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Legislation and Common Law for MLLCommonwealth of Australia Constitution Act 1901 S 51(xx) “make laws ... with respect to ... foreign corporations, and trading or financial corporations formed within the limits of the Commonwealth”ASIC Act 2001 Provides powers of investigation to ensure compliance w...

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Legislation and Common Law for MLL331 S 51(xx)

Commonwealth of Australia Constitution Act 1901 “make laws ... with respect to ... foreign corporations, and trading or financial corporations formed within the limits of the Commonwealth”

ASIC Act 2001 Provides powers of investigation to ensure compliance with the CA. Corporations Act 2001 (Cth) & CL Principles T1 – Regulatory Framework and Effects S 119 Company comes into existence upon registration as a separate legal person. - Management by single person still constitutes a separate legal entity. S 147 Availability of company name. S 124(1) Powers of company as a body corporate/separate legal entity. Piercing the Corporate Veil Salomon’s Case Piercing/Lifting the corporate veil. - Company and participants must be treated separately. S 588G Exception to the corporate veil. - Directors’ liability for insolvent trading. S 588H Defences to liability for insolvent trading. Prest v Petrodel Piercing the corporate veil by the court. - Only justified where corporate form used for something never intended by the law. T2 – Types of Companies + Constitution and Replaceable Rules S 112 Types of companies. S9 Definitions: - Limited by shares. - Limited by guarantee. - Unlimited. - No liability. S 517 Company limited by guarantee. S 112 No liability company requirements. S 148(4) Company name requirements. S9 Definitions: - Proprietary - Public S 113 Proprietary company requirements. S 148(2) “Pty Ltd” or “Proprietary Limited” requirement. S 162/163 Changing type of company. S 45A(2) Small Proprietary Company (SPC). S 45A(3) Large Proprietary Company (LPC). S 292(c)/301/314 Reporting requirements of LPC’s. Holding/Subsidiary Relationship S 46 A company is a subsidiary of a holding company if…

S 50 Holding/Subsidiary relationship = Related body corporates. S 50AA Controlled entities. Replaceable Rules/Company Constitution S 134 Rules governing internal company management. S 135/141 Replaceable Rules: - List - Applicability - Table S 136 Adoption/Alteration of a company constitution. S 140 Company Cn and Replaceable Rules effect as a contract. Limits on Altering a Company’s Constitution S 136(3) Entrenching provisions. S 140(2) Compulsion to buy more shares. S 246B Variation of class rights. S 232 Oppression remedy. Gambotto v WCP Expropriation must be for fair and proper purpose. - ID what is a fair and proper purpose. T3 – Company Relations Lennard’s v Asiatic Directing mind and will of the company. HL Bolton Not everyone can be the brains of the company. S 180 Directors’ civil obligation to exercise care and diligence. Contracts with the Company S 172 Contracting directly with or without a company seal. S 127(2)/129(6) With seal: Proper form and assumptions. S 127(1)/129(5) Without seal: Proper form and assumptions. S 129(2)/CL Contracting through an agent: Apparent Authority. - CL for actual authority. Turquand Indoor Management or ‘Turquand Rule’ Bona fide (genuine) TP’s may assume internal company proceedings were properly carried out even if they were not. Brambles Holdings Multiple officers and agents. - May be complicated. No Actual or Apparent Authority and want to hold the Company liable S 128 What assumptions may be made. S 129 When those assumptions may be made. S 128(4) Limitation to the above. Promoter and Promoter Duties Twycross/Mandalay Who is a promoter? Erlanger/Kisch Act with utmost candour and honesty by disclosure of all material facts in interest in contracts. Gluckstein v Barnes Disclosure to independent board rather than just other co- promoters. Pre-Registration Contracts S 131 Establishment and conduction of pre-registration contracts. S 132 May be released from liability but not entitled to indemnity (security against loss) against company. Fundraising

S 113

Pty companies must not engage in any activity requiring disclosure to investors under Ch 6D, except for the offer of shares to existing members or employees. Disclosure Obligations and Documents S 710/711 Prospectuses. S 714 Profile statements. S 715 Offer information statements. S 728 Document must not be misleading. - Criminal offence to do so under this section. S 718/727 Ability for ASIC to supervise through requirement that the document be lodged with ASIC first. Ch 6D Disclosure requirements for proposal of offering new shares for subscription. S 706 Must be complied with unless s 708 or 708AA say otherwise. S 708 Offers not requiring disclosure. S 708AA Rights issues that do not need disclosure. S 761A Securities or equitable rights relating to them. Exceptions to Requiring Disclosure S 708(1)-(7) Small scale, personal offers. S 708(8) & (10) Sophisticated investors. S 708(12) Senior managers. S 708(13) Existing security holders. Defences S 731 Due diligence in relation to a prospectus. S 733(1) General reliance. S 733(3) Withdraw consent. T4 – Capital, Membership & Dividends S 1070A Nature of shares and their ownership. Rights Conferred by CA (Replaceable Rules) Part 2M Financial reporting. Part 2J Buy backs and dealing with class rights. Part 2F.1A Derivative action. Part 2F.1 Oppression remedy. S 246D(1) Members with minimum 10% of votes in affected class may challenge variation. S 246D(5) Test for challenge: - Does the variation unfairly prejudice the members of the affected class? S 1324 Affected members may apply for an injunction where s 246B procedure (varying and cancelling class rights) has not been followed. S 232 Remedy under this section if variation is oppressive or unfair. S 256A Rules to follow by a company for reductions in share capital and buy backs. Trevor v Whitworth Maintenance of share capital (CL Rule). S 259A Incorporation of CL Whitworth rule. - Directly acquiring own shares.

Part 2J.2 Part 2J.3

Restrictions on a company purchasing its own shares. Restrictions on a company giving financial assistance to a person to acquire shares in the company. Permitted Share Capital Reductions S 257A Permitted share buy backs. - Also, an exception to ss 259A and 259C. S 256B Permitted share capital reductions where not otherwise authorised. - (a), (b) and (c) lay out the requirements of this. - Equal and selective reductions. S 260A Permitted financial assistance. S 257B Buy back procedure. S 1324(1B) Company has the onus of proving the reduction is fair and reasonable regarding s 256B. S 256C(5) Must lodge details of proposed reduction with ASIC to aid creditors. S 256C(1) Equal reduction approved by ordinary resolution at general meeting. S 256C Notice requirements regarding the general meeting. Permitted Financial Assistance S 260A Financial assistance by a company for acquiring shares in that company or a holding company… - Civil penalty provision. S 260B …IF approved by shareholders under this section. - + other requirements depending on the situation of the company. S 260C Exemptions. S 260D Persons involved? Becoming a Member S 172 Location of register of members. S 168 Maintenance of members register. S 169 Information about shareholders and their shares. S 176 Register is the prima facie proof of the matters shown within. S 175 Aggrieved persons may apply to have the register corrected. S 173(1) Public right to know identity and inspect. S 177 Shareholders right to privacy: - Must not use the information gathered to attempt to contact that shareholder. S 1070C Share certificates as prima facie evidence of shareholder title to number of specified shares. - Requirements of what it must contain. S 1072G Director’s right of refusal of share transfer registration. Liability of Members S 254M Liability to pay on call for partly paid shares. S 515 Liability to contribute on winding up. S 516 Basic ruse regarding the concept of limited liability. - Subject to s 518 and 519 Dividends S 135 See replaceable rule. The below are other related provisions.

S 254U S 254W S 124(1)(d) S 232

Other provisions on paying dividends. Dividend rights. What are dividends? Member remedy for dividends. - See Sanford v Sanford Courier Service S 254V Where no company Cn: When does a debt arise? - Also note Marra Developments at CL. S 254T When dividends may be paid (for dividends after June 2010) Remedies for Improper Dividend Payment S 256D Contravention of this section if reduction not authorised by s 256B. S 588G Failure by directors to prevent the company from incurring debt where there are reasonable grounds to suspect the company is insolvent. T5 – Debentures and Directors S 588FP SI in favour of officer cannot be enforced within 6 months of its creation without court approval as an attempt to protect unsecured creditors. S9 Definitions: - Officers - Director - Shadow Director S 180 – 184 Applicable to officers (directors). S 198 Business of company to be managed by or under the direction of directors. S 198A (Replaceable Rule) Directors may exercise all powers except any power required to be exercised in a general meeting. S 203D/C & 201G Power of members to remove and appoint new directors for public and proprietary companies respectively. S 136(2) Change company Cn to restrict director power without obtaining member consent. Company Directors s 201A – D Requirements for company directors. S 201G/H Appointment of directors. S 203A - E Removal of directors. S 206B – F Disqualification of directors. Company Secretary S 204A Minimum number. S 204D Appointment and function. Boards and their Meetings – Check Cn, if replaceable rules apply… S 248C Any director may call on reasonable notice. S 248F Quorum of two directors. S 248D Use of technology. S 248A Circulating written resolution. S 198D Can boards delegate their powers? S 190 Responsibility of directors for actions of delegate. T6 – Corporate Governance and Directors’ Duties

NOTE: Majority of CG principles found in the ASX listing rules – ASX CG Code. S 300A Annual Directors’ report and remuneration. Div 9 Meetings arising from concerns about remuneration reports. S 250U - Y Two strikes and spill. Directors’ Duties S 180 Act with reasonable care and diligence. S 588G Prevent insolvent trading. S 191 – 196 Disclose certain information. Ch 2E Related party transactions. S 182/183 Duty not to misuse information or position. S 181 Act in good faith in best interests of company and for proper purpose. Statutory Duties - Penalites S 1317G Pecuniary penalty order. S 961M/1317H/ Compensation orders. - S 1317H – ASIC Civil penalites 1317HA/HB/HC/HE Brunninghausen Duty to individual shareholders. S 1317E Declarations of contravention. S 1317F Declaration of contravention is conclusive evidence. S 1317G Pecuniary penalty orders. S 236 Action brought under this section (ASIC/Company: Board/Parties. - Statutory derivative action. S 180(3) Business judgement rule defence. S 198D Means by which directors may delegate. S 189 When is it reasonable for a director to rely on information or advice of others. T7 – Directors’ Duties NOTE: Above sections under directors’ duties in topic 7 are also relevant.

S 19 S 20 S 55 S 62 S 11

Personal Property Securities Act 2009 (Cth) Enforceability of SI against grantor Enforceability of SI against TP’s. SI priority rules. Super priority of purchase money security interests. Corporations legislation functions and powers and other functions and powers....