Corporations Law: Importance and Issues

This document discusses the importance of Corporation law in the commercial sector and the need for proper governance. It explores the Northside Developments Pty Ltd v Registrar-General case and highlights the issues and loopholes in the law. The document suggests the introduction of doctrines and amendments to address these issues.

Corporations Law

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................7

INTRODUCTION
Corporation law is defined as the law and regulation which deals with commercial sector of
the nation which includes business organisation. Corporation law has included the guidelines
which are needed to be considered for making any of the decision within the entity and if they
fail to comply with it then legal actions can be taken. This is among one of the law which is
being governed by different sub-topic, sections, sub-sections, doctrines and many more. In
context of the file detail discussion will be done upon the topic, Corporation law and why it is
important in present scenario. Special focus will be kept upon one of the landmark case between
Northside Developments Pty Ltd v Registrar-General (1990). As it is one of the essay based on
law, different facts and cases will be included in it. Also, major focus will be upon the weaker
side of the law which has been creating different form of issues in current scenario.
MAIN BODY
Corporation law is one of the most important law which discusses about the organisation
that how any of the organisation is required to be governed and what are those areas which is
required to be covered. The law says that in any of the organisation role of Company Secretary
and Director is very important because they are the one of whole plays significant role at the
time of making any of the decision. But, they always work as an agent of a company where if
anything gets wrong then ultimate liability occurs upon the business entity. It is necessary to
understand that they must take any of the decision by taking prior approval so that they will not
hold any of the personal liability within the decision1. There are number of situation where
laws have been not formed properly due to which sometimes organisation has to suffer. In order
to deal with all of those situation, doctrine has been commenced which prevails upon the law.
The main purpose of form any of the doctrine is just to cover the weaker side of the law so that
any of the entity will not have to suffer and even chances of taking adverse decision also reduces
significantly.
In present scenario, it has been found that common seal one of the most important
instrument for any of the organisation which simply allow to understand that the decision which
has been taken by director or company secretary has been done in the favour of organisation 2.
But, if in case, decisions are taken for the purpose of personal profit then in that respective
1 Stephen V Arbogast, Resisting Corporate Corruption (2009).

condition person can be put under suspicion and even legal actions can be taken against that
individual. One of the famous case between Northside Developments Pty Ltd v Registrar-
General (1990) 93 ALR 385. In this particular case, it was found that director and non-
authorized person acted as Company Secretary for the purpose of keeping companies land for
securing the mortgage. Also, Company Seal was used in it which allowed the Barclays to
understand that there is no fraud as decision has been taken by the company 3. After finding
default in payment, Barclays sold the property to third party for recovering the secured loan.
Looking at the situation, Northside Development filed the case against the organization that land
of the organization was sold without obtaining the permission of company by Bank. Having the
detail analysis on the case, judges held that there is default from the side of Barclay Credit
Corporation and the third party. But, in this respective situation legal charges were imposed upon
the director of a company and Gerard Sturgess who raise the fund for personal profit as there
was no benefit for company to raise fund for the organization.
This case clearly wants to indicates that there are some of the loop holes within the law of
Corporation because some of the sections are being misused by the authorized person for the
purpose of personal benefit which is completely. Looking at the situation strict actions are
required to be taken. But, there is the point of argument is who must be held liable in the above
case because every condition was used as per the Corporation act. In this situation why director
and the assumed Company Secretary must be held liable4. The main purpose of understand this
particular situation is to identify that who should be made liable because common seal was used
by them. Here, who should be given the authority to use the seal of an organization which is the
most important question. The commencement of law has been not formed by taking the situation
into real life practice which creates issues in some of the circumstances.
The most difficult task in present scenario for any of the third party is to deal with
organization because it is difficult to identify that who is authorized person and who is not with
in the company. It has been one of the issues which can be seen within the number of past cases
such as Correa v Whittingham and Caratti v Mammoth Investments Pty Ltd and more. It is
2 "Constitutional Law. Taxation. Situs Of Stock Owned By Foreign Corporation In Domestic Corporation" (2013)
26(2).
3 HIGH COURT OF AUSTRALIA. 2020.
4 "Corporations: When Is A Corporation A "Manufacturing Corporation"?" (2015) 15(7).

necessary for the corporation to law to fix this respective field so that similar form of problems
will not occur in future course of time. There are some of the section which clearly indicates
about the assumption which can be made. As per section 128 of Corporation Act 2001 states
about the entitlement to make the assumption. But, in any of the condition, company must check
all of the information in detail. If they fail to do so then legal action can be taken upon them
which has been explained as per section 128(4). As per section 129 there are some of the
assumption which can be made such as if any of the person acted from the side of company then
they can act as they are authorized or appointed person for this particular work5. Not only this
but, they have can assume if any of the person works as an agent then they can assume that they
are working as an agent of the company and their decision are directly connected with principal
i.e., company. It simply means that this are some of the area where issues can be found within
the law.
It is clearly indicating that there are some of the drawbacks for the company as per
section 128 and 129 of Corporation Act, 2001. It is necessary to for the Commonwealth to bring
some of the changes in it because ultimately it creates issues for the entity to survive. It is
because there are number of person who performs in place of company where they might prepare
forge documents which can risk the survival of the company for longer period in the market.
Here, common law can play the big supportive role by the introduction of doctrine which will
directly allow the company to perform better in any of the situation. Doctrine will be important
because it will not allow the person to take any of those steps due to which survival of a
company gets into any sort of problem6. It has been found that third party can assume but they
never try to investigate whether they are dealing with the right person of the company or not and
whether the decision which is being taken by the person is for personal benefit or not. If this
thing can get changes then there will be huge possibilities that forge cases will decrease
automatically from the business organization.
Whenever any of the authorized person of the company takes those decisions which are
not for beneficial for the company then in that respective situation then rules and regulations can
5 "Damages: Liability Of Corporation In Punitive Damages For Acts Of Its Officers" (2017) 10(6).
6 "Constitutional Law: Eight Hour Law: Municipal Corporation" (2011) 12(6).

be made where that person can be held liable. It is because this types of decision will allow to
reduce the cases. Also, sometime director doesn’t take the permission with the team which can
be beneficial in some of the cases and sometimes it does not but, there is required to be made
legal action in this types of circumstances. This is necessary because this are some of the
decision which directly or indirectly affect the company and puts company under liability. Here,
they must be removed from their authorized position and legal action must be taken against7. Not
only this, but it has been found that there are some of the condition in which Corporation Act,
2001 charges very rear penalty against the defaulter which must be changed. This types of
circumstances always creates issues for the organization and do not allows the organization to
attain the goals. If in case penalty will be increased, then there will be very minimum chances
from the side of authorized person to take those decisions where approval has been not taken.
This are the changes which can be brought by taking the help of common law where they can
introduce the new doctrine through which chances of obtaining effective result will increase.
The main reason behind raising these particular points because this were main reasons
due to which cases of unlawful activity increases. It was found in the case between Northside
Developments Pty Ltd v Registrar-General, where director and unauthorized company secretary
raised capital against the company without obtaining any of the permission. If this types of
problem will be solved in upcoming time period, then there will be less chances for any of the
person to take those decisions which are against the law and creating issues for the organization
to perform business activity smoothly. As per the perception of the companies it is will be
important for them to perform better in any of the situation and for that it will be necessary for
the Corporation Act to bring amendments in the act or even they can take the help of doctrines
which will prevails upon the law8. It will simply mean that although laws allow to assume what
can be done but as per the principal of doctrine it is not allow to take any of such kind of
decision. If there would have been availability of doctrine, then the contract which would have
been formed between director and assumed company secretary and Barclays company would
have been void from starting.
7 "Stockholders' Suits In Behalf Of The Corporation For Wrongs Of The Directors To The Corporation" (2014) 3(1).
8 "Agency. Principal's Liability To Third Persons In Tort. Liability Of Membership Corporation For Fraudulent
Issues Of Stock Certificates" (2015) 22(7).

CONCLUSION
From the above discussion, it is necessary to understand that Corporation law is one of the
most significant law which governs each and every business entity within the premises of
Australia. The major aim behind the commencement of law is to ensure that no one breaches the
guidelines for their personal benefit. If that will go around then legal actions can be taken.
Although has been formed, still it has been found that there are some of the section which can be
breached and for that respective situation doctrines have been introduced. Always doctrine
prevails upon section.
REFERENCES
Books & Journals
"Constitutional Law. Taxation. Situs Of Stock Owned By Foreign Corporation In Domestic
Corporation" (2013) 26(2)
"Stockholders' Suits In Behalf Of The Corporation For Wrongs Of The Directors To The
Corporation" (2014) 3(1)
"Agency. Principal's Liability To Third Persons In Tort. Liability Of Membership Corporation
For Fraudulent Issues Of Stock Certificates" (2015) 22(7)
"Damages: Liability Of Corporation In Punitive Damages For Acts Of Its Officers" (2017) 10(6)
"Constitutional Law: Eight Hour Law: Municipal Corporation" (2011) 12(6)
Arbogast, Stephen V, Resisting Corporate Corruption (2009)
"Corporations: When Is A Corporation A "Manufacturing Corporation"?" (2015) 15(7)
Online
HIGH COURT OF AUSTRALIA. 2020. [Online]. Available Through: <
https://jade.io/article/67573 >