Legal Regulations of Limited Companies - Desklib

This article discusses the legal regulations and essentials of limited companies in Australia. It covers the obligations of directors, commercial contractual relationships, and the accountability to perform in good faith. The article also includes analysis of study cases to provide a better understanding of the topic.

LEGAL REGULATIONS OF LIMITED COMPANIES
Assignment Questions
The significance of considering the legal rules and the business structures in Australia is
determining the most suitable structure for implementing the business idea. The examination of
the type of the business is crucial in ascertaining the choice that yields. Considerably, all
business forms and structures in Australia have to register the business name under Australian
Securities and Investment Commission.1 Certainly, the registration of limited companies in
Australia with the Australian Securities and Investment Commission authorizes the limited
company to carry out operations in all states without registering further. The limited company
structure is distinguished from the other business organizations by the virtue that the
organization remains a distinct identity from the owners. The owners of the limited company are
not accountable for financial burdens related to the corporate. The organization of limited
company is considerable for a business that is experiencing growth but prone to future liabilities.
The paper fronts the legal regulations and the essentials of limited companies in Australia
through the analysis of study cases.
Question 1(a
The directors of a limited company have obligations outlined and approved by the
corporate constitution, certainly the obligation of care and loyalty. The directors of a limited
company should endeavor to act in the best of the organization. The stockholders are the
substantial support of the corporation and therefore, the directors need to perform in the best of
the shareholders and corporate.2 The directors of the limited company should always put the
1 Webb, Dan K., Robert W. Tarun, and Steven F. Molo. Corporate Internal Investigations. Law Journal Press, 2017.
2 Conaglen, Matthew. Fiduciary loyalty: protecting the due performance of non-fiduciary duties. Bloomsbury Publishing, 2010.
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necessary measures to overcome conflicts of interest. Significantly, it is advisable for the
directors to reconcile and harmonize conflicts of interest over a certain transaction. If there are
conflicts of interests or divided opinions by the directors, there should be full disclosure.3 The
Australian legal requirements of divided opinions or conflicts of interest by the directors
necessitate full disclosure under CA 2001 “section 191-193”. Consequently, directors or officials
attached to two limited companies and have presumed conflicts of interest should only entirely
declare on the conflicting interests but also provide a detailed disclosure of the anticipated
danger to the corporate.4 The determination of a manager to transact for the welfare of the
company requires the manager to seek settlement of the management before the transaction,
courtesy of Corporations Act, s182. The Australian legal outlines for limited corporations require
the organizations to have constitution that guide the operations of the various corporations.5 The
constitution guides for elimination of managers of the corporation through the process of voting
by the shareholders.6 Each of the shareholders has the right to vote for the elimination of
managers from the office despite that the extent of shares limit the liability of the members.
However, there are shareholders either individually or collectively controlling about 5% of the
rights to vote may demand the corporation directors to mobilize shareholders’ meeting and
propose resolves. The CA 2001 “section 136(2)” provides the over-all meeting of shareholders
has the authority to amend or alter the corporation constitution by three quarters vote, when a
3 Gerrard, Michael. "Global climate change and US law." American Bar Association, 2017.
4 Bhatia, K. L. Textbook on legal language and legal writing. Universal Law Publishing, 2010.
5 Butterworths (FIRM). Australian legal words and phrases. Sydney, Butterworths, 2011.
6 Chiu, Iris HY, and Michael McKee. The Law on Corporate Governance in Banks. Edward Elgar Publishing, 2015.
2

special resolve is required. The observation of the constitution is pillar that enhances the
sustainability of limited corporations in Australia.7
Logically, Amaya as a director of the Oh My Pty Ltd owes an accountability of loyalty
and care to the shareholders. As the accountant of Oh My Pty Ltd, Amaya should act and
transact in the best interests of the corporate. However, Amaya has conflicting interests between
Gosh Pty Ltd and Oh My Pty Ltd, which need to be disclosed. . The Australian legal
requirements of divided opinions or conflicts of interest by the directors necessitate full
disclosure under CA 2001 “section 191-193”. Subsequently, Amaya presume conflicts of interest
between Gosh Pty Ltd and Oh My Pty Ltdand should only totally declare on the conflicting
interests but also provide a detailed disclosure of the anticipated danger to the Oh My Pty Ltd.8
When a manager seeks to take a chance in which the company may perhaps have an interest, the
manager must advance the fully informed accord of the panel, or the chance will belong to the
corporation under CA 2001”sections 182-183.”
Again, according to the constitution of Oh My Pty Ltd and the lawful frame work for
corporate bodies in Australia, the constitution allows for the removal of directors through voting.
The CA 2001 “section 136(2)” provides the over-all meeting of shareholders has the authority to
amend or alter the corporation constitution by three quarters vote, when a special resolve is
required. Moreover, shareholders with either individually or collectively controlling about 5% of
the rights to vote may demand the corporation directors to mobilize shareholders’ meeting and
7 Harper, “Business organizations: keyed to courses using bauman, palmiter, and partnoy's corporations.” [Place of publication not
identified], Kluwer Law International, 2008.
8 Comino, Vicky. "Australia's' Company Law Watchdog': ASIC and Corporate Regulation." (2015).
3

propose resolves. Consequently, Amaya is removal from the office through a voting forum,
which is applicable through the constitution.
Question 1(b
Commercial contractual relationships are subject to some essentials that include capacity,
certainty, intention, consideration and agreement. The parties entering into a commercial
contractual relationship should the inclination to offer and accept. Once either party offers and
the other accepts, there is a commercial agreement between the parties and agree to be limited by
the terms and conditions of the agreement. Again, consideration is an essential of binding
commercial agreement between the two parties. Consideration is the medium that supports the
commercial contract between the parties, for instance, money. Capacity is the legal capability of
the parties entering the commercial agreement, for instance, sound age and mind. The intention
of the parties should ensuring commercial contracts that are legal, the deal of the contract should
observe the legal formalities. Finally, certainty requires the parties to fully and clearly determine
the duties and role, rights and obligations, which are enforceable through the law.
Commercial agreements are bound by terms and conditions and the parties are subject to
the terms and conditions. The violation of the terms and conditions impact to breach of contract.
The terms and conditions of the agreement are legally binding and therefore enforceable through
the law. Moreover, the failure to observe the legal rules of the commercial contract amount to the
termination of the contract. Repudiation impacts to the termination of the contract if one of the
parties does not have the capacity to meet the agreed obligations. If either party behaves in
manner to suggest unwillingness to the agreement, the contract is terminated through
renunciation. Moreover, the vitiating factors that lead to the change of contractual obligations
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impact termination of the deal, for instance, when one party applies undue influence to the
agreement.
Breach of the contract results to damages for the aggrieved party. However, the nature of
the agreement determines the recourse to the parties entering the agreement. In an agreement
where the accepting party owes a duty of performance and fails to deliver, the consideration to
the agreement is no longer applicable for the remaining period of the contract. Moreover, the
accepting party cannot sue the offering party due to the failure of performance.
Certainly, the case between Oh My Pty Ltd and Gracey is a commercial agreement since
all essentials are observed and duty of performances is owed. Oh My Pty Ltd is the offering party
while Gracey is the accepting party, thus an agreement. As for the consideration to the agreement
$ 4000 per month for one year, the capacity, certainty and intention of the agreement adhere to
the legal regulations. However, Gracey airs for the Gosh Pty Ltd instead of Oh My Pty Ltd that
calls for the termination of the contract through the vitiating factor undue influence. As a party to
the commercial agreement, Oh My Pty Ltd suffers poor reputation against Gosh Pty Ltd since
Gracey podcasts Gosh Pty Ltd instead of Oh My Pty Ltd. Moreover, the Oh My Pty Ltd
terminates the agreement through repudiation since Gracey does not meet the obligations of the
contract, podcasting for Oh My Pty Ltd. Again, the deal between Grace and Oh My Pty Ltd
renounces the agreement since Gracey is unwilling to podcast for Oh My Pty Ltd.
Sensibly, Gracey should podcast for the Oh My Pty Ltd since the terms and conditions for the
agreement are binding through the law. Oh My Pty Ltd can sue Gracey for failure to observe the
duty of performance. Moreover, Gracey will not be able to receive the remaining payment since
the breach of the contract impacts to termination of the deal.
Question 2 (a
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Legal requirements demand the directors of corporations to exercise power within limits
and due diligence. The Corporations Act 2001, “section 180” sooth corporate directors to
practice authority and perform duties with necessary care carefulness. The directors are required
to make a business decision that is bound the principle of good faith and for the interest of the
company. The managers should assimilate personal desires while making the decisions that
related to the interests of the corporation. Substantially, the decision should consider the welfare
of the shareholders and the company. Furthermore, the directors and related staff members of
the corporation should exercise authority and perform in good faith since the welfare of the
corporation is the main objective. (s 181). The management should not misuse the powers to
have personal gains or guide a share order to benefit from the powers enjoyed or lead to the
collapse of the company (s 182). Moreover, it is against the Corporations Act for managers to
use sensitive information from the company for self-gains or for others parties.
The accountability to perform in good faith need the management to perform fairly, for
the welfare of stakeholders. The accountability to exercise good faith is linked to the duty of
performing for the welfare of the corporation. The management should not exercise authority for
self-gains since the performance does not reflect the appropriate reason and there is negligence
of performing in good faith. The role of equity branches from the fiduciary duties grounded on
equity. The duty deserves the directors to perform in the rank of honesty.9 The fiduciary duty is
not subjective until the management is proved to exercise power for self-reasons by the law.10
The association between the corporation and the directors is presumed to be fiduciary and thus
9 Anderson, Mark, and Victor Warner. Drafting and negotiating commercial contracts. Bloomsbury Publishing, 2016.
10 Baxt, Robert. Duties and responsibilities of directors and officers. AICD, 2015.
6

the duty assimilates the management. Considerably, trustworthy manager fails perform the duties
though acting for the welfare of the company.11 The law applies subjective and objective
strategies to evaluate if the manager failed to perform in good faith for development of the
corporation. If the management openly supposes the engagements are made for welfare of the
company, the court of law will not repudiate that proclamation by assessing the viable worth of
the engagement.12 If the manager is confident that the performance assimilated good faith, the
law does not disprove the declaration through examining the worth of the performance. The law
applies self-governing policies to determine if the manager performed for the welfare of the
company.
The directors of Drink It Up Pty Ltd breached the Corporations Act since the provisions
of Act are not observed, performance that assimilated good faith. 13 The Corporations Act 2001,
“section 180” sooth corporate directors to practice authority and perform duties with necessary
care carefulness.14 The accountability to perform in good faith need the management to perform
fairly, for the welfare of stakeholders. The accountability to exercise good faith is linked to the
duty of performing for the welfare of the corporation. The management should not exercise
authority for self-gains since the performance does not reflect the appropriate reason and there is
11 Gerrard, Michael. "Global climate change and US law." American Bar Association, 2007.
12 Australia company laws and regulations handbook, 2009. Vol. 1 strategic information and basic regulations. Vol. 1 strategic
information and basic regulations. Washington, International Business Publications.
13 Kidner, Richard. Casebook on torts. Oxford University Press, 2012.
14 Gani, Ismail, Albert Wijeweera, and Ian Eddie. "Audit Committee Compliance and Company Performance Nexus: Evidence from
ASX Listed Companies." Business and Economic Research 7, no. 2 2017: 135-145.
7

negligence of performing in good faith. The role of equity branches from the fiduciary duties
grounded on equity. The duty deserves the directors to perform in the rank of honesty.15 The
fiduciary duty is not subjective until the management is proved to exercise power for self-reasons
by the law. Furthermore, the directors and related staff members of the corporation should
exercise authority and perform in good faith since the welfare of the corporation is the main
objective. (s 181). The management should not misuse the powers to have personal gains or
guide a share order to benefit from the powers enjoyed or lead to the collapse of the company (s
182). Moreover, it is against the Corporations Act for managers to use sensitive information from
the company for self-gains or for others parties.
The Corporations Act is accountable for ensuring legal actions are imposed the
management performs contrarily. The obligation provides for remedies upon the failure of the
management to observe law. The damages provide for s 1317E (1) in the Corporation Act,
include pecuniary damages against a manager.16 The manager is to compensate the ASIC. The
determined consequence is $200,000.The law court further eliminate a manager or the presumed
compensation. Consequently, the directors of Drink It Up Pty Ltd are liable to imposition of is
$200,000 as a penalty for the breach of Corporations Act.
Question 2 (b
The case between Perival and Wright (1902) proved that the managers of a corporation
owe fiduciary duties to the corporation since the managers are part of the corporation and
maintains the dealings.17 However, the managers do not, entirely by consideration of the
company management that require fiduciary responsibilities to the stockholders, jointly or
15 Anderson, Mark, and Victor Warner. Drafting and negotiating commercial contracts. Bloomsbury Publishing, 2016.
16 Harper, “Business organizations: keyed to courses using bauman, palmiter, and partnoy's corporations.” [Place of publication not
identified], Kluwer Law International, 2008.
8

separately.18 The directors of a corporation are liable for performing the fiduciary exercise in
circumstances that permit unique relation between the management and the stakeholders.
Significantly, the unique relation between the management and the stakeholder is presumed to be
above the standard that the management is expected to portray to the members. Certainly, the
unique relation is prompted by circumstances such the requirement to perform a certain
transaction between the manager and the stakeholder.
Dhruv cannot take action against Kristofer due to the declaration that a corporation is a
distinct body from the management and the liabilities are evaluated relating to the number shares
acquired. The managers are just agents of the corporation and are not liable for the obligation s
of the company.19 Considerably, the management would be subject to numerous claims from
different members if the management would tolerate liabilities on the behalf of the corporation.
The directors of a corporation are liable for performing the fiduciary exercise in circumstances
that permit unique relation between the management and the stakeholders. Significantly, the
unique relation between the management and the stakeholder is presumed to be above the
standard that the management is expected to portray to the members determined relation between
Dhruv and Kristofer.
17 Miller, Paul B., and Charles Weijer. "Fiduciary obligation in clinical research." The Journal of Law, Medicine & Ethics 34, no. 2
(2006): 424-440.
18 Tomasic, Roman, Stephen Bottomley, and Rob McQueen. Corporations law in Australia. Federation Press, 2012.
19 Horsey, Kirsty, and Erika Rackley. Kidner's Casebook on Torts. Oxford University Press, USA, 2015.
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(2015).
Conaglen, Matthew. Fiduciary loyalty: protecting the due performance of non-fiduciary duties.
Bloomsbury Publishing, 2010.
Gani, Ismail, Albert Wijeweera, and Ian Eddie. "Audit Committee Compliance and Company
Performance Nexus: Evidence from ASX Listed Companies." Business and Economic
Research 7, no. 2 2017: 135-145.
Gerrard, Michael. "Global climate change and US law." American Bar Association, 2017.
10

Harper, “Business organizations: keyed to courses using bauman, palmiter, and partnoy's
corporations.” [Place of publication not identified], Kluwer Law International, 2008.
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