LAW513: Australian Corporate Law History and Accounting Implications

This essay provides a comprehensive overview of the historical development of corporate law in Australia, tracing its origins from the United Kingdom's company law and the influence of the Corporations Act 2001 (Cth) and the Australian Securities and Investments Commission (ASIC). The essay explores the evolution of corporate law, including the impact of common law judgments and the consolidation efforts that led to the uniform national code. It also examines the concept of corporate veil, its implications for the liability of shareholders and managers, and the circumstances under which courts may pierce the veil. The essay further discusses the influence of corporate law on the accounting profession, emphasizing the importance of regulations, disclosures, and compliance with accounting standards. The impact of the Corporate Law Economic Reform Program and the Ramsay report on auditor independence are also discussed, along with the significance of corporate governance and its impact on various stakeholders. Finally, the essay concludes by summarizing the key aspects of corporate law in Australia, including the role of the corporate veil and the importance of accountability and transparency in corporate governance.

Running head: CORPORATE LAW
Corporate Law
Name of the Student
Name of the University
Author Note

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Part A
Introduction
The corporate law prevailing in Australia in its recent form owes its origin to the company
law of the United Kingdom. The sole legislation that regulates the company laws that has
been prevalent with respect to the corporations operating in Australia is the Corporations Act
2001 (Cth)1 (CA). The chief regulating body with respect to the corporations of Australia is
the Australian Securities and Investments Commission (ASIC). The provisions contained in
the CA have been influenced by the common law judgements that have arisen in the courts of
the United Kingdom2. This essay has been concerned with the history of the corporate law in
Australia and how the elements of the same have been impacting the corporation as well as
the accounting profession.
Discussion
The main corporations that have been operating in Australia are the public limited
companies and the private limited companies. These are the main forms of corporation and
have similar characteristics with respect to limited liability. The Australian Constitution has
provided the Parliament with limited powers with respect to the formulation of laws in
relation to the corporations. The states in Australia are conferred with residual powers with
respect to the all the matters that are not included under the power of the commonwealth
jurisdiction. The growth of the corporation law in Australia has evolved and influence solely
from the English company law but the state legislatures of Australia has been mainly
1 The Corporations Act 2001 (Cth)
2 McQueen, Rob. A Social History of Company Law: Great Britain and the Australian Colonies 1854–1920.
(Routledge, 2016).

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concerned with the formulation of the same and prominent distinctions were visible in the
laws of various states3.
However, subsequent to the World War II, there has been an anomaly in this system of
diverse legislations of different states that has posed the issue of multiple impositions of fines
and rates for operating in several states. This demanded for a consolidation of these diverse
legislation which has resulted in the formation of a uniform national code relating to the
company in 1962. This code has been formulated for the purpose of harmonising the state
legislations, which has failed for the complexity of its arrangement. It has been held in the
case of Strickland v Rocla Concrete Pipes Ltd [1971] HCA 404 that any legal provisions
which has an proximate connection as well as applicability in the affairs of the company
would be rendered valid5.
All of these have resulted in a second attempt in the year 1978 creating the National
Companies and Securities Commission (NCSC). The second attempt to consolidate the
corporations law has been presenting several inadequacies which resulted in the case of New
South Wales v Commonwealth [1990] HCA 26. This has formally marked the inception of the
Corporations Act 2001 (Cth), which has been presently conferred with the regulatory powers
of the companies. The regulatory body that are conferred with the matters relating to the
Australian companies is the Australian Securities and Investments Commission (ASIC). The
registration of the companies is to be carried out by the ASIC7.
3 Bottomley, Stephen. The constitutional corporation: Rethinking corporate governance. (Routledge, 2016).
4 Strickland v Rocla Concrete Pipes Ltd [1971] HCA 40
5 Du Plessis, Jean Jacques, Anil Hargovan, and Jason Harris. Principles of contemporary corporate governance.
(Cambridge University Press, 2018).
6 New South Wales v Commonwealth [1990] HCA 2
7 Gullifer, Louise, and Jennifer Payne. Corporate finance law: principles and policy. (Bloomsbury Publishing,
2015).

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Conclusion
With the advancement of the corporate law in Australia, there has been a progress in the
accounting profession in Australia. The consolidation of the corporate law in a single
legislation has demanded increased regulations, disclosures as well as the compliances in
relation to the audit reports, financial reports and other disclosure reports. The structure of
accountability and the efficiency in the corporate governance has been supplemented by an
amendment to the Corporations Act 2001 (Cth)8 being brought by the Corporate Law
Economic Reform Program (Audit Reform and Corporate Disclosure) Bill 2003. Moreover,
the Ramsay report that has been provided to the public by a releasing the same to the public.
This report has been presenting an analysis of the independence pertaining to the auditors
under the corporate legislations. The requisites of the corporate governance have also been
discussed in the paper. There are several suggestions that have also be addressed by this
paper relating to the concerns that has been affecting the accounting profession9.
Part B
Introduction
A corporation is to be treated as a distinct entity from the legal perspective and is the
business structure having the utmost popularity. The beneficial aspects that this structure of
business provides by virtue of its unique features of restricted liability that is not available in
any other structure of business other than a company. The shareholders and the managers
involved with the company are to be extended with the limitation regarding their liability to
be rendered personally culpable. The identity of the directors and the shareholders who has
connected with a company needs to be protected with a virtual screen referred to as the
8 the Corporations Act 2001 (Cth)
9 Williams, Belinda Rachael, Simone Bingham, and Sonia Shimeld. "Corporate governance, the GFC and
independent directors." Managerial Auditing Journal 30.4/5 (2015): 324-346.

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corporate veil10. This paper would strive to analyse the limited liability of the owners and
managers of the company under the light of the concept of corporate veil and it will also
analyse the situations under which such a limited liability can be ignored.
Discussion
Under this concept, the actions of the owners and the directors in relation to the company
needs to be provided with the immunity from being incurred with the liability that has been
incurred by the actions that they have taken under the name of the company. The privileges
as well as the obligations that the company incurs needs to be restricted to the company only
and should not be imposed upon the management of the company. This implies the concept
of corporate veil protecting the management of the company from being covered under the
liabilities of the company. This contention of the corporate veil has been first deciphered in
the case of Salomon v A Salomon & Co Ltd [1896] UKHL 111. This has been enumerated by
the present case that the company on being registered is to be treated as a distinct entity from
that of the actors behind the same. Moreover, the corporations are to be extended with the
status under s 124 of the Corporations Act 200112 to conduct its affairs as a natural person.
This provides them to institute proceedings and defend suits under their own behalf. The
courts in any legal proceeding can admit a company as a party for the purpose of contesting a
suit13.
The company is said to be covered under the concept of corporate veil in the same
instance at which it comes into existence through registration as per the provisions contained
in s 119 of the Corporations Act 200114. This incorporation of the same casts a theoretical veil
upon the company. This restrict the outsiders from investigating through the veil and are
10 Macey, Joshua C. "What Corporate Veil." (2018) Mich. L. Rev. 117: 1195.
11 Salomon v A Salomon & Co Ltd [1896] UKHL 1
12 The Corporations Act 2001, s 124
13 Jackson, Kody. "Behind the Corporate Veil." (2015) ReVista (Cambridge) 15.1: 50.
14 The Corporations Act 2001, s 119

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required to look at the company from on its own name. The courts are also not empowered to
look through the veil for holding the company liable. They are required the treat the company
as a separate identity as that of the individuals acting behind the same. Moreover, the
companies are also required to be rendered capable of being a party to a contract in its own
capacity15.
The transactions that form the part of the affairs of the company needs to be accounted for
and this requires the accounting of such various transactions to comply with the disclosure
requirements as well as the accounting standards as mandated by the Corporations Act 2001
(Cth)16. The Australian accounting standards have previously found their source in the
accounting profession organisations and code of ethics that has been supplementing the same.
The chief motive that lies behind the stringent policies for the compliance with the
accounting standards while preparing the financial reports is to ensure the financial
statements and the cash inflows and outflows of the corporation to be presented in a fair
manner. The main significance of such a stringent compliance lies in the interests of the
creditors, employees, investors, shareholders as well as other individuals interested in the
affairs of the company with respect to the allocation of the financial resources. Moreover,
such compliance enhances the comparability of the financial statements of different
organisations. Thus the accounting profession has been rendered a considerable amount of
significance under the ambit of the present corporate laws owing to its increased
compliances17.
15 Vastardis, Anil Yilmaz, and Rachel Chambers. "Overcoming The Corporate Veil Challenge: Could
Investment Law Inspire The Proposed Business And Human Rights Treaty?." (2018) International &
Comparative Law Quarterly 67.2: 389-423.
16 The Corporations Act 2001
17 Stewart, Jenny, Pamela Kent, and James Routledge. "The association between audit partner rotation and audit
fees: Empirical evidence from the Australian market." (2015) Auditing: A journal of practice & theory 35.1:
181-197.

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Again, there can be certain circumstances that the courts are made to face, which requires
the concept of corporate veil or screen be pierced to hold the actual culprit liable where the
court is satisfied that the actions were constructed be disguised under the separate identity of
a company. In this context, the corporations are in an agency relation with its directors where
the directors are to be treated as the agents of the companies. However, this designation of an
agent requires the directors to inhibit good faith and ensure the wellbeing of the company.
Any actions of the directors that are not properly ensuring a benefit of the company being
served are supposed to hold the director liable for the same18. This can further be illustrated
with the case of Green & Clara Pty Ltd v Bestobell Industries Pty Ltd [1982] WAR 119.
There are certain instances where the main motive behind the formation of the company is
to suppress or hide the real purpose that has made the owner pursue for the purpose of
escaping an already prevailing obligation in the of legal nature. In such a case, the courts
have the authority to peep through the corporate veil for the purpose of holding the
management liable. This can be supported with the case of Gilford Motor Co Ltd v Horne
[1933] Ch 93520. This can also be supported with the case of Sharment Pty Ltd v Official
Trustee in Bankruptcy (1988) 18 FCR 44921, where the company has been created with the
motive of tax evasion. In the event of the company being formed as an aid to fraud, the courts
are to hold the actors behind the same liable as per the provisions established in the case of
Re Darby, ex parte Brougham [1911] 1 KB 95.
Conclusion
It can be concluded that the shareholders and the managers involved with the company are
to be extended with the limitation regarding their liability to be rendered personally culpable.
The privileges as well as the obligations that the company incurs needs to be restricted to the
18 Jackson, Kody. "Behind the Corporate Veil." (2015) ReVista (Cambridge) 15.1: 50.
19 Green & Clara Pty Ltd v Bestobell Industries Pty Ltd [1982] WAR 1
20 Gilford Motor Co Ltd v Horne [1933] Ch 935
21 Sharment Pty Ltd v Official Trustee in Bankruptcy (1988) 18 FCR 449

7CORPORATE LAW
company only and should not be imposed upon the management of the company. there can be
certain circumstances that the courts are made to face, which requires the concept of
corporate veil or screen be pierced to hold the actual culprit liable where the court is satisfied
that the actions were constructed be disguised under the separate identity of a company.

8CORPORATE LAW
Bibliography
Bottomley, Stephen. The constitutional corporation: Rethinking corporate governance.
(Routledge, 2016)
Du Plessis, Jean Jacques, Anil Hargovan, and Jason Harris. Principles of contemporary
corporate governance. (Cambridge University Press, 2018).
Gilford Motor Co Ltd v Horne [1933] Ch 935
Green & Clara Pty Ltd v Bestobell Industries Pty Ltd [1982] WAR 1
Gullifer, Louise, and Jennifer Payne. Corporate finance law: principles and policy.
(Bloomsbury Publishing, 2015).
Jackson, Kody. "Behind the Corporate Veil." (2015) ReVista (Cambridge) 15.1: 50.
Macey, Joshua C. "What Corporate Veil." (2018) Mich. L. Rev. 117: 1195.
McQueen, Rob. A Social History of Company Law: Great Britain and the Australian
Colonies 1854–1920. (Routledge, 2016).
New South Wales v Commonwealth [1990] HCA 2
Re Darby, ex parte Brougham [1911] 1 KB 95
Salomon v A Salomon & Co Ltd [1896] UKHL 1
Sharment Pty Ltd v Official Trustee in Bankruptcy (1988) 18 FCR 449
Stewart, Jenny, Pamela Kent, and James Routledge. "The association between audit partner
rotation and audit fees: Empirical evidence from the Australian market." (2015) Auditing: A
journal of practice & theory 35.1: 181-197.

9CORPORATE LAW
Strickland v Rocla Concrete Pipes Ltd [1971] HCA 40
The Corporations Act 2001 (Cth)
Vastardis, Anil Yilmaz, and Rachel Chambers. "Overcoming The Corporate Veil Challenge:
Could Investment Law Inspire The Proposed Business And Human Rights Treaty?." (2018)
International & Comparative Law Quarterly 67.2: 389-423.
Williams, Belinda Rachael, Simone Bingham, and Sonia Shimeld. "Corporate governance,
the GFC and independent directors." Managerial Auditing Journal 30.4/5 (2015): 324-346.