Corporations Law - Assignment (Solved)
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Added on 2021-05-31
Corporations Law - Assignment (Solved)
Added on 2021-05-31
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CORPORATIONS LAWSTUDENT ID:[Pick the date]
Question 1 As per s. 162, Corporations Act 2001, the given change in the company type is permissible.In order to proceed with the same, the first step is to pass a special resolution where theintended change in the company type should be ratified. A special resolution is one whichshould be ratified by least 75% of the shareholders who are voting either in person or throughtheir respective proxies. Besides, the resolution, compliance with s. 163 and s. 164 isrequired1. Section 163 highlights that the application for change in company type needs to be lodgedwith ASIC (Australian Securities and Investment Commission). The various legalrequirements are highlighted below2.In accordance with s. 163-2(a), ASIC must be provided with a copy of the specialresolution outlined in s. 162 and this must highlight the company type change alongwith specifying the new type and the new name that has been authorised by theshareholders.In accordance with s. 163-2(d), the company’s constitution consolidated copy alsoneeds to be submitted if existing. Also, it needs to be highlighted if thesection738ZIwould cover the company or not. Document highlighting the rightsrelated to both issued and unissued shares must also be highlighted. The ASIC on receiving the application vets the same in wake of s. 162 and s. 1623requirements and then issues notice under s. 164 for altering the company details on the ASICdatabase besides publishing the same in the Gazette. Further, the company thus formedwould not be a new company but would be the old company with a new type and a newname3. Question 2Issue1s.162, Corporations Act 2001 (Cth)2s.163, CA 20013s.164, CA 2001
The key issue is to determine if Ann and Bill would be successful in preventing Yung fromstarting a competing business under the non-compete clause present in the employmentcontract.RuleIn accordance with s. 124(1), a company is a separate legal entity and it exists independent ofthe owners. Also, based on this, the principle of corporate veil has been incorporated ashighlighted in the Salomon vASalomon& Co Ltd4. This case highlighted that theshareholders of the company cannot be held liable for the outstanding liabilities of thecompany owing to the company being a separate entity from the owners5.This potential immunity that is extended under the company structure is prone to misuse andpotential abuse if a company is incorporated so as to engage in any activity that could lead tolegal implications. In view of this, the court allows that in select cases, the lifting of corporateveil may be allowed so as to understand as to who is the controller of the firm. One of thecases that is relevant to the situation presented is Gilford Motor Co Ltd v Horne6[1933] Ch935. As per the relevant facts of this case, Horne (the defendant) was an employee withGilford Motor Company. During employment, non-compete agreement was signed whichwas valid for 3 years after termination of employment. Horne decided to compete with themotor company during the period when the agreement was still applicable. To escape breachof the contract, a company was formed which had his relatives and friends as shareholders.The court decided that the defendant has breached the non-compete agreement since Horneand the company were one entity only as the company was formed only as an instrument ofconducting fraud7. This highlights that even though company and owners are different but incase of using company as an instrument for committing fraud, the veil may be pierced and thecontroller may be punished.ApplicationAs per the relevant details, it is apparent that as part of the employment contract with formermanaging director Yung, there exists a clause as per which Yung cannot engage in acompeting business with that of the company. This non-compete clause is valid for a period4Salomon vASalomon& Co Ltd [1896] UKHL 1, [1897] AC 22.5Ibid. 46Gilford Motor Co Ltd v Horne[1933] Ch 9357Ibid. 6
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