Legal Regulations for Business Associations and Directors' Responsibilities

BUSINESS LAW
(LAW OFASSOCIATIONS)
Introduction
The Corporations Act 2001 (Cth) provides for the legal frame work of business structures
in Australia. Notably, the business structure is set under different regulations and therefore, it is
crucial to consider the legal regulations that guide the operations of the projected business form.
Certainly, business associations are membership groups with the objective of enhancing and
facilitating the interests of the members.1 The projects facilitated by business associations require
resources that individual corporations cannot manage, for instance, the project may need more
time before yields or require heavy investment of funds. Moreover, business associations need
lobbying of information, research and ensuring the standard of the business association before
embarking on the project. There are legal regulations that guide the members of a business
association and all the members are bound by the regulations. The assimilation of corporation act
2006 revised article of association and memorandum of association guide the members in the
management of the business association and the achievement of the projected objective(s). The
report seeks to offer analysis and suggestions to cases related to business associations.
Question 1
According to corporation act 2006, the assimilation of model article of association is
prime since it provides limelight regarding the operations of a corporation. The model describes
the activities of the corporation and therefore specifies the scope of its undertakings.2 The
1 Twomey, D. P., & Jennings, M. Business law: principles for today's commercial environment. Mason, OH, South-Western Cengage
Learning, 2010.
2Reda, J. F., Reifler, S., & Thatcher, L. G. Compensation committee handbook. Hoboken, N.J,.Wiley, 2015.
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shareholders have the liberty to take the activities as the members wish to be assimilated into the
corporations’ day to day activities.3However, it may not go in contradiction of the law of land
and the provisions of the Corporations Act. Companies that were formed before the amendment
of the corporation act 2006 were guided by the objective clause and could not act beyond or
outside its objects clause and any action done beyond the object clause will be ultra vires and
invalid. Such actions could not be approved even by the approval of the whole body of members.
The Corporations were, however, obligated to do anything which is related to and significant
upon the objects indicated, and such act is not to be reflected as ultra vires.
According to the guidelines of the object clause (1985), the shareholders were expected
to cautiously draft before the implementation since violation of the clause would be void unless
otherwise indicated. The drafting should include the key matters of the corporation.4The matters
which are related or subsidiary to the accomplishment of the key objects are further assimilated
in the first section of the object clause. The objects assimilated in the first section of the clause
include the directors of the corporation, the operations of the company and the accountabilities of
the directors according to the nature of duties.5The objects of the corporation must not be
unlawful, dishonest or contrasting to public policy or in violating of the Corporations Act,
2001.The objects clause must be sensibly drafted but the clause should be in a clear and definite.6
3Reda, J. F., Reifler, S., & Thatcher, L. G. Compensation committee handbook. Hoboken, N.J,.Wiley, 2015.
4 Austin, R. P., & Ramsay, I. M. Ford's principles of corporations law. Australia, LexisNexis, 2013.
5 Twomey, D. P., & Jennings, M. Business law: principles for today's commercial environment. Mason, OH, South-Western Cengage
Learning, 2010.
6 Tomasic, R., Bottomley, S., &Mcqueen, R. Corporations law in Australia. Sydney, Federation Press, 2012.
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The clause empowers the members and the creditors to know the determination for which the
reserves of the corporation are allocated.
The adjustment of the clause has extensive implications and thus Corporations Act has
retained some limitations on the right of a corporation to adjust the objects clause. A corporation
may, by passing a special resolve and getting it confirmed by the Company Law Board to adjust
its objects clause if the adjustment is essential to facilitate the company.Some of the exemptions
that may need the corporation to adjust the objects clause include conducting its transactions in
an improved way and more effectively, accomplishing its key drive by new or improved means,
enlarging or changing the local area of its action, conducting on business which under the
existing condition may be suitably or favorably combined with the business of the company,
selling or disposing of the whole, or any part of the activity of the corporation, constraining or
abandoning any of the objects specified in the memorandum and joining with other corporation
or members.
The powers of a corporation are limited by ultra vires, therefore, if the undertakings
provided for exceed the objects clause is ultra vires the corporation and thus negated. The
corporation shall not be certain by such acts which are ultra vires the corporation. The resolution
of the doctrine of ultra vires is to guard the interests of members of the corporation.
Consequently, by feature of the objects clause, the members of the company recognize the
purposes for which the resources are allocated by the company.7To protect the interests of the
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