Discuss about the Business Law for Corporation Act.
Under the Corporations Act 2001 (“The Act”) the shareholders can either be those people who have formed or incorporated the said company in the first place which has been prescribed under Section 120 of The Act or those people to whom the shares of the company have been issued after the company was incorporated or those who acquire the shares by means of transfer. It is, however, a requirement under The Act that it is necessary that at least one member should be there in a company at least who can be stated to be the company’s shareholder (1994 Australian corporations & securities legislation, 1994). These shareholders are required to get themselves registered and enter their name as provided by The Act under section 231 in is what is known as “Share Register” or the “Register of Shareholders” or “Register of Members” (Latimer, 1996).
Under Section 168 of The Act, it is necessary that all the companies who have issued shares must maintain a Share Register which would record the same as pursuant to the section 169. The address and name of the shareholder and date on which the shareholder’s name was entered into the register.
Attached format of Share Register:
Corporations Act
Company Limited by Shares
Constitution of More Company Private Limited
ACN 1011 1213 1415
PRELIMINARY
Part 1: General
The Company name is More Company Private Limited (“Company”).
This document date 25th May 2016 forms the Constitution of the Company and shall include any amendments/addendums made thereto from time to time (“Consitution”).
The Corporations Act 2001 provisions with respect to the Replaceable Rules shall be applicable to the company wherever the same has been included specifically herein (Gillies, 2004). The Replaceable Rules shall not be applicable to the Company unless the same has been included specifically in the Constitution or where doing so is required for giving the Constitution efficacy or the law requires the compliance to the same.
The meaning of the terms mentioned below wherever used shall have the following meaning unless it is otherwise required due to the context:
“Act” Corporations Act 2001 (Cth.);
“Articles” the articles of this Constitution;
“ASIC” the Australian Securities and Investment Commission;
“Board of Directors” the Board of Directors of the Company;
“Director” the individual who for the time being is the Company’s Director;
“General Meeting” the meeting of the members of the company;
“Managing Director” the person who the Company has appointed for the time as the Company’s managing director;
“Members” the shareholders and/or the Company’s Director;
“Replaceable Rules” means the rules which are referred to in the Act as the replaceable rules;
“Shares” the shares which the Company has issues and any related rights, options or any other type of entitlement, which under the law has been recognized, with respect to the shares;
“Shareholders” the person who is the holder of shares in the Company;
“Shareholders Register” the members registration as per the provisions incorporated under the Act.
The words that are singular shall denote the plural and the same shall be vice versa as well. The expressions and words which have been used under this Constitution will have the meaning so far as the same is possible have the same as it has under Act.
Part 2: Preference Shares
2.1 The Company may subject to the Act issue preference shares including preference shares that are redeemable (Australian corporations & securities legislation 2005, 2005). The Shares may be issued by the Company that are preference Shares which are liable to be redeemed or at the option of the Company can be redeemed.
2.2 The preference shares that are redeemable shall be at the date which the Directors has specified be redeemed at the time which there is an issue of the share or any other such date which has been determined under the Act (Australian corporations & securities legislation 2005, 2005).
2.3 The amount which is required to be paid to the Shareholders for the redeemable preference shares on the redemption of such shares shall include (Australian corporations legislation, 2010):
2.3(a) the amount originally paid for subscribing to the Shares;
2.3(b) premium, any, which had at the time of subscription been paid;
2.3(c) any dividends which have accrued and the Directors may determine the same; and
2.4(d) any other such amount which is required under law (Brophy & Gupta, 1976).
2.5 The issuance of the redeemable Shares may be with conditions that are specific to it and the same may be determined by the Director and would include (Australian corporations & securities legislation 2005, 2005):
2.5(a) the capital being repaid;
2.5(b) the surplus profits and assets should be participated in;
2.5(c) dividends would be including the cumulative dividends;
2.5(d) attending the Directors meetings;
2.5(e) voting rights similar to the of ordinary Shareholders; and
2.5(f) in the situation where there is liquidation of the Company then they would be paid on priority.
2.6 Voting Right
The preference shareholders have been conferred with voting rights that are same as that which the ordinary Shareholders have been conferred with for the attending of any of the General Meeting and it is only in the situation that are mentioned below that they shall have a voting right and not in any other situation (Australian corporations legislation, 2010) (Davis, 1996):
2.6(a) during the period in which there is a meeting that has been called there is are preference Shares that are unpaid;
2.6(b) where a proposal has been put forth to reduce the Company’s share capital;
2.6(c) where there is proposal made that would have an effect, either direct or indirect, on the rights that have been attached to the preference Shares;
2.6(d) where there is a proposal for winding up of the Company (Christensen, Kent, & Stewart, 2010); and
2.6(e) when the Company is winding up
Section 124
The Company under the Corporation Act 2001 (“The Act”) provides that a company has the powers and legal capacity of a person meaning thereby that a company is not the same as its directors and shareholders and is a separate legal entity, this includes the power of the company to be able to make agreements (Corporations Act 2001 reprinted on 16 June 2006 (taking into account amendments up to and including those made by Act No. 17, 2006), 2006).
It has also been provided that the company is specifically empowered for borrowing funds and granting security with respect to such loan(s) which have been borrowed and also for issuing of the company’s shares for raising funds for the company. The shares that can be issued under section 124 the company will have the option over these shares. This section ensure that the operations of the company is facilitated in a manner that is most effective, the Directors of the company need to make such decisions and these decisions are required to be implemented for meeting the requirement of the funds by the company. These decisions include (i) the amount of fund which is required by the company; and (ii) the source of these funds that would be most effective and suitable for the company. Thus ensuring that the company can whenever it feels the need for obtaining funds do the same on its own capacity and decision for the same can be taken by the directors.
The section 129(1) can be also termed as the statutory “indoor management rule” meaning there by that under this section an assumption is taken regarding he replaceable rules of the Act and the constitution of the company which are applicable on the company’s management. It is provided under this section that an individual who is dealing with a company may assume that the replaceable rules under the Act and the company’s constitution if the company has one the company is complying with the same while dealing with him (“CORPORATIONS ACT 2001 – SECT 129Assumptions that can be made under section 128”, 2016). Under this section assumption is made that the company has properly and duly performed all the powers and there is no obligation on the individual for enquiring whether the same has been done by the internal management (“CORPORATIONS ACT 2001 – SECT 129Assumptions that can be made under section 128”, 2016).
In the case of Oris Funds Management Ltd (Oris Funds Management Ltd v National Australia Bank Limited [2003] VSC 315) Osborn J and later in appeal to the case (([2005] VSCA 148) Cervon JA upheld the decision that section 129(1) should not be read in a manner that requires the individual who is dealing with a company to have any kind of knowledge regarding the constitution of the company. Thus it can be assumed by the person who is dealing with a company that the actions which the company is taking are within the ambit of the company’s constitution (Pentony & Lennard, 2000).
This section 588M (3) of the constitution deals with the manner in which a creditor may recover from the director directly, provided that this manner has been provided under subdivision B and should not be in any other manner, debts which are due to be paid to the creditor, this amount being the amount which is equal to the amount of loss or damage that the creditor has suffered (“CORPORATIONS ACT 2001 – SECT 588MRecovery of compensation for loss resulting from insolvent trading”, 2016).
Under this section invariably there is a right which has been provided to the creditor that he can sue the director of a company directory when the situation is such that there is an insolvent trading which has occurred in the company (“CORPORATIONS ACT 2001 – SECT 588MRecovery of compensation for loss resulting from insolvent trading”, 2016).
Further in the situation where the company is undergoing liquidation and a breach has been committed by the director under section 588M the under the subsection 3 of 588M with the consent of the liquidator the creditor of the company may recover the amount of loss or damage that has been suffered by him and this amount shall be debt of the director which would be due to the company (Symon, 2006). These creditors who can recover from the directors are those who are subject of the claims at the time of insolvent trading of the company and those defenses which are enumerated under section 588H are applicable to them (Vermeesch & Lindgren, 1992).
1994 Australian corporations & securities legislation. (1994). North Ryde, N.S.W.
Australian corporations & securities legislation 2005. (2005). North Ryde, N.S.W.
Australian corporations & securities legislation 2013. (2012). North Ryde, N.S.W.
Australian corporations legislation. (2010). Chatswood, N.S.W.
Australian national companies and securities legislation. (1982). North Ryde, N.S.W.
Brophy, D. & Gupta, L. (1976). Preference Shares and Company Finance. The Journal Of Finance, 31(5), 1528. https://dx.doi.org/10.2307/2326705
Brophy, D. & Gupta, L. (1976). Preference Shares and Company Finance. The Journal Of Finance, 31(5), 1528. https://dx.doi.org/10.2307/2326705
Christensen, J., Kent, P., & Stewart, J. (2010). Corporate Governance and Company Performance in Australia. Australian Accounting Review, 20(4), 372-386. https://dx.doi.org/10.1111/j.1835-2561.2010.00108.x
CORPORATIONS ACT 2001. (2016). edu.au. Retrieved 24 May 2016, from https://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/
CORPORATIONS ACT 2001 – SECT 129Assumptions that can be made under section 128. (2016). edu.au. Retrieved 24 May 2016, from https://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s129.html
CORPORATIONS ACT 2001 – SECT 588MRecovery of compensation for loss resulting from insolvent trading. (2016). edu.au. Retrieved 24 May 2016, from https://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s588m.html
Corporations Act 2001 reprinted on 1 July 2003 taking into account amendments up to and including those made by Act No. 41, 2003. (2003). Canberra.
Corporations Act 2001 reprinted on 16 June 2006 (taking into account amendments up to and including those made by Act No. 17, 2006). (2006). Canberra.
Davis, K. (1996). Converting preference shares: An Australian capital structure innovation. Accounting & Finance, 36(2), 213-228. https://dx.doi.org/10.1111/j.1467-629x.1996.tb00307.x
Gillies, P. (2004). Business law. Sydney: Federation Press.
Latimer, P. (1996). Australian business law. North Ryde, N.S.W.: CCH Australia.
Law of companies in Australia. (1986). [North Ryde, N.S.W.].
Oris Funds Management Ltd v National Australia Bank Limited [2003] VSC 315
Oris Funds Management Ltd v National Australia Bank Limited [2005] VSCA 148
Pentony, B. & Lennard, J. (2000). Business law. Sydney: Butterworths.
Symon, H. (2006). Corporations Act 2001. Melbourne: Leo Cussen Institute.
Vermeesch, R. & Lindgren, K. (1992). Business law of Australia. Sydney: Butterworths.
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