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LAW305: Corporations Law 1

LAW305: Corporations Law 1. Textbooks : To be determined Corporations Act 2001. Assessment:. To be Announced. Marking Schedule. Pass: attempt to answer all parts, together with legislation and cases Credit: pass plus reasonable argument

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LAW305: Corporations Law 1

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  1. LAW305: Corporations Law1 • Textbooks: • To be determined • Corporations Act 2001

  2. Assessment: • To be Announced

  3. Marking Schedule • Pass: attempt to answer all parts, together with legislation and cases • Credit:pass plus reasonable argument • Distinction: credit plus persuasive argument and some originality • High distinction: distinction plus critical consideration of the law

  4. Objectives of the Course • To outline the various forms of business organisation • To obtain an understanding of the legislative and business law regime • The mechanics involved in the creation and management • Theory and policy • Contemporary role of shareholder • Practical skills

  5. Ethics: • Utilitarianism • Rawls • Kant • Influences on modern corporate law • What is significance today?

  6. Forms of Business Organisation • Sole Trader • Partnership • Association • Incorporated/Unincorporated • Trust • Co-operative • Corporation • Joint Venture

  7. Reasons for/against • Limited Liability • Separate Legal Entity • Compliance • Formality • Public Record • Tax • Raise Finance • Personal/Business Wealth

  8. Partnership • The Elements • Relation of Partners to Outsiders • Relation of Partners to Each Other

  9. Unincorporated Associations • Two issues • Who is Liable? • When will the courts get involved?

  10. Joint Ventures • When will a joint venture be a partnership? • Fiduciary Obligations

  11. Corporation • Separate Legal Entity • Limited Liability • Promotion • Management Practices • Accounts and Auditing • Shareholder Remedies

  12. Theories of the Company • Concession Theory • Aggregate Theory • Natural Entity Theory • Team Production Theory • Managerialist Theory • Corporate Social Responsibility

  13. The Origins of Corporations • Why were they introduced? • Do the same reasons exist today? • Large/Small Corporations • Creation of Wealth • Separation of Personal Wealth

  14. Regulating Companies • English Origins • The Uniform Legislation • Australian Securities and Investments Commission (ASIC) • Administrative Review • Jurisdictional Issues

  15. Salomon v Salomon & Co Ltd • Salomon – leather merchant • He, wife and five children registered a limited company • Sole Trader business sold to company • Company paid Salomon – issue of shares + security • Company insolvent – should secured creditors (Salomon) be paid ahead of unsecured.

  16. Separate Entity Doctrine • Why was it introduced? • What did it achieve? • What is its contemporary role? • Justification • Alternatives: Enterprise Theory

  17. Consequences Separate Entity doctrine • One person companies - Salomon • One person companies now legitimised • Should they be? • Company’s property – not members • Company can contact • Company can be sued

  18. Advantages Separate Entity doctrine • Lee v. Lees Air Farming (workers compensation) • Salomon

  19. Disadvantages • Macaura (insurance) • Foss v. Harbottle • company proper plaintiff • majority rule • EPA v. Caltex (self-incrimination)

  20. Lifting the Veil – common law • fraud • improper conduct • agency • groups • commercial justification • contract/tort distinction • directing mind and will • is there an overall justification?

  21. Statutory basis for lifting veil • Holding company liable for subsidiary (s588V) • Director liable for insolvent trading (s588G)

  22. Formation and Promotion • How do you purchase a company? • How do you register a company? • Types of Companies • Obligations of Promoters • Fiduciary • Duty to Disclose

  23. Corporate Governance • Possibilities? • Advantages/Disadvantages • Practicalities • Companies of Different Sizes • Accountability?

  24. The Rules of Corporate Governance • Constitution • Replaceable Rules • What is their legal effect? • How do you alter? • What do you need to comply with? • What should you comply with?

  25. Section 140 Contract • Company each member • Company each director and secretary • Member and each other member

  26. Board/General Meeting • Division of Powers • Reality in Large Corporation • Residual Power of General Meeting? • Doctrine of Unanimous Consent • Contemporary Issues

  27. Case law on Division of Powers • Automatic Self-Cleansing • Quin & Axtens Ltd • What is reserve power of general meeting?

  28. Acting Properly and with Care • Who is a Director? • Business Judgement Rule

  29. Business Judgment Rule • No material personal interest • Informed her/himself to a reasonable level • Acted in good faith for a proper purpose • Rationally believe that judgment is in the best interests of the corporation

  30. Good Faith/Company as a Whole • What is the company? • Is it the shareholders? • Should we consider other stakeholders • Employees • Customers • Suppliers • Community Obligations

  31. Acting for Proper Purposes • What are proper purposes? • Retention of Control by Directors?

  32. Proper Purpose Cases • Tech Corp • Darvall v North Sydney • Permanent Building v Wheeler • Howard Smith v Ampol

  33. Statutory Duties • How has the standard changed? • Is this change desirable? • Entrepreneur/Accountability

  34. Ratification • What can be ratified? • What should be ratified? • Theoretical basis of ratification? • Winthrop v Winns

  35. Conflicts of Interest • What is the conflict rule? • Perceived/Actual Conflict • Statutory Provisions

  36. Misappropriation of Property/Information • What is corporate property? • What is corporate opportunity? • What is corporate information? • Importance of Regal Hastings • Statutory provisions

  37. Regal Hastings v Gulliver • Comp acquiring other cinemas • Unable to financially take advantage • Directors, Chair, Solicitor each invested in opportunity – company in good faith unable to exploit • Profit made • Original company sold • New owners or original company seek to make others liable.

  38. Special Cases • Multiple Directorships in competing companies • Nominee Directors

  39. Accounts, Audit & Disclosure • Members’ Access to Information • Directors’ Access to Information • Statutory Provisions • Common Law

  40. Directors’ Access to Information • Statutory Access • Common Law Access

  41. Duty of Auditors • Proximity? • Neighbour? • Floodgates argument • Divergence between jurisdictions

  42. Members Remedies • Common Law • Statute • Why did the legislature respond?

  43. Squeeze-out techniques • Withholding information • Dismissal from position • Distribution of profits by executive remuneration • Failure to declare dividends • Unfavourable amendments

  44. Common Law Remedies • Personal Action • Doctrine of Fraud on the Minority

  45. Personal Action • Common Law • Right to Vote • Right to notice • Improper Dilution

  46. Doctrine of Fraud on Minority • Equitable Limitation on the power to alter constitution • Amendments authorising expropriation • Other amendments

  47. StatutoryRemedies • Class rights variation • Statutory Derivative Action • Winding Up • Oppression Remedy • Personal Rights under Statute

  48. Class Rights Variation • Part 2F.2 • Actions deemed to vary • Procedure • Application to Court • Procedural Matters

  49. Statutory Derivative Action • Distinction personal and derivative action • Criteria under legislation

  50. Winding Up • Just and Equitable Considerations • Partnership Analogy • Denial of Information • Deadlock • Common Understanding

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