Discuss about the Commercial and Corporation Law for ASIC.
Ying and Zena must turn their idea into an action in order to form a company. Section 1.5.3 of Corporation Act 2001 provides for setting up of a company. The guidelines is that having the idea of forming Any Aim Fitness is not enough, Ying and Zena have to lodge an application that is properly completed in the prescribed form. A proper application form will include the directors, shareholders and their personal information details. The Any Aim Fitness Company shall exist upon registration by Australian Securities and Investment Commission (ASIC).
The second issue will be whether the proposed company to be formed by the friends would be registered. Section 112 of Corporations Act provides that a company can be public company or a private company. The intention by Zena and Ying to turn what has been a charity for a number of years into a business can therefore be realized by choosing the Proprietary Company as a vehicle of their business operation. A proprietary company limited by shares s the best vehicle in the circumstances owing to the investment which needs to be done, limitation of membership and transferability of shares and the limitation of liability of the members once the company is registered
Again, it is worthy to note that being two friends; they meet the statutory minimum of members of a proprietary company asunder section 114 of Corporations Act 2001 and still be way below the statutory maximum of numbers of the 50 members of the proprietary company under section 113 of Corporations Act (CA) 2001.
Having identified the business opportunity, Zena and Ying must then move to search for the name of the company and ascertain that their proposed name of Any Aim Fitness is available. This is will be their principal role as promoters of the company. The guiding principle the name search is in order to ascertain that the name that the two friends are settling on is not unacceptable or identical to an existing name as under section 147 of CA 2001. The two friends must be aware of the requirement of section 148 of CA 2001 that makes it mandatory for the company to have the word limited at the end. Since the best business vehicle is a proprietary company, the company name shall be Any Aims Fitness Proprietary Limited.
The procedure of reserving the name is clearly outlined in the section 152 of Corporations Act 2001. Under the section, a person has to lodge an application for reservation if the name is available under section 147 of CA 2001. The reservation last for two months and can be extended for two more months when the ASIC discretionary powers are invoked.
While the registration of the proposed company is pending, the two friends, Zena and Ying shall be called promoters of the company. A promoter is a person who undertakes in the formation of a company and sets the same going through taking of necessary steps in order to achieve a certain purpose. From the definition, it is clear that they have conceived the thought and idea of setting the business of offering fitness to the people and are tasked with the future prospects of the business. They need to be aware of their liability to the pre-incorporations contracts entered into such as the agreement to lease the office near the park for three years.
The position of common law is that a promoter is personally liable for the contracts unless they are approved by the company. The similar position has been adopted by the CA under section 131 as it provides that the company formed will be bound by contract if the company ratifies it after registration. Even if it fails to ratify, the company is still able to be found liable for payment of damages or transfer if property. Therefore Ying and Zena ought to provide guidelines for ratification and the timelines in the company constitution in order to avoid uncertainty as to a reasonable time. If the registered company ratifies, the company itself shall be bound by the lease agreement.
Prior to registration, Ying and Zena have to make certain decisions. This will include choosing the registered and business address of the proposed company where all communications are to be sent. Another is the choice of officeholders such as the director and to give full particulars such as full names, date and place of birth and residential address. The point of awareness in respect of this requirement is that a proprietary company must have at least a director but the position of a company secretary is not mandatory. Lastly they have to decide on the share structure of the company including classes of shares, total number of shares.
Registration process also called incorporation. Currently, the incorporation can be done on an online platform for automated way of registering a company in Australia and getting incorporated. The procedure as under section 117 of Corporations Act is that a person must lodge an application with the Australian Securities and Investment Commission. The application must contain the type of the company, company proposed name, name and address of consenting persons, names and place of birth of directors, company secretary, if any, address of registered office or principal place of business, number , classes and value of shares. If the ASIC is satisfied, it shall give the company an ACN number, register it and issue a certificate starting the ACN and company name, type and date of registration. Under section 119, it is only after registration that the company shall be deemed to have come into existence.
Another vital thing is the effect of registration of the company. Once registered, the company becomes a body corporate and shall have separate legal capacity from the members. This is advantageous to the two friends as their liability shall be limited to the extent of shares held alone. Section 124 of Corporations Act provides that the company has powers to issue shares, grant unissued shares, and distribute company property and to do anything authorized by law.
Another point of awareness is in the area of having an Australian Company Number (ACN). This is a peculiar number with nine digits that every company in Australia has. Though Ying and Zena have opted for a name without the number, it is requirement under the law that the ACN must appear in its accounting documents, notices, letterheads, cheques and written advertisements.
The brief facts are that Adelaide Bus Ltd wants a pay for printing of picture for AEM on account of a concert with was cancelled, has been contracted to print pictures for advertisement in major contract. From the set of facts certain issues can be identified for determination. First issue is whether the act of cancellation of the concert could be anticipated in the circumstances when AEM was contracting AB to do the advertisement. Second issue will be whether the actions of AEM were unconscionable thus warranting an exception to the application of the doctrine of frustration.
The law on performance of a contract indoctrinates the doctrine of frustration which flows from Coronation cases. It provides that once a contract has been entered into and is affected by a force majeure, it fails in futuro. The doctrine as it is operates has over time been modified by various statutory laws. Other inherent limitation is that the courts will apply it as a last resort only the act complained of as having caused the frustration must not have been anticipated reasonably in the circumstances. Statutory laws have also modified this doctrine by requiring that the conduct of any person who wants to be protected under this doctrine ought not to be unconscionable. It must prove that the actions were not oppressive or harsh.
The two parties shave been entangled in a complex situation of multiple application of laws and exceptions. Amazing Events Management Ltd. (AEM) will argue that the contract between it and Adelaide Bus Co. Ltd. (AB) was frustrated. In advancing this argument, AEM will first need to prove that there is a valid contract between AEM and AB. In establishing a valid contract, ne needs to prove the existence of the elements such as agreement, consideration and intention to be legally bound.
As to the first limb, Amazing Events Management Ltd can argue that there was a meeting of minds between the parties as to the advertisement of the concert. He will argue that the offer was certain and is distinguishable from an invitation to treat. The arguments can be furthered by stating that the contracting of AB by AEM to print fifty large poster advertisements was in no uncertain terms (Beatson, 1998).
As to the consideration, AEM can argue that in the agreement, AB was to print fifty large posters and in the end he would be paid for the service. Thirdly, AEM will have to prove that here was an intention to be legally bound amongst the parties to the contract for printing of advertisements. This would be evident from the communication between the parties. Once Amazing Events Management Ltd has proved the existence of a valid contract, it will then advance an argument that the contract has been frustrated. Frustration here means that the cancellation rendered the completion impossible.
Amazing Events Management Ltd. will argue for the application of the doctrine of frustration (El-Hassan, 1985). This will be advanced by stating that the cancellation of the concert was supervening and beyond the control of Amazing Events Management Ltd. Evidently, this was the case as the major contractor, Barry Big Noise did not formally inform AEM that they were cancelling the main contract of advertisement and organizing of the contract. AEM can rely on the case of Taylor v Caldwell (1863) 3B & S 826 to persuade the court that upon proof of frustration by lack of anticipation, the contract must thus be automatically terminated (McIntyre, 2004).
In Taylor case, the common law position on frustration was upheld and the court underscored that common law has no place for performance where a contract has been frustrated. Finally as to the claim of the debt, AEM ca advance the argument that the loss for termination ought to lie where they fall. Furthermore the advertisement contract was dependent of the concert events organizing agreement and that when the later failed; there was no reason in principle why the dependent contract of advertisement must not fail.
AB will argue for common law exception that it will advance in the argument is that the doctrine of frustration is not absolute but applies in limited cases (McIntyre, 2004). It shall argue that the kind of frustration was common in the business of Events management and that it could have been anticipated by the parties therefore removing it totally from the ambit of doctrine of frustration (Rothschild, 1931).
The second legal argument which can be advanced by AB is that the doctrine of frustration if applied would be unfair to it given its harshness in the instant circumstances. This is because, at the time of being called not to proceed with the advertisement, AB had already printed the pictures (Marchetti, 2012). Particularly, he will rely on the provisions of Part 2(C) of Fair Trading Act 1999 Act No. 16 of 1999.
Conclusion
The reliance on the statutory AB’s reliance on section 8(2)(b) of Trading Act on prohibition of unconscionable conducts where would be strong due to the seniority that the statutes have over common law principles during interpretation (Leske and Schweitzer, 2009). Again, it is because that AEM had a higher bargaining power. This it can do by relying on the case of Cutter v Powell [1795] EWHC KB J13 (9 June 1795) KB in order to persuade the court that her is unity of the contracts.
While Amazing events management Ltd will rely on the doctrine of frustration, Adelaide Bust Ltd can base the argument on the exception t the operation of t doctrine. As to the argument on damages, Adelaide Bus Ltd is likely to fall because the court is likely to consider that Amazing Events Management Ltd can be able to recover from Barry Big Noise for lack of proper notice of cancelation of the contract of organizing the concert. Secondly, it would be easy for AB to invoke courts discretion to grant damages and orders by showcasing exceptions to the general rule.
References
Beatson, J. (1998). Anson’s Law of Contract. Oxford University Press
Kelly, D., Holmes A., Hayward, R. (2002). Business Law. Oxford University Press
Lunney, C. (2000) Tort Law: Text & Materials. Oxford University Press
Marchetti, C., 2012. Doctrine of frustration.
El-Hassan, A.E.W.A. 1985. Freedom of contract, the doctrine of frustration, and sanctity of contracts in Sudan law and Islamic law. Arab Law Quarterly, pp.51-59.
McIntyre, E. (2004). Business Law. Longman Publishers
Anderson, A. 1953. Frustration of Contract-A Rejected Doctrine. De Paul Law Review 3(1) pp 1
Rothschild, J.L. 1931. The Doctrine of Frustration or Implied Condition in the Law of Contracts. Temp. LQ 6, pp.337.
Leske, K.O. and Schweitzer, D. 2009. Frustrated with Preemption: Why Courts Should Rarely Displace State Law Under the Doctrine of Frustration Preemption. NYU Ann. Surv. Am. L. 65, pp. 585.
List of Cases
Cutter v Powell [1795] EWHC KB J13 (9 June 1795)
Taylor v Caldwell (1863) 3B & S 826
List of Statutes
Fair Trading Act 1999 Act No. 16 of 1999.
Corporations Act No. 16 of 2001
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