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BA 1 - 5 Intro Notes
1 BA 15 Intro to Constitution, Organs, Board of Directors and GM Table of Contents
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2 1 Introduction to the Corporation and Incorporating Under Australian Law Types of business associations Three types of business associations: sole trader, unincorporated associations and corporations. (1) Sole trader: individual (2) Unincorporated associations: (partnerships, limited partnerships, joint ventures, syndicates, trusts, unincorporated nonprofit associations), a. Note on unincorporated associations: s 115(1): Cannot have a partnership that has as an object gain for itself or members, and is greater than 20 people. Have to incorporate. b. (exception - for some professions or calling specified since ethical rules or regulating statute of some professions have traditionally restricted practice in incorporated form. See Corporations Regulations reg 2A.1.01 (3) Corporations include:
* Associations incorporated under associations incorporated act
* Chartered corporations
* corporations created by special act of pmt
* banks and insurance companies
* ATSI corporations
* Credit unions, permanent buildings societies and friendly societies
* Companies under the CA: under s 112 below a. A company registered under CA or predecessor statute is referred to as a company: s 9 , 1378 b. Where CA refers to corporations and body corporate extends to reach of provisions to corporations formed under other statutes or sources of power and to unincorporated bodies with some corporate characteristics: s 9 Companies under the CA (prop v public; limited by shares/guarantee etc) under s 112 Proprietary companies: Limited by shares (Definition: company that is registered as or Unlimited with share capital converts to a proprietary company under the CA: s 45A(1) Limited by shares Public companies: Limited by guarantee Unlimited with share capital No liability company Proprietary vs public companies
* Proprietary companies: (no more than 50 nonemployee shareholders (s 113(1), and cannot engage in any behavior which would require disclosure under part 6D to investors ( s 113(3)): o Limited by shares o Unlimited with share capital
* Public companies: (Greater disclosure requirements: need to produce both financial reports and have external auditor.) o Limited by shares o limited by guarantee o unlimited with share capital o no liability ( s 112(2)
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3 Proprietary: small vs large proprietary companies
A small proprietary company generally has reduced financial reporting requirements (s 292(2)). Small proprietary company: S 45A(2) If it satisfies at least 2 of s 45A(2)(a), (b) or (c). (a) consolidated revenue for financial year of company and controlled entities is less than $25 mill (b) value of gross assets at end of financial year of company and controlled entities less than $12.5 mil (c) company and entities it controls have fewer than 50 employees at end of financial year Large proprietary company: satisfies at least 2: (a) consolidated revenue for financial year of company and controlled entities is $25 mill or more (b) value of gross assets at end of financial year of company and controlled entities is $12.5million or more (c) company and entities it controls have 50 or more employees at end of financial year
Types of company liability: shares vs guarantee etc
* Types of company liability: o Limited by Shares: Liability is limited to the paid up value of your share plus any outstanding amount on partially paid shares. o Limited by Guarantee: Limited to particular amounts guaranteed by an individual regardless of interest or outstanding debt. Usually nonprofit organizations. o Unlimited Liability: No bar on liability. Used where there is very low risk and the less strict requirements on the movement of share capital. Beneficial to low risk schemes which require liquidity. o No Liability: Objects must be mining purposes only (s 112(2)). Deciding whether or not to incorporate
Note: More than 20 members form a company (s 115) Factors Affecting the Decision to Incorporate o Limited liability: Insulates members' assets from claims against the company and protects against losses which may not be covered by insurance. o Perpetual succession: The status of a company is not affected by the death or bankruptcy of a member of the transfer of ownership interests. o Greater financing: Ability to create a floating charge over assets which is attractive to lenders. o Taxation: Removal of double taxation of dividends to shareholders through imputation. o Additional cost, formality and continuing obligations of an incorporated company: Obligations to disclose information to creditors and members, maintaining financial accounts, duties of directors, following formal constitutional procedures, legal complexity of wining up a company and other legal obligations are significant burdens upon companies.
Registration of companies under CA
* Proprietary companies (s 45A(1)): o Registration: A proprietary company can be registered under s 118 or s 601BD. o Conversion: A company can convert to a proprietary company under Part 2B.7. o Requirements: A proprietary company must:
? Be limited by shares or be an unlimited company with a share capital;
? Have no more than 50 nonemployee shareholders (s 113); and
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4 ? Minimum one member (s 114). How to register - lodge application under s 117
Where to register? Application must be lodged with ASIC: s 117(1). o Can only register one of the types set out in s 112(1). Req 1#: Must have at least one member to form a company: S114: o Cannot have a partnership that has as an object gain for itself or members, and is greater than 20 people. Have to incorporate: s 115(1) Req 2#: Contents of Application: s 117(2) The application must have: o Type of company proposed: s 117(2)(a) o Proposed name (or ACN will be used): s 117(2)(b)
? A limited company is required to include 'limited' or 'ltd' at the end of its name; a proprietary limited company must have 'proprietary limited' or 'pty ltd' at the end of its name: s 148(2)
? Can reserve name prior to incorporation: s 152.
? Exception: s 147: cannot reserve where identical to a name (a) reserved or registered in respect of another company; (b) included on national business names register in respect of another person; or (c) is of a kind declared by regulation to be unacceptable (eg under reg 2B.6.01 and Sched 6 - names which suggestion a connection with crown government or royal family or are protected names). o Name and address of each consenting member: s 117(2)(c) o Names (Current and former), D.O.B and P.O.B for directors who have consented in writing: s 117(2)(d) o Names (Current and former), D.O.B and P.O.B for secretaries who have consented in writing: s 117(2)(e) o Addresses of directors and secretaries who have consented in writing : s 117(2)(f) o Address of proposed registered office: s 117(2)(g) o Proposed opening and closing hours (Public company): s 117(2)(h) o Address of principal place of business (if not proposed registered office): s 117(2)(j) o Companies limited by shares - Shares owned by each member upon registration: s 117(2)(k)
[(obligation of shareholders to contribute capital) for a company limited by shares/unlimited
details of proposed share capital or guarantee obligation - how much each shareholders is contributing]
o Company limited by guarantee - the proposed amount of the guarantee each member agrees to in writing: s 117(2)(m) o State or Territory the company will be registered: s 117(2)(n) Req 3#: Application must be in prescribed form: s 117(4). Req 4#: Additional req for Public company constitution must be lodged with application : s 117(3).
4 A limited company is required to include 'limited' or 'ltd' at the end of its name; A proprietary limited company must have 'proprietary limited' or 'pty ltd' at the end of its name: s 148(2). unless s 150 or 151 applies Unlimited proprietary companies: S148(3) unlimited proprietary companies - must have proprietary at end of name No liability company: must have ' no liability' at end: s 148(4)
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5 Public company cannot include word proprietary or abbreviation in its name unless (a) it was a public company before 1 july 1998 and (b) the word proprietary was included in its name before 1 july 1998: s 148(5). Offence based on this is offence of strict liability: s 148(6). Exceptions: charities etc s 150 Reserving names: S152 Changing names: 157161
Acceptable abbreviations : s 149 Word Company Proprietary Limited No liability Australian Number And Australian company number Australian business number
Abbreviation Co or coy Pty Ltd Nl Aust No
What ASIC does with registration application: s 118, 119 When a s 117 application has been lodged, ASIC may: s 118(1) a) Give the company an ACN: s 118(1)(a) b) Register the company: s 118(1)(b) c) Issue a certificate of registration stating name, ACN, type, jurisdiction and date of registration: s 118(1)(c)
* ASIC keeps copy of registration: s 118(2). Effect of registration Obligations on company must set out name on all public docs: s 153(1) General obligation: company must set out its name on all its public documents and negotiable instruments: s 153(1).
* (2) Subject to sections 154 and 155, if the company's ACN is not used in its name, the company must also set out with its name, or with 1 of the references to its name, either: o (a) the expression "Australian Company Number" followed by the company's ACN; or o (b) if the last 9 digits of the company's ABN are the same, and in the same order, as the last 9 digits of its ACN---the words "Australian Business Number" followed by the company's ABN. If the company's name appears on 2 or more pages of the document or instrument, this must be done on the first of those pages. Note 1: If a company has a common seal, its name and ACN or ABN must be set out on the seal (see section 123). Note 2: A public company must display its name at its registered office. Every company must display its name at places at which the company carries on business and that are open to the public (see section 144). Note 3: Section 149 provides that "ACN" is an acceptable abbreviation of "Australian Company Number", and that "ABN" is an acceptable abbreviation of "Australian Business Number". Note 4: In any case where the company's ACN would be used, the company's ABN may be used instead if section 1344 is satisfied. (3) An offence based on subsection (1) or (2) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code.
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6 Company rights
* A company will have the legal capacity of an individual: s 124
* A company will come into registration the day it is registered by ASIC: s 119.
* A company will be incorporated in 'this jurisdiction' (s 119A(1) - meaning the geographical area that consists of each referring state; and capital territory and northern territory and : s 9
* A company is taken to be registered in the jurisdiction nominated during application: s 119A(2) and which is shown on certificate of incorporation s 118(1)(v).
* A person becomes a member, director or secretary of the company upon registration: s 120(1).
* Share capital proposed for company in application is deemed to be issued to members: s 120(2).
* The company's proposed registered office becomes the address of the company's registered office on registration: s 121. The certificate of incorporation is conclusive evidence that all requirements for incorporation have been complied with (s 127(4)) o Presumption of conclusiveness absolves persons dealing with company from inquiry as to whether reqs for incorporation have been met: Ha Stephenson o Presumption does not legalize objects which would otherwise be illegal and directors will be guilty of misfeasance if they apply the company's funds for an illegal object: Bowman v Secular Society
? However - section as expressed does not bind crown and Attorneygeneral from instituting proceedings by way of certiorari to cancel a registration which [has been] improperly or erroneously allowed. Legal personhood of company: s 124 (1) From registration, the company has the powers and capacity of an individual, together with distinctive powers of a body corporate issue and cancel shares in the company; (a) issue debentures (despite any rule of law or equity to the contrary, this power includes a power to issue debentures that are irredeemable, redeemable only if a contingency, however remote, occurs, or redeemable only at the end of a period, however long); (b) grant options over unissued shares in the company; (c) distribute any of the company's property among the members, in kind or otherwise; (d) give security by charging uncalled capital; (e) grant a floating charge over the company's property; (f) arrange for the company to be registered or recognised as a body corporate in any place outside this jurisdiction; (g) do anything that it is authorised to do by any other law (including a law of a foreign country). A company limited by guarantee does not have the power to issue shares. Naming Provisions (1) S148(2) limited companies Must have "Limited" at the end of its name - unless s 150 or 151 applies (2) S148(3) unlimited proprietary companies - must have proprietary at end of name (3) S149 - accepted abbreviations (4) S150 exceptions - eg charity (5) S152, reserving a name. (6) 157161 - changing a name (7) s153(1) - must set out name on all its public documents and negotiation instru. Registered office (8) s142(1) registered office and place of business (9) s142(2) - required to register any change of address with ASIC Type (10) s162167 how to change the company type
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6 7 Registers
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s169 (1) company is to set up and maintain a register of members, debentures and option holders (12) s170 - what register has to show (extra for company with share capital) (13) s173 right to inspect register (14) s176 - evidentiary value of registers. (15) s254A - issuing shares (16) s254T - dividends to be paid out of profits s13(11) A breach of a provision amounts to a contravention. (guilty of an offence) (see schedule 3) Individuals can aid and abet the company. (17) If not mentioned in schedule 3, then penalty is 5 units.
No liability companies: s 112(2)
* Requirements for registration under s 112(1): A company can be registered as a no liability company only if: (a) The company hs a share capital; and (b) The company's constitution states that its sole objects are mining purposes; and (c) The company has no contractual right under its constitution to recover calls made on its shares from a shareholder who fails to pay them.
* Rationale for this: Because if you strike gold then the shareholders will want to pay you money to sell your shares.
* Requirements for actions: No liability company must not engage in activities that are outside its mining purposes objects.
* Director requirements: directors of no liability company must not: (a) let the whole or proportion of a mine or claim on tribute; or (b) make any contract for working any land on tribute; unless (c) Revision:
* Four ways of issuing share (a) Ordinary shareholder pays up front who is then issued a share (b) Shareholder issued a share with a call - that is bindig under constitution (c) A noliability company where there is no right and no contractual nexus to call shares from shareholders (d) Then company limited by guarantee ASX Listed/Unlisted companies
* big proprietary companies more regulated than small proprietary companies
* ASX Listed companies are more heavily regulated and required to give greater discretion than the smaller unlisted companies.
* Requirements: o Have to be a big enough and well known enough company to offer shares to public - have to be able to have a quite large number of shareholders in 1000s, not just 10.
* ASX not only has listed rules but also corporate governance guidelines. The latter is becoming an important influence on law of director's duties. This presence in beginning to percolate down to director's duties in the courts as to what we would like the directors do. Also note
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