- Information
- AI Chat
Summary - exam notes
Company Law (LAWS2301 )
University of Western Australia
Students also viewed
- LAWS2301 Exam - Just the examinable lectures of lectures 11 and onwards
- Insolvent trading
- Company law lecturer11-22
- LAWS2301 case list - CASE LIST OF SOME OF THE CRUCIAL CASES IN THE UNIT
- LAWS2301 - Notes + Answer Guide
- Wunna Nyiyaparli Indigenous People v Australia case (CCPR C 137 D 3585 2019 ) (10 July 2023)
Preview text
Page 1 of 38 LAW EXAM NOTES Topic: Introduction Issue Notes relating to statute Case Law concurrent power s51 decision to incorporate s114 Minimum number of members is 1 s115 if More then 20memebrs must incorporate Proprietary company s45A, s9, s113 less then 50 non employee shareholders s113,3 no public fundraising except offer of shares to existing shareholders limited shares, unlimited with share capital Large Small Pty companies s292 large must be audited s301 large must prepare financial and directors report small has less audititing and governed only under s294 Public Companies s9 (require directors and 1 secretary) types of companies: limited shares, limited guarantee, unlimited with share capital and no liability companies (mining only) Coversion of PTY to Public company s162 167 1. pass a special resolution, 2. lodge application with ASIC, 3. Asic gives notice, 4. ASIC alters details, 5. new certificate produced Separate Legal entity s124 Corporate Powers, extra power then the natural person Salomon V Salomon lifting of the corporate veil Holding Co and Subsidiary s9, 46 Holding company owns more then of shares then the subsidy or has control over the company Holding company can not declare profits as its own from the subsidiary company Industrial Equity Ltd V Blackburn Page 2 of 38 Topic: Corporate Veil Issue Notes relating to statute Case Law Statute: Insolvent trading s95A when a company is insolvent and they take on more debt, there directors are liable for the new debt s588G directors are liable s588V allows for recovery against the holding company being liable, if holding company allowed subsidiary to continue trading Statute: voidable transaction Liquidator may void an uncommercial transaction if directors had made poor decision to avoid going insolvent s588 FE the liquidator can claw back up to 2years from application of winding up human beings s588 FE (4) for related entities can claw back up to 4years before application of winding up Statute: Company officer security interest s588FP if security interest is enforced officer within 6months of creation of interest, the security interest is violable s588FP(3) a secured party is regarded as taking a step to enforce interest if a) appoints a recover b) enters possession or assumes control of companies property to enforce security interest c) seizes property can however seek court approval Statute: Financial Assistance s260A when company provides financial assistance for acquisition of its shares or holding Co shares, veil can be lifted s260D person involved in contravention is guilty of the offence liable under civil penalty provisions Common Law: Avoidance of obligation fraud Restraint of trade clause in employment contract, to stop from poaching clients, so set up a company to get around clause held: court granted injunction against Horne and his company Gilford Motor Co Ltd V Horne Common Law: Promoters of the company Promoters create the company, then sells shares to represents an asset but as asset is invaluable so the share price falls and promoter has been paid channel islands company corporate veil was lifted Re Dar (1911) Common Law: Agency Partnership SSK owned a factory BWC was subsidiary of SSK, when the government bought the factory, they have to pay for Smith stone and Knight Ltd V the land and removal costs of the factory. SSK claimed that BWC was an agent to them but could only claim if Birmingham Corp BWC had no independence. Common Law: benefit of group as a whole One of the banks loan defaulted and group paid for defaulted loans for their benefit so they could continue to loan. the liquidator of one of the companies sought to recover the funds based on breach of directors duty to act in the best interest of the company. held: the transfer benefited the group as a whole and therefore no breach of duty as they were indirectly helping themselves Equiticorp Finance Ltd V Bank of Zealand Common Law: company participates in breach of directors duties Green was a manager of Bestabell, green incorporate Clara, he made clara to submit tender prepared himself in competition with bestabell Claras won the tender and bestabell was the third highest tender Held: bestabell could obtain an account of profits from clara as manager behind company had breach his responsibility to respect his employer Green V Bestabell Page 4 of 38 Topic: promoters duties a promoter is some who is actively involved in the formation of a company Issue Notes relating to statute Case Law Duty of disclosure A group of people purchased an island which supposedly contained minerals, company formed to purchase land. The new directors sued syndicate (promoters) and turns out land was much less valualbe. Held: contract rescinded, as there must be an independent board and full disclosure of promoters interests errand V New Sombrero Phosphate Undisclosed Profits The promoters made a secret profit of pounds and but disclosed the in the prospectus however the discount was not disclosed. Held: liquidator was able to recover the profit, promoters failed to disclose all profits. disclosure to embers of the syndicate was not sufficient, need to disclose to the shareholders. Gluckstein V Bardnes Common Law Remedies of unfulfilled promoters duties 1. recession bars: in the care where there is no affirmation of contract, innocent third parties involed or inability to restore land property to original condition 2. account of profits 3. constructive trust Statutory Remedies 1. recovery liquidators as voidable transaction 4years claw back 2. recovery for false statements in disclosure docs (public companies) Topic: Pre registration contracts Issue Notes relating to statute Case Law Becoming bound contracts 131 if a person enters into contract company becomes bound if 1. company is registered within a reasonable time 2. where the company fails to ratify, the person who signs is liable for damages Bay V Lillawarra stationary supplies (only the accountant who signed contract could be sued) Statute exceptions s131 the court has the power to make an order for the company to pay all or part of the damages s131 if company does not ratify the court can change it so that the company may not indemnify person who signed s131 company ratifies does not pay, the person who signed may be liable s132 the outsider may release the person who signed from liability Page 5 of 38 Topic: Constitution Replaceable rules Chapter 4 Page 7 of 38 Statutory restrictions to alter constitution s136(3) allows for entrenched provision which require consent of named person or higher then vote s140(2) unless member agree in writing to be bound, member is not bound modification if it requires members to 1) take additional shares 2) increase liability 3) restrict rights transfers s246(b) variation of class rights require 2 meetings a AGM and second meeting of affected shareholders (class shareholders) s232 oppression remedy Common Law restrictions oppression case, voting majority V minority altered constitution allowed for compulsory acquisition majority shareholders (the majority shareholder owned Held: the alteration was invalid, as the court looks to protect the minority shareholders Fair judgement and alterations 1. 2. 3. 4. Common Law remedies of breach of constitution Declration, injunction and damages s135(3) RR is not a contravention of Corps act no s1324 remedy process of expropriation: full disclosure and independent valuation price to be paid: account for future and present value s140(2)(c) if there is a change s124(2) Co legal capacity to do something is not affected if interest are not served Gambotto V WCP Ltd (1995) Page 8 of 38 Topic: Directors Issue Notes relating to statute Interim Director s9 defines a direction who is appointed into the position s210 GM ordinary res, for Pty co must be confirmed within 2month, public co can wait until never AGM s201H BOD s201K if one director appoints someone else to attend board meetings when they are absent disqualification of director s206(B) convicted of fraud or serious offence with jail time 1yr s206(b)(3) undischarged bankruptcy s206(c)(d)(e) order the court s206(f) ASIC power to disqualify without court approval removal of director PTY Co s203C ordinary resolution, 21 days notice entrenched provision can make it more difficult s140(1)(b) if director removed breaches RR it would require remedies under statutory contract injection not possible, as it would amount to an enforcement of contract on unwilling parties removal of director Public Co s203D 2 months notice, directors must have a change to be heart at the GM s203E other directors can not remove a director s140(1)(b) public co can remove director regardless of RR however damages may be available for breach of contract The board of directors s198A RR to manage company s198D delegate powers s254U pay dividends s201J managing direction s201G ordinary resolution appointment of directors, s201H appoint BOD Case Law Allen V Gold reefs (1900) removed director can sue for wrongful dismal on the separate employment contract Page 10 of 38 Issue Notes relating to statute Duties of directors s180 care and diligence of directors and officers (1) a director of corporation must exercise their powers and discharge their duties and of a reasonable person. (2) business judgement rule, a director who makes a business judgement to meet requirement of subsection (1). a) must be in good fiat and power person b) do not have material interest c) must inform themselves on the matter of judgement c) must rationally believe it is in the best interest of the company. civil penalty provision s1317E s181 good faith of directors and officers (1) a director must exercise their powers and discharge their duties for proper purpose, in good faith a din the best interests of the company. civil penalty provision s1317E liability s182 use of position (1) a director or officer of corporation must no improperly use their position to a) gain advantage for themselves of someone else or b) cause detriment to the corporation. civil penalty provision s1317E s183 use of information a) a person who obtain information can not use it to a) gain advantage for themselves or b) cause determinant to Co. s184 criminal liability 1) a director or officer corporation commits an offence if they are a) reckless or b) intentionally dishonest and either c) act in good faith or d) for a proper person. Case Law standard for Director Employee concealed forex trading arranging unauthorised foreign currency borrowings, he had not been supervised properly. Auditor failed to detect the debt however warned senior executives of inadequate control and they did not act on warning. AWA sued auditor who then counter sued for contributory negligence the AWA board held: AWA liable, senior executives and CEO were negligent as they failed to make enquiries. No breach non executive directors as they had made full enquiries but details were concealed from them. Hamilton (MD) and wheeler (chairman), the two wanted to own a majority interest in capital hall and ensure it was overpriced. JCLD wanted to sell business to tower to help to obtain money and bought land at twice its actual value. Held: Hamilton breached his duty to exercise reasonable care, he was responsible to make other directors aware of potent ion detriment. Directors made company to pay out debts owed another company they control when they know the second CO was insolvent. He argued he was uneducated held: lack of education is irrelevant Case Law Daniels V Anderson (AWA case) Parmanent Buildings society V Wheeler Gamble V Hoffman Vines and other directors breach their duties in relation to involvement with prep of forecast for takeover tempt AMP. Part B statement included that GIP was well on track to achieve significant profit however Vines and GFO ASIC V Vines provided an unqualified assurance of the reliability of the profit forecast despite the hurricane issuance claims which should have been accounted for. they therefore failed to claim up to date information however they knew their forecast was improbable and failed to inform senior GIO Managers. Page 11 of 38 Directors defences: Reliance on another s189 Reliance on others for information s189(a) either an employee or profession outsider s189(b) need to satisfy requirements: a) acted in good faith b) after making an independent evaluation of information having regards for directors knowledge s189(c) reliance is a breach of directors duty under statute and common law Directors defence: act of another s190 act of another non executive directors executive specialist s198D delegation s190(1) responsibility when you delegate you bear the fault s190(2) excused: only excused if requirements satisfy a) believed on reasonably ground that delegate would act properly b) believed on reasonable ground and in good faith and after making a proper inquiry Directors defence: Business judgement s180(3) business judgement decision relevant to business operations of CO s180(2) directors if not liable if can satisfy a) judgement was made in good faith B) no material personal interest c) they inform themselves properly d) they rationally believe judgement in best interest of the CO Duties of Loyalty and good faith Bona fide (act genuinely) in interest of CO s181(1)(a) director must act in good faith and in the best interest of co 1. Co is solvent interest as a collective group 2. s232 different classes of shares fair between shares 3. Co is solvent interest of creditors 4. interest of group of CO which consequently helps their own Co Proper purpose Issue of Share Capital s181(i))(b) directors must exercise their power for a proper and legal purpose: only proper purpose is to raise capital apply the test Percival V Wright Jeffree V NSSC Equiticop finance Page 13 of 38 Topic: Related Party Transactions (only applies to public companies) Issue Notes relating to statute related party transaction s228 Related parties, s229 financial benefit given to related parties s208 approval of GM exemptions under s209 Co is not guilty, person involved is liable exemptions s210 arms length transaction: market value s211 salary which is reasonable s212 payment of insurance premiums or legal costs related to liability as an officer s213 amount less then s214 benefit between closely held subsidiary and holding company s215 benefit to related party in capacity as a member which doe snot unfairly discriminate other members remedies of related party transactions s1317L breach of civil penalty provisions, on balance of probability will have criminal liability s1317E(2) court declaration orders: pecuniary penalty order and compensation order s1317G pecuniary penalty s206C disqualification from managing company s1317H compensation order s1317J Application ASIC or Co Case Law ASIC V Adler Case adler was in breach of could not rely on business judgement rule Page 14 of 38 Topic: liability for contracts Page 16 of 38 Statutory exceptions s129(4) can not confer authority s129(5) sure execution without seal is signed per s127(1) s129(6) due execution with seal if affixed and witnessed s129(7) officer or agent has authority to warrant authenticity of documents s128(1) Co not entitled to assert that any of assumptions are incorrect s128(3) assumptions are held if officer or agent acts fraudulently Story V advance Bank of s128(4) outsider can not make the assumptions if they knew or suspected assumptions were Australia incorrect s130(1) outsider can not intentionally ignore suspicious circumstances and are required to investigate assumptions Topic: Companies liability in Tort and Crime Issue Notes relating to statute Capacity of company s124 same capacity as a normal person company can commit acts which amount to tort and criminal liability lennard knowledge attributed to company, no defence as loss was due to owners actual fault one active directors, knows something the company knows something Case Law Lennards Carrying V Petroleum Liability of Company managers actions chain of supermarkets and therefore one chains manager had a misleading advertisement, he was not on the board, company had taken all reasonable steps and due diligence to avoid offence held: that only managers was liable as it the actions of the company Tesco Supermakrts V Nattrass (1972) Vicariously liable employer liable for employee actions in the course of their employment, if they act as an agent within the scope of their apparent authority Lloyd V Grace Smith and Co (1912) Criminal offence s3 physical element act needs to be committed employee, agent or officer of the co acting within their scope of employment s12(1) intents, proof that company expressly authorised the commission of the crime, tacitly Page 17 of 38 Topic: meetings Issue Notes relating to statute General Meeting s246(B) class meeting of shareholders are invited s198A board of directors can call a GM s249C single director s249D boaard on written request member with 100 votes or s239E members with more then of requesting members votes can call a GM on failure of board to call GM s249F members with votes can call GM at their own expense s249G court application of directors or members when other ways are not possible notice requirements s249H unlisted Co 21 days notice can be lower if its a AGM and all agree, or EGM of share holders agree s248HA 28days for listed Co s203D minimum 21 days notice for removal of PTY Co director s329(1)(A) minimum months notice for removal of Director public Co Voting requirements s250J show of hands, or poll with 1 vote each s250E(3) chair has the casting vote s250L members of votes or chair can request a poll s250S member can send a proxy board of directors meeting s248A can be a circulating meeting s248C any director can call a meeting s248F must have quorum, at least 2 directors s248G chairmen has casting for majority vote Material interest If a director has a matieral interest in the matter it must be disclosed s191(1) in PTY Co once material interest has been disclosed can vote s195(2) Public Co disclosed material interest, can not vote unless board consents Procedural Irregularity s1322 member feels that a decision was wrongly obtained GM s1322(1)(b)(i) lack of quorum s1322(1)(b)(ii) insufficient notice refusal of demand for poll s1322(2) proceeding only invalid if because of the procedural irregularity caused substantial injustice and the outcome would be different If proved court has power to declare meeting invalid Case Law Re Pembury Pty Ltd the procedural caused no difference to the outcome Chew investment Australia V General Corp of Aust chair refused if poll had of gone through outcome would be different Page 19 of 38 Topic: Members rights Page 20 of 38 Issue Notes relating to statute Members rights to inspect books s247D director or GM may allow inspection s427A applicant must prove to be in good faith to inspect the records APA held of Humes, made a hostile take over of Humes. shareholders being diluted to so APA applied to court to inspect books. Held: dominant purpose waste ascertain whether directors were in breach of duties Variation of class rights s246B enables the company to vary class rights obtaining two resolutions 1) special resolution of company, 2) special resolution of class s246D enables a member who holds can apply to court to set aside variation, on ground of unfair prejudice s1322 deflation proceedings invalid: substantial injustice caused statutory injunction of breach of corps act Oppression s232 oppression court application s234 Members can apply for oppression must satisfy either A,B or C and D or E A) s53 Affairs: membership, control, internal management, promotion of Co B) Act Omission C) resolution decision at GM D) contrary to interests as a whole e. all shareholders E) oppressive, unfairly discriminatory against individual member Must satisfy either A,B or C as well as either D or E Orders s233 orders 1. winding up 2. constitution modification 3. purchase of shares Co or other members 4. authorisation of member to commence action s1324(1) injunction can be granted the court to restrain person from contravene corporations act Case Law Re Humes LTD (1987) court is unlikely to wind up company if its operating profitability John J Starr
Summary - exam notes
Course: Company Law (LAWS2301 )
University: University of Western Australia
This is a preview
Access to all documents
Get Unlimited Downloads
Improve your grades
Why is this page out of focus?
Why is this page out of focus?
Why is this page out of focus?
Why is this page out of focus?
Why is this page out of focus?
Why is this page out of focus?
Why is this page out of focus?
Why is this page out of focus?
Why is this page out of focus?
Why is this page out of focus?
Why is this page out of focus?
Why is this page out of focus?
Why is this page out of focus?
Why is this page out of focus?
Why is this page out of focus?
Why is this page out of focus?
Why is this page out of focus?
Why is this page out of focus?
Why is this page out of focus?
Why is this page out of focus?
Why is this page out of focus?
Why is this page out of focus?
Why is this page out of focus?
Why is this page out of focus?
Students also viewed
- LAWS2301 Exam - Just the examinable lectures of lectures 11 and onwards
- Insolvent trading
- Company law lecturer11-22
- LAWS2301 case list - CASE LIST OF SOME OF THE CRUCIAL CASES IN THE UNIT
- LAWS2301 - Notes + Answer Guide
- Wunna Nyiyaparli Indigenous People v Australia case (CCPR C 137 D 3585 2019 ) (10 July 2023)