism – by the 13th-14th century they too had royal charters conferring privileges (e.g. monopolies in certain areas). These merchant guilds became like boroughs too, regulating trade etc.

      • As trade became more provincial borough merchant guilds gave way to ‘craft guilds’ which were controlled not by a monopoly of a borrow but a particular craft in a geographical region

Chartered Corporations

  • [2.30] The application of corporate notions to trading ventures – by the 16th century guilds broke down as egalitarian values were compromised by oligarchy in governing bodies

    • The new form of trade was focussed around a rapidly burgeoning culture of investment – this was parallel to the development of the chartered corporation (which succeeded guilds) which gradually formed a joint stock to supplant the individual trading of members

      • Generally these companies took the names in respect of the regions in which they traded as navigational advances opened up a number of trading opportunities in the ‘new world’ (East India Company, Levant Company etc.)

    • Charters ceded to these companies conferred not only trading privileges but self-government in a certain region as these companies established far-reaching trading empires

  • By the 17th century commercial benefits of the corporate form which accompanies these charter rights were prized in their own rights. Holdsworth identifies certain corporate advantages that were apparent in this period:

    • Perpetual existence

    • Can easily bring suit against strangers and its own members

    • Can authenticate its actions and distinguish them from the individual members through the company seal

    • Facilitated continuity of management and transferral of shares

    • Facilitated the distinction between group liability and personal liability of members

  • [2.35] The influence of corporate ideas – Charters were then granted to domestic trading concerns – usually large partnerships like the Society of Mines Royal. By the 17th century these grants were commonly granted to mining and industrial companies

    • The TB writers note 3 major points of influence of the chartered corporation on the modern company

      • The adoption of voting power dependant on size of shareholding rather than ‘one man one vote’ – which was common in guilds

      • Governors and associates of the companies were held to the rigorous trustee...

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