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Australian Company Law Lecture Notes –
LAW1026 Sample
Contents
Topic 1 – Introduction to Organisations at Law ...................................................................................... 1
Topic 2 – Partnerships and Fiduciaries .................................................... Error! Bookmark not defined.
Topic 3 – History, Social Role, Regulatory Framework & Corporate Personality ... Error! Bookmark not
defined.
Regulation of Companies ..................................................................... Error! Bookmark not defined.
Classifying Companies .......................................................................... Error! Bookmark not defined.
Internal Rules and Organs .................................................................... Error! Bookmark not defined.
Corporate Personality .......................................................................... Error! Bookmark not defined.
Topic 4 – Management of Companies ..................................................... Error! Bookmark not defined.
Director's Powers ................................................................................. Error! Bookmark not defined.
Members' Powers ................................................................................ Error! Bookmark not defined.
Directors ............................................................................................... Error! Bookmark not defined.
Topic 5 – Directors Duties Care Skill & Diligence ..................................... Error! Bookmark not defined.
Topic 6 – Members Rights & Remedies ................................................... Error! Bookmark not defined.
Topic 7 – Corporate Finance .................................................................... Error! Bookmark not defined.
Topic 8 – Fundraising and Securities ........................................................ Error! Bookmark not defined.
Topic 9 – External Administration & Winding Up .................................... Error! Bookmark not defined.
Summaries ............................................................................................... Error! Bookmark not defined.
Topic 1: Choice of Structure to Conduct Business ............................... Error! Bookmark not defined.
Topic 2: Partnership ............................................................................. Error! Bookmark not defined.
Topic 3: Proprietary vs Public Companies ............................................ Error! Bookmark not defined.
Topic 4: Regulatory Framework / Company organs ............................ Error! Bookmark not defined.
Topic 5: Directors' Duties ..................................................................... Error! Bookmark not defined.
Topic 6: Members' Rights .................................................................... Error! Bookmark not defined.
Topic 7: Company Finance ................................................................... Error! Bookmark not defined.
Topic 8: Fundraising ............................................................................. Error! Bookmark not defined.
Topic 1 – Introduction to Organisations at Law
Corporations Act
Legal form of an organisation used to work out liability and rights of people involved
•
Simplest to most complex:
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o Sole Proprietor
o Partnership
o Unincorporated association
o Incorporated association (formal structure of organisation, formal obligations agreed
upon collectively (usually bylaws), members of organisation)
o Company (three forms)
Proprietary Company (Pty Ltd)
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Public Company (at least 3 directors, as grows in size, obligations grow)
•
Listed Public Company (ASX)
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Introduction
Organisations at law
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o Unincorporated associations
o Partnerships
o Trusts
o Corporations
Distinguishes business from other activities
•
Distinguishes business from its organisational form
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*organisation / entity = same thing*
*business use of assets for a generation of profit*
Types of organisations
Organisations at law differ from sociological and business categories
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o Sociological (e.g. school, church)
o Business (e.g. consultancies, producers)
o Law (e.g. partnership, labour union, company)
Organisations are not a single category at law
•
Organisations at law are governed differently by distinct areas of law
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Aspects of organisations
A group of people identifying themselves as such
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Use a group name
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Varying levels of formality
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Membership:
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o Various methods of becoming a member
o Carries variable rights
o Carries unlimited liability
o Governance
Mechanisms and processes by which an organisation is controlled and directed
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(broader than statutory)
Unincorporated association
Group of people organised for a purpose - not for business purposes
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Often used by sporting and social clubs
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Law does not grant group identity apart from individual members
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o Social position i.e. president etc. is not recognised by law
Not liable merely because of their membership for debts incurred
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As a form of organisation for business it is unworkable. It is not designed to achieve business
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outcomes
Can incorporate to avoid
•
*sole proprietor*
Partnerships
Dealt with in next topic in detail
•
It is the relationship that exists between persons carrying on a business in common with a
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view of profit - see s.5 of the Partnership Act 1958 (Vic)
The law does not recognise a partnership or firm as separate from its partners - partners
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personally liable for the debts of the partnership
Statutory limit of 20 with exceptions:
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o 50 medical professionals
o 400 lawyers
o 1000 accountants
*textbook pages: 2 (top of page), 3 (definition), 4 (case reference, United Dimuniations Corporation
Limited), 10 (reference to unlimited liability), 11 (top of page)
Trusts
Trust law does not create an organisation per se
•
Three separate entities settlor, trustee and beneficiary
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Fundamental aspect is the split in legal and beneficial title over property
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Often used for charitable purposes
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For business - may be used as a unit trust or corporate vehicle
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Why?
•
*cestui que trust (beneficiary)*
Corporations
A company is an artificial person, created by law, with functions, in a legal sense, to hold
•
assets and carry on a business or other activity as an entity separate from the participants
o Social group of people contributing their single amounts of capital so as to get a
sufficient amount to make the industrial purpose possible
o Legal device for obtaining individual profit without individual responsibility. Company
is separate legal entity with its own corporate identity (cf. shareholders and managers)
o Economic corporate form is like a standard form contract protecting the shareholders
and directors from being liable for company's transactions
*Page VII (second para)*
*Page 97 (bottom of second para) core function of corporations*
Key concepts of a corporation
Separate legal identity from investors
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Limited liability of investors
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o Limited to the amount they paid for the shares
Perpetual succession, until deregistered
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o Company continues as an organisation even if one of the directors die
Form of association - different to other entities
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Form Description/characteristics
Company Artificial entity recognised by the law as a legal person with rights and
liabilities. Per Marshall CJ (USA): individuals who run company can die,
company can go on forever. Created so individuals can act in concert
towards certain object
Partnership Not separate legal entity. Relationship between persons carrying on
business in common with a view of profit (now embodied in s5
Partnership Act 1958 (Vic)). Debts of the partnership and debts of the
partners are jointly and severally liable. CA s 115 says that the maximum
size of a partnership is 20. But the regulations provide for exceptions
(such as 400 for lawyers)
Sole Trader Individual carries on business in his name, no separation between the
business/personal assets/obligations. Sole proprietor personally liable for
debts of the business. Can trade under business names but does not
change legal identity
Trust Vehicle by which a trustee who owns the property acts for and on behalf
of beneficiaries
Joint Venture Legal entity formed between two or more parties (e.g. corporations) to
undertake an economic activity/exploit opportunity together
Factors affecting choice of form
Who is liable for business costs?
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What are the legal set-up costs?
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How are earnings taxed?
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How much do I have to tell the government/the public about my business?
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What level of government regulation?
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What happens if the business owner dies?
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How easy is it to raise funds?
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Defining and distinguishing business
Broad and ubiquitous terms - look at it because essential to assess what organisation is doing -
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see definition of 'partnership' in PA
Business is the use of assets for the generation of profit
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Not just about money changing hands
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The focus is on assets and their use
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Ownership is not mandated
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The organisation of business is separate from the assets of a business
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Company law focuses on organisation not business
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The following problems are common to all organisations:
What objects?
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How is it to be structured?
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Who is in charge; who has what rights and duties?
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What processes for decision making?
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What process for challenging and disputing decisions?
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What resources?
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What happens when the organisation's purpose or ability to survive ends?
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