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LAW OF BUSINESS ORGANISATION
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LOBO NOTES FINAL EXAM

Directors and Company meetings Director Section 9 states a director is someone validly appointed, and may act as a de facto director and shadow director Section 198 A company is to be managed by or under the directions of the directors Section 201 A States all companies must have a director Section 201 B states the minimum age for a director is 18 Removal of Directors proprietary company is 203 C, for public companies it is 203 D Section 201 H states the appointment requirements of the director Section 205 B (1) when a director is selected and given their consent, ASIC needs to be informed. case of Corporate Affairs Commission V Drysdale He was allowed to act as a director and he was bound ASIC needs to be informed on the appointment of a director. Promoter Promoter is someone who is involved with the formation of a company People who do not take part of the company formation but leave things in the hands of others with the view to profit, they are called passive promoters Breach of the fiduciary duty means there will be civil proceedings, courts can decide person was a trustee of the company Preregistration Contract Before the incorporation of the company people can enter in to contracts on behalf of the company which is known as the pre-registration contract and may be entered by a promoter or by someone else Section 131 (1) states that a company will be bound by a contract and receive its benefits, if the company ratifies the contract Section 132 (2) states that if the company does not ratify the contract the person entering in to the pre-registration contract becomes liable, 131 (3) states the conclusions that the court will come to if the company is found liable for the contract

*Ratification is the accepting of liability after the event Constitution/ Replaceable rules 140 (1) A company’s Constitution has the effect of a contract between the company and its director, secretary and members. *company can sue for breach of constitution The statutory right to change the constitution stems from section 136, A special resolution must be passed to change the company constitution. Members Members cannot change decision of board only remove directors or change constitution with special resolution. This is supported by Automatic Self Cleansing Filter Syndicate V Cunninghame (1906) which states that giving the shareholders power to change decision takes management power from the board

Contractual liability Section 124 (1) States the powers that the company has Section 127 (1) a public company can execute a contractual document with signing by 2 directors, director/secretary or company seal. Proprietary company just needs sole director Apparent authority Freeman & Lockyer v Buckhurst Park Properties Mangal Ltd 1964 stated that apparent authority is given to those who act in the scope of apparent authority entering in to a contract and does not require the agent to have actual authority Section 129 (1) states that a person may assume that a company’s constitution have been complied with, the exception 128 (4) which is knowledge and suspicion

Directors Duty Directors have a duty of care, THE BEST ANSWER IS IN THE COMPANY LAW BOOKLET FOR ALL CIRCUMSTANCES Section 189 states that the directors can rely on the information of others and more specifically the employees, expert, another director, and a committee of directors. Section 189 B states the reliance must be made in good faith and with an independent evaluation

Section 190 states that if the director delegates power, they must believe that the power exercised by the delegate would be the same as themselves. Section 190 (2) sets out the limitations on directors duty and makes them not responsible for section 190 (1) Conflict of interest THE BEST ANSWER IS IN THE COMPANY LAW BOOKLET Insolvent Trading BEST ANSWER IS IN BOOK 588 G (1) (b) states that their needs to be proof the company is insolvent at the time the debt occurred, or became insolvent by incurring the debt A company may be assumed insolvent if the 3 things occur in 3 months listed in 459 C (2) Members The relationship between a company and its members is contract law. The members must agree to have their names in the company register. Section 169(1) requires companies to keep a record of their members Section 173 states that unless a company is in liquidation members can inspect their company books Shares Shares can be partly paid or fully paid depending on whether they are preference shares or ordinary shares Ordinary Shares have the right to share equally in dividend, right to vote at general meeting, right to be repaid if company is wound up and after claimant’s are paid, right to share in pro rata of surplus assets upon winding up Preference Shares have the right to receive fixed dividend if there is a profit, not usually given voting rights, no right to share in surplus of assets upon winding up, right to be paid dividend before ordinary shareholders. 3 types of preference shares are cumulative preference shares, Redeemable preference shares, convertible preference shares Trevor v Witworth means that a company is generally prohibited from reducing its issued share capital as it would have prejudice on the rights of creditors. Companies can participate in share buybacks 257 A. A company cannot put prejudice on its creditors and must follow its procedures laid down 257 A-257J LOOK AT PAGE 32 IN THE COMPANY LAW BOOKLET The Corporations act restricts companies on giving people financial assistance to purchase shares, unless it is approved 260 (B) or is not prejudicial to company, members and creditors.

Meeting Section 1322 (2) A proceeding under this act is not invalidated because of any procedural irregularity unless the court is of opinion it may cause substantial injustice that cannot be remedied by any order of the court and by order declares the meeting invalid Financial Records Section 286 (1) states that companies need to keep financial records, the definition of financial records is section 9. Reesema v Flavel confirmed that financial records needed to be kept under section 9. Directors should ensure compliance of their company section 344(1), if no compliance to keep financial records they are liable under civil penalty for breach of 344 (1). Criminal penalty if they breach 344 (2) and act dishonest Auditors Definition: Carry out an audit and provide a reliable independent account on the financial position of a company. An auditor’s account provides a professional opinion on the company. Duty is to carry out an audit, report back to members under statutory duties section 296 and section 297, they have to make an independent financial decision. Daniel V Anderson which states that they can’t be negligent. Winding up Courts can order a company to be wound up under section 461, they can be wound up by members in COMPANY LAW BOOK Section 459 A states that courts may force companies to be wound up Certain people from 459 P(1) may apply for winding up if they are granted leave from the court. Inspect books Members have the right to inspect books if they are denied their right section 247 A states that courts may make an order if the members are acting in good faith. Dividend BTR Nylex Ltd v Churchill International Inc. case states that dividends cannot be paid inconsistently

Ammonia case in COMPANY LAW BOOK a bit wrong, even if a company made losses in previous years a profit can still be declared and paid out in the current year if it is made. Disclosure Documents Section 705 lists the different types of disclosure documents these documents are defined in section 5 proper disclosure document information is in the COMPANY LAW BOOK Liquidator In compulsory winding up of a company a liquidator is appointed by the court section 472. In a members voluntary wind up a liquidator is appointed by members through a general meeting section 495 Section 471 A states that liquidators replace and get the powers of the board, their statutory powers are listed under section 477. Power of liquidator: Make calls, sign documents, to appoint agent to do things in the business 479 (3) they need an application to court for direction, and they have the power to disclaim property Section 568...