#8570 - Introduction To Company Constitution Organs Board Of Directors And Gm - Business Associations

BA 1-5 Intro to Constitution, Organs, Board of Directors and GM 1

1 Introduction to the Corporation and Incorporating Under Australian Law 3

Types of business associations 3

Companies under the CA (prop v public; limited by shares/guarantee etc) under s 112 3

Proprietary vs public companies 3

Proprietary: small vs large proprietary companies 3

Types of company liability: shares vs guarantee etc 4

Deciding whether or not to incorporate 4

Registration of companies under CA 4

How to register – lodge application under s 117 4

Naming company 5

What ASIC does with registration application: s 118, 119 6

Effect of registration 6

Obligations on company - must set out name on all public docs: s 153(1) 6

Company rights 6

Legal personhood of company: s 124 7

Company’s pre-registration contract: ss 131 – 3 9

Small business guide – for proprietary companies limited by shares – see CA. 9

Appendix of statute: 9

S 45A Types of companies 9

112 Types of companies 11

113 Proprietary companies 11

114 Minimum of 1 member 12

117 Applying for registration 12

Procedures for registration – ss 117 – 121 and s 114 - detail 15

2 separate legal personality 16

Salomon 17

3 piercing the corporate veil 20

Statute: s 588G: 20

Ground 1# Fraud or improper conduct (Gilford; Jones v Lipman) 20

Ground 2#: Agency (SSK) 20

Ground 3#: Issues when a corporate group and involuntary creditors 22

4(A) Corporate Constitution and decision making 22

Constitution: adopting, modifying, distributing, its effect, limiting effect: ss 136 – 140 23

S141 – Table of Replaceable Rules 25

4(B) Board of Directors 27

1. Intro: Powers of directors v shareholders 27

Principles: re Directors’ Independence in the Exercise of their Powers: Automatic Self-Cleansing; Marshall’s Valve Gear 29

Cases: Automatic Self-Cleansing; marshall’s valve gear; john shaw 29

2. Have directors been validly appointed? Appointment, Remuneration, and Cessation of Appointment 30

Corporations Act 2001 Part 2D.3 32

Executive Directors’ Service Contracts 34

3. Has the Board made an effective decision? s 248A - G 34

4(C) General Meeting: Part 2G.2 ss 249 onwards 38

Procedure for general meetings and passing resolutions 39

2. Have the disclosure obligations been met? s 249L; Holmes; Fraser v NRMA; Re Marra; also s 12DA 45

3. If the formalities haven’t been complied with, could the resolution of the general meeting still be valid under the doctrine of unanimous consent? 51

4. Issues with GM curing contraventions of Director? 51

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 non-profit associations),

   1. 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.

   2. (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

• Co-ops

• 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

  1. A company registered under CA or predecessor statute is referred to as a company: s 9 , 1378

  2. 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

• Proprietary companies: (no more than 50 non-employee shareholders (s 113(1), and cannot engage in any behavior which would require disclosure under part 6D to investors ( s 113(3)):

  • Limited by shares

  • Unlimited with share capital

• Public companies: (Greater disclosure requirements: need to produce both financial reports and have external auditor.)

  • Limited by shares

  • limited by guarantee

  • unlimited with share capital

  • no liability ( s 112(2)

• Types of company liability:

  • Limited by Shares: Liability is limited to the paid up value of your share plus any outstanding amount on partially paid shares.

  • Limited by Guarantee: Limited to particular amounts guaranteed by an individual regardless of interest or outstanding debt. Usually non-profit organizations.

  • 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.

  • No Liability: Objects must be mining purposes only (s 112(2)).

• Note: More than 20 members form a company (s 115)

• Factors Affecting the Decision to Incorporate

  • Limited liability: Insulates members’ assets from claims against the company and protects against losses which may not be covered by insurance.

  • Perpetual succession: The status of a company is not affected by the death or bankruptcy of a member of the transfer of ownership interests.

  • Greater financing: Ability to create a floating charge over assets which is attractive to lenders.

  • Taxation: Removal of double taxation of dividends to shareholders through imputation.

  • 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.

• Proprietary companies (s 45A(1)):

  • Registration: A proprietary company can be registered under s 118 or s 601BD.

  • Conversion: A company can convert to a proprietary company under Part 2B.7.

  • Requirements: A proprietary company must:

    • Be limited by shares or be an unlimited company with a share capital;

    • Have no more than 50 non-employee shareholders (s 113); and

    • Minimum one member (s 114).

• Where to register? Application must be lodged with ASIC: s 117(1).

  • 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:

  • 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:

  • Type of company proposed: s 117(2)(a)

  • 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).

  • Name and address of each consenting member: s 117(2)(c)

  • Names (Current and former), D.O.B and P.O.B for directors who have consented in writing: s 117(2)(d)

  • Names (Current and former), D.O.B and P.O.B for secretaries who have consented in writing: s 117(2)(e)

  • Addresses of directors and secretaries who have consented in writing: s 117(2)(f)

  • Address of proposed registered office: s 117(2)(g)

  • Proposed opening and closing hours (Public company): s 117(2)(h)

  • Address of principal place of business (if not proposed registered office): s 117(2)(j)

  • Companies limited by shares – Shares owned by each member upon...