Formation Of Business Law And Management

LENGTH 2,500 words (excluding footnotes and bibliography) Each Memorandum is 1500 words Harvard Reference: footnotes and bibliography must be included DUE DATE 9th Monday at 2:00 pm DETAILS Requirements for this assignment: 1. comprehensive footnotes 2. a bibliography of all sources 3. memorandum format (example below) INSTRUCTIONS 1. Read above requirements carefully. 2. Read the Assessment 2: Research Assignment Scenario 3. See Memorandum Format 4. Please provide a memorandum of preliminary advice on the five issues referred to in the scenario. The memorandum is from you as the trainee addressed to Jo Delaney, lawyer, containing advice on the legal issues and risks, and relevant commercial implications, of each of the five issues referred to above. Each issue is worth eight marks providing a total of 40 marks

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

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MEMO 1
To: Jo Delaney
From: [To be filled in by the student]
Date:
Subject:
Issue
The primary issue is which form or structure relating to business shall be best suited to
the needs of Win, Nick, Mick and Ying.
Rule
It must be mentioned that certain factors must be considered during the formation and the
management of a business. Such factors include distinct legal entity, transferability of the
interests of the owner, capability to secure finance, control and management, plans for growth,
resolution of disputes and planning relating to taxation.
A partnership is considered to be a relationship among certain individuals who have
decided to carry on any particular common business. The partners shall share the similar
intention of earning revenues and profits. The partners in relation to any partnership business
may be either individuals, or bodies corporate, or companies. Each partners regarding the
business establishes a specific contract, which is known as the partnership agreement. This
particular agreement states the guidelines according to which the partners should conduct the
business of their partnership. Except when a contract or any statute is in existence to the
contrary, the common obligations and rights in relation to each partner shall be directed by the

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agreement mentioned above. A partnership is regarded as a relationship, and it is not considered
to be a distinct legal body, although, for the purposes of procedural suitability and expediency,
the rules in connection to Court permit any particular partnership to be sued or sue in the name of
the partnership firm. The partnership should file a tax return in order to determine the share of
loss and profit in relation to each partner1.
Section 115 as provided in the Corporations Act (Cth) of the year 2001 permits any
particular partnership to have a quantum of twenty members at the most, however, exceptions
exist in this regard in case of professional service providing partnerships, such as accounting
firms and law2. Each partner shall be privately accountable to the outside creditors in relation to
the entire quantum of the debt, as a partnership is not considered to be a distinct legal body. Each
partner shall act as an agent of the firm as well as the agent for all the other partners in that
particular firm. The partners shall be personally accountable, which may include their assets.
However, in case of a limited partnership, certain partners enjoy a limited accountability towards
the partnership firm.
In the case of Birtchnell v Equity Trustees, Executors and Agency Co Ltd [1929] HCA
243, it was stated that an important belief or standard in relation to the law of partnership is that
any particular partnership shall be considered to be a fiduciary relationship, which should be
grounded and established on mutual confidence and trust among the partners.
A non-profit or not-for-profit association is considered to be a group of either two
individuals or more than two individuals, all of whom have reached an agreement for the
purposes of joining together in order to follow a certain kind of shared lawful purpose. Such
1 Klatt, Gosia, Teresa Angelico, and John Polesel. "Emerging partnership practices in VET provision in the senior
years of schooling in Australia." (2018) The Australian Educational Researcher 45.2: 217-236.
2 Corporations Act, 2001 (Cth).
3 Birtchnell v Equity Trustees, Executors and Agency Co Ltd [1929] HCA 24.

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shared objective may include sporting or social clubs, learned and artistic societies, professional
and trade associations, either religious or charitable or educational organizations, and
associations that may be formed in order to promote any kind of environmental, cultural or other
similar purposes with the intention to do good for the community. Contrary to partnerships, the
purpose of a non-profit association is not to do business and earn profits for the partners, instead
the profits that are earned from a non-profit organization should be utilized for the objectives of
the association4. In the case of Wise v The Perpetual Trustee Company Limited (Executors of
WH Paling (deceased) (New South Wales) [1903] AC 1395, it had been stated that in case of non-
profit organizations, regarding the accountability of the ordinary members, it may be restricted to
the amount or quantum of the entrance or the subscription fees. However, if the rules are binding
in the legal sense and the members have decided to take greater accountability, then the members
shall be bound by the increased accountability. It must be mentioned that there is no presence of
a distinct legal body in case of an unincorporated association. However, if an association is
incorporated then it shall be considered as a distinct body corporate, and shall be included in the
Associations Incorporation Act.
The companies are popular they certainly deliver several advantages in relation to the
context of the business, for instance, limited liability, succession planning, taxation
considerations. Companies should be registered as per the Corporations Act (Cth) of the year
2001. The variations in relation to the type of companies depend on the accountability of the
members. In case of proprietary company there shall be only one director, and the shareholders
shall be no more than fifty, unlike the public companies, where the quantum of directors shall be
4 Gilchrist, David, and Robyn Pilcher. "The intention and the reality: A commentary on the not-for-profit reform
Agenda in Australia." (2018) Public Sector Accounting, Accountability and Governance. Routledge, 118-129.
5 Wise v The Perpetual Trustee Company Limited (Executors of WH Paling (deceased) (New South Wales) [1903]
AC 139.

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three and no limit to the quantum of shareholders. The key most features of a company include
perpetual succession and the distinct legal body6.
Analysis
A partnership is considered to be a relationship among certain individuals who have
decided to carry on any particular common business. The partners shall share the similar
intention of earning revenues and profits. Section 115 as provided in the Corporations Act (Cth)
of the year 2001 permits any particular partnership to have a quantum of twenty members at the
most, however, exceptions exist in this regard in case of professional service providing
partnerships, such as accounting firms and law7. The partners shall be personally accountable,
which may include their assets. However, in case of a limited partnership, certain partners enjoy
a limited accountability towards the partnership firm. Therefore, the structure of partnership
cannot be followed as there is no common intention of the members to earn profits. Another
reason is that the quantum of members has already exceeded the required number, that is, twenty.
The structure of non-profit or not-for-profit association shall be considered to be a
suitable structure in this regard, because this structure is considered to be a group of either two
individuals or more than two individuals, all of whom have reached an agreement for the
purposes of joining together in order to follow a certain kind of shared lawful purpose.
Shared objective regarding non-profit associations may include sporting or social clubs or
learned and artistic societies. In this case, it is a reading club.
6 Ng, Yee-Fui. "In the Moonlight: The Control and Accountability of Government Corporations in Australia."
(2019) Melb. UL Rev. 43: 303.
7 Corporations Act, 2001 (Cth).

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In the case of Wise v The Perpetual Trustee Company Limited (Executors of WH Paling
(deceased) (New South Wales) [1903] AC 1398, it had been stated that in case of non-profit
organizations, regarding the accountability of the ordinary members, it may be restricted to the
amount or quantum of the entrance or the subscription fees. However, if the rules are binding in
the legal sense and the members have decided to take greater accountability, then the members
shall be bound by the increased accountability. Therefore, the members shall be able to decide
the status of their accountability, which could be beneficial for the members.
The company format may be suitable in the given scenario, as it delivers several
advantages like limited liability, succession planning and taxation considerations. Companies
should be registered as per the Corporations Act (Cth) of the year 20019. In case of the public
companies, the quantum of directors shall be three and no limit to the quantum of shareholders.
The key most features of a company include perpetual succession and the distinct legal body.
However, in the given scenario, the members are not looking for profit earning opportunities.
Even though the company structure is suitable for formalizing the reading club, if the members
are opting for charity, then this structure cannot be followed.
Conclusion
To conclude, it may be said that the non-profit association structure shall be best suited to
the needs of Win, Nick, Mick and Ying as per the demands of other members.
8 Wise v The Perpetual Trustee Company Limited (Executors of WH Paling (deceased) (New South Wales) [1903]
AC 139.
9 Corporations Act, 2001 (Cth).

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MEMO 2
To: Jo Delaney
From: [To be filled in by the student]
Date:
Subject:
Issue
The issue in the provided scenario is what shall be the accountability of Jill in relation to
debt towards the EastWest Bank.
Rule
Section 180 as given in the Corporations Act of the year 2001 states that it shall be the
obligation of any particular official or director to perform actions with adequate diligence,
caution and care in favor of the company10.
Section 181 as given in the Corporations Act of the year 2001 states that any particular
official or director of an organization should perform actions for an adequate purpose and in
good faith to further the interests and wellbeing of the company11.
Section 182 as given in the Corporations Act of the year 2001 states that any official or a
director in any organization should not exploit their position in an improper manner, which may
cause any kind of damage to the organization12.
10 Corporations Act, 2001 (Cth).
11 Ibid.
12 Ibid.

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Section 183 as given in Corporations Act of the year 2001 states that any official or a
director should not improperly exploit information in order to further their private benefits and
cause any kind of detriment or damage to the organization13.
The case of Australian Securities and Investment Commission (ASIC) v Cassimatis (No.
8) [2016] FCA 102314 shall be considered to be a relevant case in this regard. In this case, the
Federal Court of the country of Australia measured the facet in relation to the responsibilities
regarding diligence, caution and care that is owed by the officials and directors as per section
180 as given in the Corporations Act of the year 2001. It was found by the Court found that the
directors relating to the financial services organization had instigated a violation concerning their
responsibilities as directors. Any particular reasonable or rational director in accordance to his or
her responsibilities, and in accordance to the situations of the organization should have been
sensibly alert and conscious that it was most likely that the company would have caused a
contradiction to the Corporations Act, with disastrous consequences in connection to the
company.
The case of Australian Securities and Investments Commission v Healey [2011] FCA
71715 shall be considered to be a relevant case in this regard. This case related to a violation in
relation to the responsibility of diligence and care, which has been caused by the board of
directors. The violation was the consequence of the flawed classification of material debts that
are short-term as liabilities that are long-term. Such flawed classification was made in the
financial statements of the organization. The Board even failed to unveil numerous substantial
intra-group guarantees as mentioned in financial statements.
13 Ibid.
14 Australian Securities and Investment Commission (ASIC) v Cassimatis (No. 8) [2016] FCA 1023.
15 Australian Securities and Investments Commission v Healey [2011] FCA 717.

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The case of ASIC v Hellicar & Ors [2012] HCA116 shall be considered to be an important
case in this regard. In this case, it was stated that the director of the organization, who was also
the CEO of that organization, and the company secretary of that organization, caused a violation
of the responsibility to perform actions with adequate diligence and care. Such violation was
caused when the release and issue of a market announcement was approved by the board. It was
stated that such announcement or declaration by the board was misleading and false and caused
damage to the organization.
The case of Kelner v Baxter (1866) LR 2 CP 17417 shall be considered to be a significant
case in this regard. In this case, it was stated that any promoter shall not be able to evade private
accountability if any particular substitute agreement outmodes the initial pre-incorporation
contract. However, in the case of Newborne v Sensolid (Great Britain) Ltd [1954] 1 QB 4518, it
was stated that any particular promoter may evade private accountability regarding a contract a
signature has been put on the agreement only to affirm the signature of the corporation, because
such signature was neither as an agent nor as principal. The contractual document and the
signature shall be entirely null because the corporation did not exist at that time.
Analysis
In the given scenario, Jack obtains loan on behalf of JnJ Delights Café before
incorporation. After one year it is discovered that Jack also commenced a fresh business with
Jane.
16 ASIC v Hellicar & Ors [2012] HCA1.
17 Kelner v Baxter (1866) LR 2 CP 174.
18 Newborne v Sensolid (Great Britain) Ltd [1954] 1 QB 45.

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Applying section 180 of Corporations Act of the year 200119, it may be said that it should
have been the obligation Jack to perform actions with adequate diligence and care in favor of the
company.
Applying section 181 as provided Corporations Act of the year 2001, it may be said that
Jack should have performed actions for an adequate purpose and in good faith to further the
interests and wellbeing of the company20.
Applying section 182 as provided in Corporations Act of the year 2001, it may be said
that Jack should never have utilized his position in an inappropriate manner, which caused such
damage to the organization.
Applying section 183 as provided in Corporations Act of the year 2001, it may be said
that Jack should never have improperly utilized any information in order to further his private
benefits and caused such detriment or damage to the organization.
Applying Australian Securities and Investment Commission (ASIC) v Cassimatis (No. 8)
[2016] FCA 102321, it may be said that Jack had caused a violation of his responsibilities. Any
particular reasonable or rational individual in accordance to his responsibilities, and in
accordance to the situations of the organization should have been sensibly alert and conscious
that it was most likely that he would have caused a contradiction to the Corporations Act, with
disastrous consequences in connection to the company.
Applying the case of Australian Securities and Investments Commission v Healey
[2011] FCA 71722, it may be said that Jack caused a violation in relation to the responsibility of
19 Corporations Act, 2001 (Cth).
20 Ibid.
21 Australian Securities and Investment Commission (ASIC) v Cassimatis (No. 8) [2016] FCA 1023.
22 Australian Securities and Investments Commission v Healey [2011] FCA 717.

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diligence and care. The violation was the consequence of the flawed decision in relation to the
financial statements.
Applying the case of ASIC v Hellicar & Ors [2012] HCA 123, it may be said that Jack
instigated a violation regarding the responsibility to perform actions with adequate diligence and
care.
Applying the case of Kelner v Baxter (1866) LR 2 CP 17424, it may be said Jack shall not
be able to evade private accountability if any particular substitute agreement outmodes the initial
pre-incorporation contract. However, as per the case of Newborne v Sensolid (Great Britain) Ltd
[1954] 1 QB 4525, it may be said that Jack may evade private accountability regarding the pre
incorporation contract as signature has been put on the agreement only to affirm the signature of
the corporation, because such signature was neither as an agent nor as principal. The contractual
document and the signature shall be entirely null because the corporation did not exist at that
time.
Conclusion
Therefore, in the conclusion it may be said that Jill shall not be held to be accountable in
relation to debt that is owed towards the EastWest Bank, instead Jack shall be accountable in
relation to the debt that is owed towards the EastWest Bank, and he shall also be accountable
towards the company for causing violation of his responsibilities.
23 ASIC v Hellicar & Ors [2012] HCA1.
24 Kelner v Baxter (1866) LR 2 CP 174.
25 Newborne v Sensolid (Great Britain) Ltd [1954] 1 QB 45.

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Bibliography
Cases
ASIC v Hellicar & Ors [2012] HCA 1.
Australian Securities and Investment Commission (ASIC) v Cassimatis (No. 8) [2016] FCA 1023.
Australian Securities and Investments Commission v Healey [2011] FCA 717.
Birtchnell v Equity Trustees, Executors and Agency Co Ltd [1929] HCA 24.
Kelner v Baxter (1866) LR 2 CP 174.
Newborne v Sensolid (Great Britain) Ltd [1954] 1 QB 45.
Wise v The Perpetual Trustee Company Limited (Executors of WH Paling (deceased) (New
South Wales) [1903] AC 139.
Statute
Corporations Act, 2001 (Cth).
Journals
Gilchrist, David, and Robyn Pilcher. "The intention and the reality: A commentary on the not-
for-profit reform Agenda in Australia." (2018) Public Sector Accounting, Accountability and
Governance. Routledge, 118-129.
Klatt, Gosia, Teresa Angelico, and John Polesel. "Emerging partnership practices in VET
provision in the senior years of schooling in Australia." (2018) The Australian Educational
Researcher 45.2: 217-236.

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Ng, Yee-Fui. "In the Moonlight: The Control and Accountability of Government Corporations in
Australia." (2019) Melb. UL Rev. 43: 303.