Discuss about the Legal Environment of Business for Corporations and Securities Legislation.
Registration of Company
Share Register
To: The Board of Directors of the Company
From: The Company Secretary
Subject: The Share Register
Under the corporations act, it is required that the company should have one member at least who is termed as being the shareholder of the company (Latimer, 1996). These shareholders may either be under section 120 of the Corporations Act 2001 (“The Act”) those who are incorporating or forming the company firsthand or those who have been issued the company’s shares after the same has been incorporated or those who acquire those shares which to them have been transferred and these shareholders shall have to enter their names in the “Register of Members” or the “Share Register” or the “Register of the Shareholders” as provided under Section 231 of The Act (1994 Australian corporations & securities legislation, 1994).
Attached format of Share Register:
Constitution
Corporations Act
Company Limited by Shares
Rules of XYZ Company Private Limited
ACN 123 456 789
Preliminary
The replaceable rules and this Constitution shall be jointly applicable to the Company. General
The name of the Company is XYZ Private Limited.
The members’ liability in this company is limited.
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. In the places where there has been the specific exclusion of the replaceable rules, the same will stand specifically excluded (Law of companies in Australia, 1986).
Unless other required by the context the phrases and words mentioned below shall have the meaning as mentioned below:
“Act” means the Corporations Act 2001 (Cth.);
“ASIC” means the Australian Securities and Investment Commission;
“Board of Directors” means the Board of Directors of the Company;
“Common Seal” means the company’s common seal (if any);
“Company Secretary” means the person who has been appointed by the company for the performance of duties as the company’s secretary;
“Constitution” means this Constitution and any amendments/addendums to the constitution thereto;
“General Meeting” means the company’s member meeting;
“Replaceable Rules” means the rules which are referred to in the Act as the replaceable rules.
“Registered Office” means for the time being the registered office of the Company;
“Register Shareholders” means registration of the members in pursuant to the provisions of the Act.
“Section” means wherever the term section has been used in this act it would mean a section of the Act.
The Company may subject to the Act issue preference shares including preference shares that are redeemable.
These preference shares are to be issued on the terms on which they are or at the company’s or holder’s option and shall be liable to be redeemed whether the company has the profit or not (Gillies, 2004).
These preferences are to confer upon the holders of these shares the right of converting it into ordinary shares on the basis and if it is determined by the Board at the time when the preference shares are being issued (Australian corporations & securities legislation 2005, 2005).
There shall be conferring on the holder by the preference shares the right of receiving the profits that the Company avails for preferential dividend’s dividend on the basis that the Board shall determine at the time when the preference shares are issued;
There shall be participation of the preference shares along with the ordinary shares when the Board declares the dividends to the extent and if the Board at the time when the preference shares are issued determines (Australian corporations & securities legislation 2005, 2005); and
At the time of issuing of preference shares the Board may determine that the preferential are cumulative and if cumulative to the extent to which it shall be cumulative
The holders of the preference share are to be conferred with (a) the redemption right, and wherein there is a winding up priority for payment in case as compared to any other class of shares (Australian corporations legislation, 2010); and
The right of being given the priority with respect to the payment of any dividend over any other class of shares, to those dividends which are preferential in nature.
There is no conferring of any further rights to the holders of the preference shares by the preference shares for participating in the profits or the assets of the company (Brophy & Gupta, 1976);
The rights that are conferred to the preference shareholders is same as that which are conferred to the Ordinary Shareholders for attending of any general meeting of the members of the Company and only in the following situations and in no other situations can there be a right of vote in the member’s general meeting (Davis, 1996):
Where there are an unpaid Preference Shares with respect to a Dividend during a period in which there is a meeting called;
Where there is a proposal for reducing the share capital of the Company;
With respect to a resolution which is for the buy-back agreement’s terms being approved with respect to the Company;
Where there is proposal which would affect the rights which have been attached with the Preference Shares (Christensen, Kent, & Stewart, 2010);
Where there is proposal for winding up of the Company; and
When the company is being wound up;
If there is a permit for voting under the clause 2.6 then in that case each of the holders of Preference Shares will have the rights mentioned below with respect to their Preference Shares in the general meeting of the members:
One vote will be given to per shareholders at the time of show of hands; and
In the case of a poll, per fully paid Preference Share shall have one full vote and partly paid Preference Shareholder shall have the fraction of the vote which is proportionate to the amount which has been paid for issuing of the Preference Share, which is partly paid.
Accounts and Reports:
The right of receiving audited accounts, notices and reports shall be same as that of the holder of Ordinary Shares.
Prevailing of Preference Share Provisions
The provisions of preference shares as described in the Part 2 shall prevail over all the other provisions of the Constitution to the extent of there being an inconsistency. Section 124
Under section 124 of the Corporations Act 2001 (“The Act”), the companies, have been empowered specifically for borrowing money, granting of security for these loan(s) and issuing of shares. Under the section 124, the companies have also been empowered to the issue of shares and also to have the option over such shares (Corporations Act 2001 reprinted on 16 June 2006 (taking into account amendments up to and including those made by Act No. 17, 2006), 2006). For facilitation of the company’s operations in a manner that is effective decision has to be made by the managers of the company and also these decisions are required to be implemented with respect to the company’s need for capital. These decisions include decisions regarding the amount of the capital which the company requires and the source of capital which would prove to be most effective for the company. If the companies want to expand the opportunities with respect to trading in the future, there will inevitably be a necessity for financing such operations either by way borrowing of funds directly through a financial institutions agency or by way of shares and issue such share or by way of debentures which are issued. This section provides for the company to be able to raise such capital (“CORPORATIONS ACT 2001 – SECT 588MRecovery of compensation for loss resulting from insolvent trading”, 2016).
Section 129(1)
The section 129(1) assumption is concerned with the constitution of the company and any of The Act’s replaceable rules that are applicable (Latimer, 1996). It is provided under the section 129(1) that it may be assumed by an individual that the constitution of a company, if any, and any of the replaceable rules under The Act’s provision that are applicable on the company have been complied with by the company (“CORPORATIONS ACT 2001 – SECT 129Assumptions that can be made under section 128”, 2016).
The statutory espousal by the Section 129(1) of the CL IMR is represented. Under the principle of this section a person who is contracting with a given company and wherein the individual is dealing with the company in good faith it may be assumed by the individual that all such acts are within the constitution of the company and there has been a due and proper performance of all the powers, and there is no binding on such individual to enquiring whether there have been regular acts by the management which is internal (Pentony & Lennard, 2000).
Section 588M (3)
Under this section the creditor in a manner as provided under the B subdivision however not in any other manner may recover directly from the director, for the debts which are due to such creditor, an amount being equal to the amount of damage or loss suffered by the creditor. The section 588M(3) provides invariably a right to the creditors for suing the director for compensation when it comes to a situation where there has been insolvent trading directly (“CORPORATIONS ACT 2001 – SECT 588MRecovery of compensation for loss resulting from insolvent trading”, 2016).
Also in the even where the company undergoes liquidation and there has been a breach by the director under section 588M then pursuant to section 588M(3) of The Act the creditor of the company, with the liquidator of the company’s consent, may from the director of the company, as a debt which shall be due to the company, recover an amount which amounts to the damage and loss which the creditors directors have suffered from the director (Symon, 2006). Such creditor directors should be those are a subject of the claims with respect to the company’s insolvent trading and the defenses which have been set out under section 588H of The Act are available 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.
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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