Introduction to Constitution and Legal Issues | Law of Business
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Added on 2020-03-16
Introduction to Constitution and Legal Issues | Law of Business
Added on 2020-03-16
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Running head: LAW OF BUSINESSLaw of BusinessName of the StudentName of the UniversityAuthor Note
LAW OF BUSINESS1Question 1 Introduction to constitution and legal issuesThe replaceable rules or constitution of a company provide the guidance which theofficers and directors of the organisation abide by in order to carry out the responsibilities withrespect to the organisation. The clauses of relationship with any third party as well as itsmembers are set out by the constitution of the organisation1. This part of the paper discussesabout effect the Constitution have with respect to the relationship between the members of thecompany. This part also discusses whether our constitution can be amended and what are therequirements and process involved in amending the constitution. The paper also discussesremedies available to a member whose rights have been violated by the directors or majorityshareholders of the organisation. There are two primary issues which needs to be determined inrelation to this part of the paper. Firstly the issue is whether it is within the powers of Som toimpose the term which is incorporated into the constitution of Chocolate Cleaning Products PtyLimited (CCP) in relation to him being the solicitor and not being replaced unless there isnegligence. Another issue which needs to be determined in relation to this question is whetherthe directors of the company can change successfully its constitution as per the rules of theCorporation Act 2001 (Cth).Section 140 of the CASection 140 of the corporation act deals with the effect of replaceable rules and theconstitution of the company. Subsection 1 provides that the terms of the constitution andreplaceable rules of a company have an effect in form of a contract between each member of the1 Hiller, Janine S. "The benefit corporation and corporate social responsibility." Journal of Business Ethics 118.2(2013): 287-301.
LAW OF BUSINESS2company and the company, between the members of the company with each other and betweenthe director and company secretary with the company. According to the contract each personagree to abide by its terms as far as they are applicable on them. Unless there is an agreementbetween the members of a company to be bound in writing search members cannot be found withrespect to any alterations in the constitution which has been made after they have becomemembers. These alterations should be related to asking a member to take up additional shares,increasing the liability of the member my asking to pay money to the company or contributing tothe share capital and imposing limitations on transferring shares which are held by the member2.Cases on Section 140 of the CAIn the case of Lion Nathan Australia Pty Ltd v Coopers Brewery Limited it wasprovided by the court that the constitution of a company has the same nature like a commercialcontract between two or more parties and the violation of which results in contractual remedies.Section 136 of the CAAccording to the provisions of this section the constitution of the company can bechanged by passing a special resolution by the shareholders of the company. However if there isa further Clause mentioned in the constitution the clause has to be complied with before theclause can be amended. In addition in order to amend such condition the condition itself has tobe complied with before being amended3.Section 232 of the CA2 Corporation Act 2001 (Cth) at Section 140.3 Corporation Act 2001 (Cth) at Section 136.
LAW OF BUSINESS3Section is related to providing remedy to a person under section 234 of the CA whoserights have been violated, prejudice or unfairly discriminated by an act or resolution or aproposed act or resolution4.Section 233 of the CAAs per section 232 any order can be made by the court including a specific action,injunction, winding up of the company and modification or repealing the existing constitution5.Section 234 of the CAProceedings can be brought under section 233 by any person who is a member of thecompany a person who has been removed as a member of the company as a result of specificreduction6.Relevant cases in relation to Section 232-234Gambotto v WCP Ltd7 the court held that the majority has to provide that the act wasoverall fair and not prejudicial in case it is related to the Expropriation of shares. Determination of issue 1The constitution of CCP provides that Max can be only removed as a solicitor of thecompany if negligence have been committed by him while discharging his duties in relation tothe company. Section 140 as discussed above establishes the contractual relationship between themembers of the company. Thus the directors of the company have been imposed with a duty bythe constitution not to remove Max as a solicitor if he has not committed negligence. In addition4 Corporation Act 2001 (Cth) at Section 232.5 Corporation Act 2001 (Cth) at Section 233.6 Corporation Act 2001 (Cth) at Section 234.7(1995) ACLC 342
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