Corporations Act 2001 - Regulations and Duties of Directors

Corporations Act 2001
1
Corporations Act 2001

Corporations Act 2001 2
Answer 1
Introduction
In this case Sammy and Huw develop an app through which they podcast the interviews and
shows, and in this context they register the new company named as Oh My Pty Ltd. For taking
the accounting services, they hire Amaya and allot her 10% shareholding in the organization.
They also signed contract with the Gracey in terms of giving them weekly podcast and for this
they agree to pay $4000 on monthly basis. This answer discusses the regulations related to the
changes made in constitution, and regulations related to the expropriation of shares. Second part
discusses the contractual remedies and liability in terms of contract.
Discussion
Part A
It is possible for the organizations to make changes in the organizations constitution, and this
authority is stated under section 136 of the Corporations Act 2001. This section states that any
changes done by organization in the constitution must be done in terms of the conditions stated
under section 136 (CorporationsACT, 2001).
In other words, this section defines such conditions which need to be complied by the board and
members of the organization for making any legal changes in the constitution. As stated by this
section, any changes made by the company in the constitution must be made by passing special
resolution under the organization. However, such special resolution must be favoured by almost
75% shareholders of the organization, which means, any changes made in the constitution of the
company must be approved by at least 75% shareholders of the company (Austii, no date).
In section 232 of the Corporation Act 2001, right of the minority shareholders are defined. As
stated by this section, power to seek court intervention is given to the minority members of the
organization in case members believe that directors and majority shareholders conduct any such
action which cause disadvantage to the minority members (CorporationsACT, 2001).
It is not possible for the minority members of the organization to seek any order with the help of
which they can change the share capital structure of the organization or prevent the majority
shareholders and directors in making the required changes in the constitution of the organization.
However, some exceptions related to this are also defined by the Corporation Act 2001, and with
the help of these exceptions minority shareholders can prevent the majority shareholders in
making changes in the capital structure of the company like they can restrict the share buyback in
the organization. (ACL, no date)
This exception mainly aims in providing the power to the minority shareholders to prevent the
directors and majority shareholders in making any type of changes in the company’s constitution.

Corporations Act 2001 3
Following exceptions are introduced by the common law and statutory law in context of the
restrictions-
 Minority shareholders holds the right to prevent the changes which are made by the
majority shareholders and directors in terms of the rights related to the class of shares.
 Minority shareholders can restrict the changes made by the directors and majority
shareholders related to the expropriating of the shares. However, there is an exception
also which states that, directors and majority shareholders can expropriating the shares of
the organization if such shares result in disadvantage and big loss to the organization.
In this case, Amaya sign the contract with the Gosh (competitors} for providing the similar
services to them, and this action of Amaya cause great loss to the organization and this can also
threat the survival of the organization. Because of this action of the Amaya Oh My suffers great
loss and risk at its survival. As per the law it is not possible for the organization to expropriate
the shares of the minority shareholders, but there is an exception also which states that, directors
and majority shareholders can expropriating the shares of the organization if such shares result in
disadvantage and big loss to the organization. In case Gambotto v WCP Limited (08 March
1995) - [1995] HCA 12 (08 March 1995) (Gambotto v WCP Limited, 1995), court consider the
question related to the expropriating of the shares. Therefore, both Sammy and Huw hold the
right to expropriate the shares of the Amaya because these shares cause huge loss to the
organization. (Mitcchell, 1994)
Part B
Pre-incorporation contracts are deemed as those contracts which are entered by the promoter on
the behalf of organization before the organization is registered, and these contracts are bound on
the organization only in case such contracts are ratified by the organization after the registration
of the company (Hambrook, no date). Section 131 of the Corporation Act 2001 defines the
regulations related to the contract enter between the parties before the registration. It must be
noted that, those contracts which are entered by the promoter on behalf of the organization which
is not yet registered needs to be ratified by the organization, which means, in case organization
fails to ratify the contract within the time period specified by the parties of the contract or in case
not specified by the parties then within the reasonable time period.
Clause 4 of this section states that, in case company after ratification of the contract fails to
perform the obligation stated under the contract then Court order the organization to pay all the
damages that can be order to any individual who breach the contract (CorporationsACT, 2001).
Both Sammy and Huw signed the contract with the Gracey before the registration on the
company for giving the weekly podcast, and in exchange organization pay him $4000 on
monthly basis. In this case, contract signed by organization is ratified by the organization, and as
stated by section 131 in case company ratified the contract then company becomes liable to