Commercial Law | Assignment-1

Running head: COMMERCIAL LAW
COMMERCIAL LAW
Name of the Student
Name of the University
Author Note

COMMERCIAL LAW1
Question 1
a) It shall not be possible to raise funds in the absence of a prospectus, as to raise and
accumulate funds utilization of disclosure document should be done. Prospectus is
regarded as disclosure document.
b) The directors would be protected against prosecution if appropriate data and facts
regarding the company is delivered to investors through the prospectus. The chief
objective of disclosure document is to forward noteworthy information to investors
before it I decided by them that an investment should be made.
c) According to section 710 mentioned in Corporations Act enforced in the year of 20011, it
can be stated that all detailed data and facts that must be rationally and practically needed
by investors for assessing the decision relating to making an investment, should be
provided in the prospectus. Any particular prospectus should not contain any kind of
misleading or deceitful information, as it would mislead the investors in assessing the
decision of making an investment. Any official or a director shall be considered to be
liable in case of any misleading or deceitful information.
d) Section 731 mentioned in Corporations Act enforced in the year of 20012 is created in the
form of a defense in relation to prospectuses. In the circumstances, in which the raising of
the funds may be done through prospectus which may encompass a misleading or
deceitful data or any omission, in such situations, it shall be obligation of the
prospectuses to demonstrate that adequate and practical investigations have been
1 Corporations Act, 2001 (Cth).
2 Ibid.

COMMERCIAL LAW2
conducted, and as a result of such investigations, it may be considered by prospectuses
that neither the declaration nor the omission was misleading or deceitful.
Question 2
a) Section 256 A mentioned in Corporations Act enforced in the year of 20013 delivers the
guidelines, rules and instructions that the companies should follow concerning shares
buy-back and in connection to reductions of share capital. According to the section, an
organization should:-
 Discourse the risk and jeopardy regarding the transactions that may result in
insolvency of company.
 Safeguard the shareholders by ensuring fairness among them.
 Reveal the essential and important data and facts to shareholders as well as
members.
The construction of the rules given in the aforementioned provision are done in a
way, in order to deliver protection concerning the interests in connection to the
shareholders as well as creditors. Hence, regarding the provided situation, permission of
commencing the plans may be given to the directors, only when the plans are in
conformity to the above mentioned rules. In the provided situation, the directors and the
organization must make sure that shares buy-back does not result in an extensively
adversarial and negative impact in connection to the ability of the organization to pay the
creditors. The directors must make sure that fairness relating to the shareholders is done,
and all the significant data and facts must be revealed by the directors to the shareholders
3 Corporations Act, 2001 (Cth).