Introduction To The Corporation And Incorporating Notes

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

• Look at remedies if things go wrong in companies. In the Queensland floods the question was should they take a generous look at the policies that they provide? What is corporate social responsibility? The things that are strictly legal and those which are voluntary. How should we treat companies as a political, social matter and whose perspective should we judge them from? Shareholders?

• Co-operatives have the Co-operative Act. They are not companies but they are corporations.

• Statutory corporations.

• Public companies:

  • Use the term limited which means limited liability. There are many shareholders.

  • People buy stocks on the Australian Securities Exchange. Shareholders may dismiss the directors.

  • Perpetual succession captures the idea that the shareholders come and go. The company is a legal entity in its own right.

• Not for Profit Company limited by guarantee is slightly different. Not as many shareholders.

• Proprietary companies have limits on the members they can have.

  • Business associations include partnerships. Transfer of interests is harder in this circumstance. They become individually liable for the loan if the others don’t pay. The shareholders in a company have the limited liability. Sole traders do not enjoy limited liability.

• Section 45A has different stipulations for small and large proprietary companies.

• Section 112 tells you all the characteristics of the different public companies.

• The stakeholders include creditors (lending, floating charge but section 1324 gives them rights to get injunctions but they have more effective remedies in their lending agreement), employees, governments, consumers, environment, community (media)

• The partnership have special duties to one another. They have fiduciary duties. They come from Trust law.

History of corporations

• 15^th/17^th century- joint stock companies

• 1720- south sea bubble

• 18/19^th centuries- deed of settlement companies

• 1844- joint stock companies act

• 1855- Limited Liability Act

• 1856- Joint Stock Companies Act (Consol)

• Isn’t limited liability a device for fraud

• 1989-1999: ASC (now ASIC). Corporations law. Re Wakim (all the decisions of the Federal Court were found to be unconstitutional so states had to pass individual legislation to say that all the decisions in the federal court were state decisions and they had to refer their corporations law to the commonwealth government- state power is unconstitutional when vested in the national government).

• ASIC Act 1989- referral of state power, treasure/ASIC/ASX, Federal/state and cross vesting, AAT/state criminal jurisdiction.

• Corporations Act 2001

Page 26-40 History of how the regulation of corporate enterprise evolved

• Corporations are legal persons.

• The corporate group enjoys perpetual existence. It can more easily bring suit against strangers and even its own members. Its common seal can authenticate its acts and distinguish it from the acts of individual members. Transferability of shares. Distinction between group liability and personal liability of members.

• Voting rights are based on the size of the shareholding. One vote, one share. Governors and associates of the companies were held to rigorous trustee standard of disinterested service- fiduciaries. The company is a personality distinct from its members.

• There were strong economic factors in the 18^th century making it imperative that a form of business association be available to facilitate the aggregation of investment capital. This was due to expansion of foreign trade, industrialisation and the growth of the factory system.

• The Bubble Act was passed. It was repealed in 1825. It did not establish a distinct legal regime for the joint stock company.

• The state adopts a limited interventionism by requiring disclosure as to specified matters perceived to be material to the judgment of potential investors. The state does not attempt any merits review of the efficacy or equity of the proposed venture or the interests in it which are being offered to investors.

• The Joint Stock Companies Act 1844 UK established accountability mechanisms through obligations with respect to the holding of company meetings and the audit and publication of company accounts. There was the deed of settlement of a company. It vested management powers to directors and directed that shareholders would not act in the management concerns of the company.

• The shareholders had limited liability in the Limitation of liability Act 1855 UK.

Page 40-52 Phases of corporate regulation in Australia

• The first native company was the bank of NSW in 1817 formed as a partnership. It had shares. It had a deed of settlement in 1828.

• There were chartered companies incorporated by royal prerogative and clothed with privilege for the benefit of English capital. This included the Australian Agricultural Company which was granted a million acres of land. Van Diemen’s Land Company but the land was poorly chosen.

• The Uniform Companies Acts were adopted in 1962.

• There was a stock market boom in 1969. The Poseidon boom.

• Whitlam Labor government introduced the Corporations and Securities Industry Bill 1974. It proposed financial reporting obligations on companies which solicited public investment in their securities and sought to prevent market abuse through manipulation and insider trading.

• The Corporations Act 1989 gives the commonwealth in section 51(xx) the power to legislate with respect to foreign corporations and trading or financial corporations formed with the limits of the Commonwealth.

• The Corporations Agreement 2002 provided the framework for the national scheme. The Ministerial Council is at the centre of the scheme. It provides the machinery to alter the Corporations legislation. The parliament must consult the ministerial council before altering the Corporations legislation. The approval of the council is not required. They need approval from at least three state or territory...

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