Law of business organisations summary notes PDF

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l BX2112 Notes Law of business organisations Table of Contents Week 1: Partnership Law ...................................................................................................................... 6 Partnership: ..................................................................................

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BX2112 Notes Law of business organisaons

Table of Contents Week – 1: Partnership Law ...................................................................................................................... 6 Partnership: .......................................................................................................................................... 6 Cases: ............................................................................................................................................... 6 Elements For a relationship to be in common ..................................................................................... 6 (Canny Gabriel): ............................................................................................................................... 6 Carrying on: .......................................................................................................................................... 6 Smith v Anderson (1880) .......................................................................................................... 6 Re Ruddock (1879) ................................................................................................................... 6 Commonality ........................................................................................................................................ 7 Partnership – fiduciary relation: ........................................................................................................... 7 When does a fiduciary relationship start? ....................................................................................... 7 When does the relationship end? .................................................................................................... 7 Case reference: ................................................................................................................................ 7 LECTURE 2: ............................................................................................................................................... 8 Partnership – agency (liability) ............................................................................................................. 8 Partnership act Section 8: Liability; scope ........................................................................................ 8 Case reference: ................................................................................................................................ 8 Other liability sections in the Act ..................................................................................................... 8 Partnership – property: ........................................................................................................................ 9 Section 23: Property ca be acquired via ........................................................................................... 9 Types of ownership: ......................................................................................................................... 9 When the partnership dissolves: ...................................................................................................... 9 What happens if you contribute something for the partnership? ................................................... 9 Killing off the partnership: S 38 .......................................................................................................... 10 Grounds for dissolution: ................................................................................................................. 10 Effect of dissolution: ...................................................................................................................... 11 Partners continuing liabilities ......................................................................................................... 12 New debts ...................................................................................................................................... 12 Winding up: ........................................................................................................................................ 14 Week 3: Corporations Law ..................................................................................................................... 15 Corporations and partnerships .......................................................................................................... 15 Corporation: ....................................................................................................................................... 15 Salomon vs Salomon 1897] AC 20: ................................................................................................. 15 Types of companies:........................................................................................................................... 15 Corporate Veil cases: .......................................................................................................................... 16 Test to determine if a business is a true corporation: ....................................................................... 16 The waterfront dispute – 1998: arguments ................................................................................... 16 High court:...................................................................................................................................... 16 Lessons from the lecture 3: ................................................................................................................ 16 Lecture 4: lifting the corporate veil ........................................................................................................ 17 Corporate veil ..................................................................................................................................... 17 When do we lift the veil: .................................................................................................................... 17 Fraudulent use of a corporation .................................................................................................... 18 Subsidiary company has a very strong relationship, so strong that it is not possible to distinguish them ............................................................................................................................................... 18 A family company and fraud .......................................................................................................... 19 Commercial morality has boundaries ............................................................................................ 19 Lifting the corporate veil to find the parent company responsible ................................................ 20 Lifting the veil for Pooling of assets ............................................................................................... 20 Lecture 5: Corporate structures; capital and finance; promoters & the prospectus ............................ 21 s. 117 Registration of a company: ...................................................................................................... 21 Types of companies:........................................................................................................................... 21 Proprietary Company: .................................................................................................................... 21 Public companies: .......................................................................................................................... 21

Terms: ................................................................................................................................................ 21 LECTURE 6: Corporate structures; capital and finance; promoters & the prospectus ........................... 23

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Prospectus Sections of the Corporations Act 2001 ............................................................................ 23 Prospectus definition ......................................................................................................................... 23 Offense ........................................................................................................................................... 23 Replaceable rules/constitution: aka internal rules ............................................................................. 24 Due process .................................................................................................................................... 24 Corporate constitution: ...................................................................................................................... 24 According to the sections: Replaceable rules and constitution are: .................................................. 24 S.135: ............................................................................................................................................. 24 S.136-140: ...................................................................................................................................... 24 Lecture 7 – Director’s duties and oppression ........................................................................................ 26 Section 198 A ..................................................................................................................................... 26 Directors duties .................................................................................................................................. 26 The statutory duties s. 181 - 189: .................................................................................................. 26 Breaching and remedies: ................................................................................................................... 26 Sections in detail: ............................................................................................................................... 27 S181: the good faith for proper purpose ....................................................................................... 27 S 182: directors must not gain an advantage for themselves aka conflict of interest ................... 27 ALWAYS DISCLOSE .......................................................................................................................... 27 S183: misuse of information [includes employees and directors] ................................................. 28 DISCLOSURE: ...................................................................................................................................... 29 Sections in the act .......................................................................................................................... 29 s.191: Material personal interest notified to other directors ........................................................ 29 s.194: disclosure for proprietary companies .................................................................................. 29 s.195: disclosure for public companies .......................................................................................... 29 s.180 is the most litigated section ...................................................................................................... 29 s.180 ....................................................................................................................................... 29 LECTURE 8: directors duties and oppression ......................................................................................... 30 Baseline standards for directors s. 180 .............................................................................................. 30 City Equitable Fire Insurance [1925] Ch 407 .................................................................................. 30 Daniels v Anderson (1995) 37 NSWLR 438 ..................................................................................... 30 ASIC v Rich (No.2) ........................................................................................................................... 30 Vines v ASIC .................................................................................................................................... 30 S180 (2): business judgment rule – statutory safe harbour ............................................................... 31 S.189 – reliance on others. ................................................................................................................. 31 Disclosure ........................................................................................................................................... 31 S.588G ............................................................................................................................................ 31 Insider trading: ................................................................................................................................... 32 s1042A ................................................................................................................................... 32 s1043A ................................................................................................................................... 32 Continuous disclosure: ....................................................................................................................... 32 S1041H ........................................................................................................................................... 32 Lecture 9: insider trading, continuous disclosure and oppression ......................................................... 33 Insider trading section: 1043A ........................................................................................................... 33 Insider ............................................................................................................................................ 33 Offense ........................................................................................................................................... 33 Disclosure: .......................................................................................................................................... 33 Case reference ............................................................................................................................... 33 Insider trading Cases: ......................................................................................................................... 33 R V Glynastis ................................................................................................................................... 33 Hill and Ramsay: ............................................................................................................................. 33 Continuous disclosure: ....................................................................................................................... 33 Twiggy forrest: ............................................................................................................................... 33 QBE Class action: ............................................................................................................................ 33 Oppression ......................................................................................................................................... 34 Definition of oppression (s.232) ..................................................................................................... 34 Cases: ............................................................................................................................................. 34 Affairs, proposals, resolution or proposed resolution can be seen as oppression if:......................... 35 Oppression sections: ...................................................................................................................... 35 Proceedings S 236: a statutory derivative action (SDA) ..................................................................... 35 S236 ....................................................................................................................................... 35 1324 ....................................................................................................................................... 35 S237 ............................................................................................................................................... 35 Proceeding definition: .................................................................................................................... 35 Further notes: ........................................................................................................................................ 35 Division of powers in a company: ...................................................................................................... 35 Automatic Self Cleansing Filter Syndicate co v Cunninghame........................................................ 35 NRMA v Snodgrass [2001] NSWSC^ ............................................................................................... 36 Powers of the board of directors: ...................................................................................................... 36 Who can be a director and types of directors: ................................................................................... 36 Managing directors ........................................................................................................................ 36

Executive directors. ................................................................................................................ 37

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Non-executive directors. ........................................................................................................ 37 Alternate directors ................................................................................................................. 37 Disqualification of directors: (Part 2D.6: S 206A – S 206H) ............................................................... 37 The following persons are or can be disqualified: .............................................................................. 37 Purpose of disqualification: ............................................................................................................ 38 Removal of Directors .......................................................................................................................... 38 Lecture 11: corporate insolvency ........................................................................................................... 40 Voluntary administration: s. 435A ...................................................................................................... 40 Reasons why administrations fail: .................................................................................................. 40 Moratorium: ....................................................................................................................................... 40 Meetings: ........................................................................................................................................... 40 First meeting: ................................................................................................................................. 40 Why? .............................................................................................................................................. 40 Ansett airlines lessons: ....................................................................................................................... 40 Pam Pharmaceuticals: ........................................................................................................................ 41 Winding up: ........................................................................................................................................ 41 Statutory demand (s.459 A): .......................................................................................................... 41 S 459c: .................