Business and Corporate Law

This assignment discusses the types of companies under the Corporation Act, 2001, the mandate of conducting meetings, and the duties of directors. It advises on the appropriate form of the company and provides insights into the validity of meetings conducted through technological advancements.

Running Head: Business and Corporate Law 1
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Running Head: Business and Corporate Law
Contents
Question 1...............................................................................................................................3-4
Question 3...............................................................................................................................4-6
Question 5...............................................................................................................................6-7
Conclusion..............................................................................................................................7-8
References................................................................................................................................9

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Running Head: Business and Corporate Law
Question 1
In the light of the facts given Kara, Adrian, Barbara and Adrian have agreed on the following
as -:
1) Two directors to be appointed- Kara and Adrian
2) Both the Directors will also be engaged as employees.
3) One hundred fifty shares @ $2000 each to be issued.
4) Adrian and Barbara purchase 25 shares each, and Karl and Kara purchase 50 shares
each and profits and losses will be borne in the proportion of their shareholding.
Now, the Corporation Act, 2001 under Section 112 provides for types of companies. It
provides for two types of companies, i.e. “Proprietary Company and “Public Company”. A
“Proprietary Company” is furthermore classified into “Limited by shares” and “Unlimited
with share capital” and on the other hand “Public Company” is further classified into “limited
by share” “Limited by guarantee” and “Unlimited with share capital” and “No liability
company”. The characteristics of both types of companies make them different from each
other (Corporations Act, 2001, 2017). The basis of the difference between two types of companies
is in the strength of members and Directors and the number of employees.
Proprietary Company has following features-:
1) Section 113 of the Corporation Act, 2001 provides that company to be registered as a
proprietary company shall not have more than 50 employees as shareholders
("CORPORATIONS ACT 2001 - SECT 113Proprietary companies", 2019). In the given
proposition, Kara and Adrian are appointed as Directors as well as employees and
Barbara and Karl are employees who are also the shareholders. Hence, the proposed

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Running Head: Business and Corporate Law
company setup makes Kara, Adrian, Barbara, and Karl all are employees and also
have shareholding and thus does not exceeds the 50 non-employees shareholders.
2) Section 114 of the Corporation Act, 2001 provides that proprietary company shall
consist of at least one member("CORPORATIONS ACT 2001 - SECT 114Minimum of 1 member",
2019) and out of 3 Directors at least 2 Directors must ordinarily reside within the
territory of Australia(Jaque, 2018). This means that a minimum 1 member must be there
in the company. In the given proposition the company comprises of 4 members.
Therefore this condition also gets satisfied.
3) Section 201A provides with the minimum number of Directors. It states that
minimum number of Directors in the proprietary company must be at least one
director whereas in case of public company minimum number of directors must be
three directors ("The Directorless Company", 2019). In the given proposition it was decided
between Kara, Adrian, Barbara and Karl that Kara and Adrian will work as Directors,
which means there will be two directors. This satisfies the requirement of the
minimum number of Directors required in the Proprietary form of the company, and
thus it will not be deemed to be a public company as it required minimum three
directors.
Therefore, the suggestion to Adrian and Barbara will be that they should have
“Proprietary form of the company” as what they have decided satisfies the
requirements of the same and not that of a “Public Company.” They have agreed upon
issuance of 150 shares, and all 4 of them have bought the shares and thus it will be
“Proprietary Company which will be limited by shares.”

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Question 3
Under the Corporations Act, 2001, there is no provision which provides with a mandate of
compelling the companies to conduct regular meetings. The Corporation Act, 2001 neither
provides for a mandate for public companies nor for proprietary company. However, the
public companies must hold Annual General Meeting in a financial year. In case of
Proprietary companies, no resolution can be passed without giving notice in advance;
however, in cases of sole proprietor resolution can be passed without such notice. Therefore,
in the proposition given, the company would not be bound by any mandate of conducting
meeting under the Corporation Act, 2001.
It is established without a doubt that the presence or rather involvement of every shareholder
is a must in the meeting to arrive at a resolution. But, the question arises as to the validity of
the meeting when the presence of shareholder becomes difficult. With the technological
developments, the traditional view of meetings has evolved, and thus the validity of the
meeting is now not dependent upon the physical presence of shareholder (Mohd Ali, A., Hassim &
Abdul Samat, 2013). In the case of Byng v. London Life Assurance Limited (Byng v London Life
Association, 2019) it was observed that where the general meeting was conducted in different
rooms connected through with electronic medium that meeting was held to be valid.
Similarly, in the case of Wagner v. International Health Promotions (Wagner v. International
Health Promotions, 2019) held the meeting to be valid, which was conducted on a telephonic
conversation. Justice Santow held the meeting as the meeting of minds and not of bodies.
Legislative bodies of various nations to keep pace with the changing approach and with
technological developments have incorporated the suitable provisions (Mohd Ali, A., Hassim &
Abdul Samat, 2013).

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Section 249S of Corporation Act, 2001 provides with the opportunity to the members to
participate in the meeting through conducting it at 2 or more venues with the use of
technology ("Hybrid and virtual AGMs - Knowledge - Clayton Utz", 2019). Thus it makes it feasible for
the member who cannot attend the meeting to participate in the same by getting connected
through technological help. The purpose behind this provision is that the meeting means the
“meeting of minds” and not of “the mere meeting of bodies.” The word “meeting” has to do
with the involvement and participation of the member at meetings and “not mere “the
meeting of bodies.” Such a provision ensures not just participation but also an opportunity for
the member to bring his interests and opinions on the business activities across the others.
Therefore, if in case a meeting is organized when Barbara is not in the country, then in such
case, Barbara’s presence can be ensured through technological advancements. The statutory
rule of Section 249S would render Barbara an opportunity to contribute in arriving at a
resolution, and through this, no resolution can be passed which would affect the interests of
Barbara.
Question 5
The duties of Directors can be classified into Statutory Duties and Common Law duties.
Statutory Duties refer to those duties which are provided under the Corporation Act, 2001.
Those Statutory duties refer to the duties which are important for the effective and efficient
functioning of the corporation. Such duties are as follows-
1) Under Section 180, it is the duty of the Director to exercise its power and shall
discharge its duties with reasonable care.
2) It shall be the duty of the Director under Section 181 to exercise their powers and
discharge their duties for the appropriate purpose and in good faith, which shall be in
the best interest for the corporation.

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3) Section 182 imposes a duty upon the Director to not gain the benefit of their position
either for themselves or for others or to act in such a manner which shall be
detrimental to the corporation.
4) It is expected from the Directors, that owing to their position of being Director they
shall not use the information for an improper purpose. This is provided under Section
183 of Corporation Act, 2001.
5) Section 184 makes it obligatory for the Directors to not to fail in the discharge of their
duty because of their mala fide intentions. Violation of this would be a criminal
offense ("General Duties of Directors - Corporations Act 2001 (Cth)", 2019).
6) Section 190 fixes the liability of the Directors in cases of when they delegate their
powers to any officer. Any act done by such officer will be deemed to be the act of
the Director (Ferguson & Ma, 2016).
7) Directors are required to disclose all their interests in the corporation under Section
191 of Corporation Act, 2001.
Apart from the above mentioned statutory duties there exist certain fiduciary
obligations which are based upon equity and common law i.e. obligation no to avoid
conflict of interest, duty not to abuse opportunities, duty for not disclosing
confidential information, duty for not acting for improper purpose, duty pertaining to
careful conduct, duty for acting in good faith and for the betterment of the
corporation(Jaque, 2018).
Under the Corporation Act, 2001, the duties of Directors are not segregated based on
whether the Directors work within the business or they not involved in the day to day
affairs of the company. Therefore, the duties of Directors are irrespective of, whether they
are involved in the functioning of the company or not, are the same. All kinds of

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Directors are bound by the duties as enunciated under the Corporation Act, 2001, and will
be equally liable for their actions which breach the duties.
Conclusion
Therefore, Adrian and Barbara, in consideration of their decision at the meeting, are advised
to follow the Proprietary form of company. Barbara is a geologist at remains out of country
for 3 months every year that will not be a problem for her to attend meetings as Section 249S
validates the participation in the meeting through the use of technology as the term “meeting”
implies meeting of minds and not just bodies. Directors are required to adhere to their
statutory as well as common law duties with due diligence. The violation of the duties would
render them to be involved under Section 79(Baxt, 2015) and can make them even personally
liable in certain circumstances.

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References
https://www.legislation.gov.au/Details/C2017C00328. Corporations Act, 2001 (2017).
CORPORATIONS ACT 2001 - SECT 113Proprietary companies. (2019). Retrieved from
http://www5.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s113.html
CORPORATIONS ACT 2001 - SECT 114Minimum of 1 member. (2019). Retrieved from
http://www5.austlii.edu.au/au/legis/cth/num_act/ca2001172/s114.html
Jaque, A. (2018). A PRACTICAL GUIDE TO DIRECTORS’ DUTIES [Ebook]. Sydney NSW: Swaab. Retrieved
from https://www.swaab.com.au/assets/download/Directors-Duties-guide-_2018.pdf
The Directorless Company. (2019). Retrieved from
https://www.hopgoodganim.com.au/page/knowledge-centre/blog/the-directorless-company
Mohd Ali, H., A., Z., Hassim, Z., & Abdul Samat, N. (2013). Some Legal Uncertainties in Electronic Corporate
Meetings [Ebook] (2nd ed., pp. 284-285). International Journal of Computer Theory and Engineering. Retrieved
from http://www.ijcte.org/papers/694-EN20065.pdf
Byng v London Life Association, [1990] 1 Ch 170 (Ch 2019).
Wagner v. International Health Promotions, (1994) 15 ACSR 419 (Supreme Court of New South Wales 2019).
Hybrid and virtual AGMs - Knowledge - Clayton Utz. (2019). Retrieved from
https://www.claytonutz.com/knowledge/2017/july/hybrid-and-virtual-agms
General Duties of Directors - Corporations Act 2001 (Cth). (2019). Retrieved from
https://lawhandbook.sa.gov.au/ch05s04s02.php
Ferguson, D., & Ma, C. (2016). Company Meetings – Tips and Insights - Board Committees: Delegation and
Decision-Making [Ebook] (p. 2). Addisons Lawyers. Retrieved from

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Running Head: Business and Corporate Law
http://www.addisonslawyers.com.au/knowledge/assetdoc/41a4a65cf33c2e9d/1796194_1%20Company
%20Meetings%20-%20Tips%20and%20Insights.pdf
Baxt, B. (2015). Accessorial liability - Australian Institute of Company Directors. Retrieved from
http://www.companydirectors.com.au/director-resource-centre/publications/company-director-magazine/2015-
back-editions/september/directors-counsel-accessorial-liability