(Solution) Assignment on Corporations Law
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Added on 2021-06-15
(Solution) Assignment on Corporations Law
Added on 2021-06-15
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Running Head: CORPORATIONS LAWCORPORATIONS LAWName of the Student:Name of the University:Author Note
1CORPORATIONS LAW Introduction This paper will aim to discuss and critically analyze the operations of a company called AustinPty. Ltd. in relation to fundraising. In this paper, the provisions of law as provided in theCorporations Act which have been violated by the Company Austin Ltd while engaging in theprocess of fundraising will be discussed and analyzed. In this paper the advice sought by theparties, in relation to their liabilities will also be considered. Fundraising can be defined as a process by which a company can raise capital from the public.For the purpose of raising capital, the company provides the public who invest in the companyequity in the company1. The Corporations Act 2001(Cth) governs the provisions for raisingcapital of public companies by the issuance of shares. It has been provided in the CorporationsAct that that a public company in order to issue shares to the public must be registered with theAustralian Securities Exchange. The Australian Securities Exchange (ASX) and the corporatelegislation impose several restrictions on the public companies. It can be stated that publiccompanies are required to comply with the provisions and restrictions as imposed by the ASXfor the purpose of ensuring that the process of fund raising is lawful and that no penalties areincurred by the company and the directors.Requirements of a prospectusA document which is used to the raise funds from the public can be called a prospectus. Sections710 and 711 of the Corporations Act contain the specific requirements of a prospectus. It hasbeen specifically provided in section 708 of the Corporations Act 2001 a few offerings will notneed a prospectus. A prospectus contains all the information relating to the probability of1 Graw, Parker, Whitford, Sangkuhl and Do, Understanding Business Law 7th ed LexisNexis Butterworths, 2015.
2CORPORATIONS LAW success of the investment in the company. It can be mentioned that a prospectus must containthe information which can be relied upon by the investor2. An investor generally decides thefeasibility of the success of the investment by the information provided in the prospectus. It has been clearly provided in section 674 of the Corporations Act 2001 that several obligationsare imposed on the corporations and companies to operate in accordance with the listingprocedures of the Australian Securities Exchange which mandates companies to makecontinuous disclosure of information in relation to the prospectus. It has been further provided inthe aforementioned section that companies must notify ASX, the company operator about all theinformation in relation to a particular event or matter. Information which is not generallyavailable to the people and any information which would be required by a reasonable person toassess the material effect on the financial position of the disclosing entity must be lodged withthe ASX. It has been provided in section 710 of the Corporations Act that a prospectus which is used forthe purpose of fundraising must contain all the information which would be reasonably requiredby the investors for the purpose of assessing the true financial standings of the company. It hasbeen further been provided that the information contained in the prospectus should be fit forreasonable reliance and must be genuine. The information provided in the prospectus must beobtained after making reasonable enquiries.In section 728 of the Corporations Act it has been provided that securities must not be offered bycompanies which contain statements which are misleading and deceptive in nature or likely tomislead or deceive the people. In section 728(c) it has been provided that a market operator must2 Fisher S, Anderson C, Dickfos, Corporations Law - Butterworths Tutorial Series, 4th Edition Butterworths, Sydney2014
3CORPORATIONS LAW be notified by the disclosing entity about any new circumstances that have arisen after theissuance of the disclosure document. The provisions of section 674 of the Corporations Act 2001 (Cth) which deal with theprovisions of disclosure document had been analyzed in the case Australian Securities andInvestments Commission v Fortescue Metals Group Ltd [2011] FCAFC 19. The court heldthat in this case the directors of the company in consideration had breached the provisions of theaforementioned section as the information which was provided in the disclosure document. Thecourts imposed a civil penalty on the directors for engaging in misleading and deceptive conduct.Forecast Section 728(2) of the CA contains the provisions of disclosure of information in relation tofuture matters3. Any statement given by any person about future matters would be considered tobe misleading and deceptive if the there are no reasonable grounds to believe that suchstatements will come true in the future. In the case of Australian Securities and InvestmentsCommission v Sino Australia Oil and Gas Limited, the provisions as provided in section 728 ofthe CA have been interpreted and analyzed. In the case mentioned above the court held thatmisleading or wrong information had been provided in the prospectus which could affect theprice of the shares as assessed by a reasonable person. The courts further held that the director inconsideration was not entitled to claim that he did not understand the contents of the prospectsprior to signing the document. Such director should have appointed a translator to interpret thestatement that had been contained in the prospectus in English. Other cases which involved3Corporations Act 2001 (Cth)s 728(2)
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