Business Law - Questions/Answers

Running head: BUSINESS LAW
BUSINESS LAW
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BUSINESS LAW1
Question 1
a) Funds cannot be raised without a prospectus because in order to raise funds a disclosure
document must be utilized. Prospectus acts as the disclosure document.
b) The directors shall be safeguarded from any kind of prosecution if proper information in
relation to the company is provided to the investors with the help of the prospectus. The
primary function of the disclosure document is to provide the investors significant
information before they decide to make an investment.
c) As per section 710 as provided in the Corporations Act of 20011, it may be said that a
prospectus should encompass every information and data that would be reasonably
required by the investors in order to assess that whether an investment should be made.
One may be accountable for the losses that may have been suffered by an individual who
made an investment depending upon the prospectus, which contains deceptive or
misleading information or omissions. It shall be the obligation of the company to issue a
prospectus, in which there would be no deceptive or misleading information.
d) Section 731 as provided in the Corporations Act of 20012 acts as a defense for the
prospectuses, where funds may be raised with the help of a prospectus that contains a
deceptive or misleading information or an omission. In such a cases, it must be
demonstrated by the prospectuses that the necessary and reasonable inquiries have been
made, and after conducting such inquiries it is genuinely believed by the prospectuses
that either the omission or the statement was not deceptive or misleading.
1 Corporations Act, 2001 (Cth).
2 Ibid.

BUSINESS LAW2
Question 2
a) Section 256 A as provided in the Corporations Act of the year 20013 forwards the rules
that must be adhered to by any organization in relation to reductions regarding share
capital and in relation buy-back of shares. As per this section, a company should:-
 Address the risk in relation to such transactions, which may lead to insolvency.
 Ensure, guarantee and confirm fairness in relation to the shareholders.
 Disclose every material and relevant information to the members and the
shareholders.
The rules in this provision are constructed in a manner, so that protection may be given in
relation to the interests concerning the creditors and the shareholders. Therefore, in the
given scenario, the directors shall be permitted to commence their plans only if their
plans follow the rules mentioned above. In the given scenario, it should be ensured by the
company and the directors that the buy-back of the shares does not give rise to a
substantially adverse and unfavorable effect upon the capability of the company to make
payment to its creditors. The directors should ensure and confirm fairness regarding the
shareholders and the directors must disclose every important information to the members
and to the shareholders of the company. Only after such conduct by the directors the
company shall be permitted to commence their plans.
b) In case of Jasline, the company is attempting a selective buy-back in relation to the shares
owned by Jasline. A particular process must be followed by the company in this scenario.
A special resolution must be held by the company, where a 75 percent majority is
mandatory for passing of the resolution. Jasline shall not vote in the special resolution’s
favor in order to approve and accept the selective buy-back.
3 Corporations Act, 2001 (Cth).