Write an essay on The “Corporation Act .2001” .
The “Corporation Act 2001” deals with the several provisions which governs the function of the directors and other bureaucrats of the business entity As stated in the “section” 180-184 of the corporation act which describes the powers and duties of the directors which are imposed on him, the contravention of such powers may result in numerous liabilities.
In the present case, “James and Jenny” who are husband and wife are together holding 60% of the shares in the “MTL” and perhaps they even seek out to take a wider role in the managerial areas of the business. They went on to the extent of saying that the directors are should change the strategy of the business and even asked them to pay more attention to their business strategy or else the directors might be sacked.
It is evident that a business is an entity, which is separate from its “shareholders” and “directors”. A number of its powers may according to its articles be put into effect by the directors along with there are numerous erstwhile “powers” which is preserved for the share holders in the “general meeting.
The present scenario in the case reflects that the owners are exercising the powers which are not in the “articles of the company”. The control of the “directors” are contained by the restrictions of the authority granted to them in relation to the “articles” and surrounded by the perimeter which is described by the act was clearly expressed in the case of “Green L.J in John Shaw & Sons (Salford) Ltd v Shaw (1935) 2 K.B” in the subsequent expression.
A business corporation is an unit, which is independent from its “shareholders” and its “directors”. In the present case the significance of the “shareholders” are in conflict of the interest of the “directors”. In such a case neither the interest of the shareholders nor the interest of the directors shall prevail. It is the interest of the company which shall prevail. “As per section 192 of the corporation act 2001” if a shareholders of the company seeks any interest from the company than the same must be communicated to the directors. No shareholders is liable to act beyond the powers which is conferred to him.
The present case study reflects that the shareholders to seeks to gain interest from the directors by asking the directors to change the strategy of the business. Here in this the shareholders are “acting” beyond the authority provided in the “articles of association” and even threaten to sack the directors. Thus, this can be described as the breach of duty. The case reflects that the interest of the shareholders should not material to the personal interest.
Similarly, a company secretary hold an important position in the company. “It was held in the leading case of Northside Developments Pty ltd v Registrar” general that a secretary can bind the company. Nevertheless, in order to bind the company the actions of the shareholders must be in accordance with their authority. In the present case, the act of the share holders are is beyond the scope of their authorities and powers in such a case the transaction are non-binding.
In the present case Martin Lu is a minority share holders in MTL and the shareholders have expressed the concern regarding the run down and the draining of its assets. However, the case study reflects that the directors have not shown any signs of trouble and they were not reluctant to hold the meeting with the minority shareholders.
The minority shareholders have the right to convey act with the objective of putting a stop on the majority for “oppression and mismanagement”. These are “legal rights” of the “minority shareholders” and discover the in depth conversation in the later part of the study. In “Bannet Coleman & Co v. Union & Ors (1977) the division bench of the court under section 397 and 398 of the corporation act 2001” are intended to prevent the shareholders and directors to avoid the dissolution of the company and continue its operations. On the other hand, mitigating the “minority shareholders” from the acts of “operation and mismanagement” or avert its associations from being performed in a mode which is detrimental to the interest of the public. Hence, according to the act, the court has the wide authority to displace the whole administration of the MTL.
The case reflects that when the “directors” signifying the minority of “shareholders” performs an “ultra vires” act for the business concern an individual shareholders has the authority to take up a legal action against the directors. The minority shareholder do not have the authority to confirm the legal issues. However, in such a scenario a “minority shareholder” has the authority to contain the business concern by an order or by an “injunction” of the courtyard from performing an ultravirus act.
It was held in the “Foss v Harbottle that an action can be brought by an individual shareholders”. It is noted that the court decides the cases related to the minority shareholders. If the “shareholders and the director of the company are in control of the company, the minority shareholders representative actions for fraud on the minority will be entertained by the court as it was in the case law of (Cf. Birch v. Sullivan, 1957 1 W R L 1274). The main reason for this is that if the minority shareholders is denied of the right to action, their grievances in such cases would be entertained in the court of law”.
In “(Glass v Atkin 1967 65 D.L.R) (2d) 501, a corporation was equally controlled by the two defendants and the two plaintiff”. The case highlights that the two “defendants” claiming that had deceptively changed the “assets of the company” for their private use. The court authorized the “actions” and “noticed that the general principle of the company itself it to bring an action where it had an interest”. The case reflects that the two defendants controlled the company in the wisdom that they would thwart the business concern from undertaking actions. However, the court on listening to the grievances of the plaintiff decides to initiate action against the company.
In the present case the Martin Lu who is the minority shareholders can sue if an act necessitates a “special majority but is passed by simple majority”. The directors of MTL can act in simple or rigid formalities in order to observe the “majority shareholders” wants to provide “validity” to an act, which alleges to restrict the “interest of the minority”. “Martin Lu has the right of action to restrain the company from acting on a special resolution to which a notice is served. (Baillie v. Oriental telephone and electric co.ltd (1915) 1 Ch. 503 (C.A)”.
“Conversion requires special resolution”:
“A company registered under section 8, which intends to convert itself into a company of any other kind, shall pass a resolution at a general meeting for the approval of such conversion”. In the present case the directors of MTL is looking to change the trade of MTL in order to emphasis more focus on production and allocation of smart phone business as they assumed that the marketplace for DVD players have drenched. It is noticed that the directors have entered into the market with the view of implementing new strategy.
Perhaps the descriptive declaration seize to the perceive summoning the “general meeting” may put out the details regarding the cause for such kind of alteration. The case reflects that that the directors who seek to change the business must file an application in the “Form No. INC 18” with the local directors along with the payment of fee and authorized copy of the “special resolution” and a “copy of notice” assembling the conference which consisting of the instructions for approval itself into the business of any class and the corporation must also enclose the evidence of the “notice” given to all the “authorities prescribed”. In this regard, the “rule 22(b) states the company shall send the copy of the notice, simultaneously with its publications together with the copy of the application and all the attachment are to be registered”. The principal “commissioners of income tax” having the authority over the business concern and the main shareholders of the company have to make any representation to the regional director with in the receipt of the notice.
In the present case the directors of MTL needs to be seek the permission to enter into the contract in order to acquire a new manufacturing firm for mobile phone in Shanghai in order to implement new strategy. The law states that the business concerns y must enclose the application a official document from the practising company secretary, which has been stated in the act regarding the regulations for “conversion of a company registered under section 8” into other types of business which must be in compliance with the Corporation law.
The present case study reflects the directors of the company are under pressure for the shareholders however, they are not liable to sell off the assets of the company. On the other hand, it is better advised that the directors can create a holding company to avoid the pressure from the shareholders. The above stated case demonstrates the importance of general marketing and contrast to this general deterrence is the primary principle for the fixation of price in disposal of assets while gaining the control of the other holding companies, which the directors are planning to hold.
Section 395 of the corporation act 2001 states that where the transferee business entity has offered to undertake the assets of the company or any “class of shares of the transferor company”, the scheme and the contract of the company exemplifying such offers has to be permitted by the shareholders. It must be noted that the shareholders holding not less than “51 per cent of the shares” of a business firm or its nominee or the subsidiary company give the approval. The corporation act states that the transferee company is entitled and is under the obligation to acquire the share of the dissenting company shares and assets. Perhaps in this under the corporation act 2001 the directors are not advised to sell the share of the MTL and hence the above provisions will not apply in such scenarios and the transferee Chinese entity cannot take into the possession of the assets of the same class.
According to the “subsection (1) of section 233” of corporation act states that the notwithstanding with the provision of the “section of 230 and sub section 232 a scheme of merger or amalgamation may be entered into the business of MTL”. By merging the company with its subsidiary companies between the “holding company and its wholly owned subsidiary company or such class of companies” as may be prescribed in contrast to the following.
The transferee company which is MTL in this case shall file an application with the registrar, representing the “revised authorised capital” and pay the prescribed fees which is payable in the transferee company.
Reference List
Australian Companies Legislation (CCH Editions, 1991)
Charlesworth, J et al, Charlesworth’s Company Law (Stevens, 1987)
Charlesworth, J et al, Charlesworth’s Company Law (Stevens, 1987)
Company Law (R. De Boo, 1950)
Corporations Act 2001 Reprinted On 1 July 2003 Taking Into Account Amendments Up To And Including Those Made By Act No. 41, 2003 (Attorney-General’s Dept., 2003)
Corporations Act 2001 Reprinted On 16 June 2006 (Taking Into Account Amendments Up To And Including Those Made By Act No. 17, 2006) (Attorney-General’s Dept., 2006)
Crengle, Julie, Mark W Russell and J. G. M Shirtcliffe, Company Law Update (Australian Law Society, 2000)
Oliver, M. C and Enid A Marshall, Company Law (Pitman, 1994)
Related Party Transactions And Minority Shareholder Rights (OECD, 2012)
Symon, Helen, Corporations Act 2001 (Leo Cussen Institute, 2006)
Turley, Ian F and Ayshia Rizza, The Financial Services Reform Act 2001 (Leo Cussen Institute, 2002)
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