Corporation Law: Case Study Analysis

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

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Part B: Corporations Law:
Option 1:
ISSUES:
The matters in dispute involved in this case study are depicted below;
 Whether the Bank can successfully sue the said Company for repayment of loan along
with interest,
 Whether it has resulted into appropriate outcome,
 Whether the result will be separate in case the loan was sought with the aim of
refurbishing the clothing shops,
 Whether the result will be different in case the loan officer of the Bank comes to know
about the bad relation between the Board and Sarah.
Rules:
In order to discuss the present case study, the Corporations Act 2001 (Cth) can be taken
into consideration. This Act of the Australian Commonwealth provides the laws in relation to the
business organizations at the both interstate and federal level (Bird and Gilligan 2016). The main
objective of the Act is controlling the Australian corporations. To resolve the matter in dispute,
sections 125 and 126 have to be referred.
A company has the authority to limit its powers by means of its constitution. It can also
state its objective by the constitution. Section 125(1) of the Act says that when there exists a

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constitution in the company, such constitution may provide restriction expressly on the company
for exercising its powers. Such constitution can also prevent the company from exercising its
powers. However if the company exercises its powers which contradicts the constitution’s
prohibition or limitation, such act of the company will not be invalid.
On the other hand, section 125(2) of the Act states that when a company has got a
constitution, it can also provide the objects of company. If any company’s act is found to be
contradicting with the objects or beyond it as given in the constitution, such act will not be
regarded as void. This is similar to section 125(1).
Section 126 provides the power of an agent to make transactions on behalf of the
company. Section 126(1) provides that any power of the company can also be exercised by any
person as an agent of the company provided such power or authority is given to him by the
company expressly or in an implied manner. The agent can act on behalf of the company for
making any contract or modifying it or even for discharging or ratifying any transaction. Such
agent can act on behalf of the company even by not using is seal.
Section 126(2) however states that section 126 will not be effective against any act of
law.
In addition to these, the rule established in the landmark case of Royal British Bank v.
Turquand (1856) 6 E. & B. 327 has to be referred (Maloka, 2017). It is a UK case related to
company affairs that provides the rule of indoor management. This rule states provides that when
an outsider or third party is dealing with the company regarding any matter, he will assume that
all the internal matters of the company have been followed accordingly. To simply it, the
doctrine states that the indoor affairs of a company are its problems and the outsiders will not