Company Law Analysis: Rights and Liabilities of Build It Ltd

This report provides a comprehensive analysis of the legal rights and liabilities associated with Build It Ltd, a hypothetical company operating under Australian company law. The report begins by outlining the rights of Build It Ltd against its shareholders, including share issuance, distribution of company property, and the right to select investors. It then details the company's liabilities to its stakeholders, emphasizing the importance of audits, director remuneration, and accountability. The report also explores the actions that the Australian Securities and Investments Commission (ASIC) can take against directors for misconduct, including civil and criminal penalties. Furthermore, the report examines the rights of disgruntled shareholders like Mike, focusing on voting power, access to annual reports, the ability to elect new board members, and the right to call meetings. The analysis is supported by references to relevant legislation, case law, and academic literature.

APPLIED COMPANY LAW
1

TABLE OF CONTENTS
Question...........................................................................................................................................3
1(A) Advice Build It LTD to it potential right and liabilities against respective parties............3
Rights of Build IT ltd against its shareholders............................................................................3
Liabilities of company against its stakeholder.............................................................................3
Action that could ASIC take against the directors.......................................................................4
1(B) Right of disgruntled shareholders Mike of Build It Ltd......................................................5
REFERENCES................................................................................................................................7
2

Question
1(A) Advice Build It LTD to it potential right and liabilities against respective parties
Rights of Build IT ltd against its shareholders
As per the company act 2001, it is act of commonwealth of Australia that set out legal
right and liabilities of company at federal and interstate level. Australia, company have legal
capacity and power of individuals in terms of both in and outside the jurisdiction. Likewise there
are several potential right or power that Build It LTD has is:
 Issue and cancel of share in the company.
 Distribute the company property among the member
 It also grants security interest in uncalled capital.
Company also have legal capacity to do something is it does not affect on company interest
or would not be, served by doing it. Moreover it have right to elect and select particular
shareholder of company that will invest specify amount of capital in the firm in order to earn
higher return. The Build It ltd have right to fiduciary duties provide to shareholder such as duty
of care, duty of loyalty and duty of obedience (Graham, 2020). Thus it clearly stated that Build it
Ltd will put its interest in first as compared to others. Furthermore it is right towards the parties
is to comply with all legal laws and regulation such as maintaining and protecting the personal
information of shareholders so that no harm can be caused to them. It has to call meeting of
shareholders in order to know their area of interest and problem that they are facing in recent
scenario.
Liabilities of company against its stakeholder
As per the companies act of Australia the organisation contain a liability against its
shareholder to audit the books of accounts of the organisation in the end of each financial year.
The audit is about to ensure the authenticity of the books of accounts or the financial reporting
done by the organisation. Audit is the mandatory requirement that business entity require to meet
up in against to fulfil its responsibility against the shareholder of company. This is te liability of
the organisation that the auditor holding responsibility of auditing the books of accounts and
financial records of the company must be independent in nature. It should not be connected with
the organisation in any way possible (Chen, 2017). The decision to appoint the independent
auditor must be supported by each of the director associated with the company. Shareholders are
the owner of the company and it is the responsibility of the organisation and its management to
3

ensure the proper authenticity with the company books of accounts. In the annual general
meeting this is the liability of the company to read the audit report o that different aspects about
the audit could have been projected in front of the stakeholder of the company.
The Companies act of Australia found liability to the company that directors of the
company must contain a right over the profit of the company. A certain percentage of profit
margin directors must get in form of the director remuneration. This is again a responsibility of
the company to provide the remuneration against the liabilities and responsibility directors of
company perform in against to deliver the business operations (Keay, 2019). This is the
responsibility of the company to pay remuneration to its board of directors both full time and part
time directors of the company. Liability of the company is to pay the remuneration of its
directors on a timely basis.
Companies Act of Australia also ensures that the liability of the company and its board of
directors to ensure the proper accountability of each and every function that is performed in the
organisation. This is important that the company board of director cope up with the
accountability for every single functional responsibility in the organisation. Shareholders invest
in the business operations of company being an owner of the company so they also expect to
have an authentic operations and decision making in the business. The liability of the brad of
director of company to ensure that every single functional activity contain a proper authentic
practices and records (Lewis, 2020). The board of director of the company also found liability
for meeting up the accounting standards and code of conducts. This is the responsibility or the
liability of the company to match up with the accounting standards of Australia so that proper
projection can be done in respect to the accounting records of the business entity. All these are
the responsibility of the company against is directors and the shareholder group of the company.
Action that could ASIC take against the directors
ASIC is Australia corporate, market and financial services regulator hat ensure that
Australia financial market are transparent and fair in order to retained confidence level of
investors and consumers. It has broad range of power and function that it make use in order to
detect misconduct, gathered necessary evidence related to criminal proceeding and restrain
unlawful conduct. There are several disputes related to right of company shareholders as per
ASIC such as accessing the company register, company acting contrary to interest of its member
4

and lack of general meeting. Moreover the company member bring legal action against the
directors so the ASIC in all of these disputes can enforce the directors to become personally
liable for company debts and regulatory action can be taken against the same (Ramsay. and
Upadhyaya, 2021). Thus if the directors effective perform their roles and responsibilities them
ASIC have right to seek civil or criminal penalties. In addition to this the ASIC has right to
disqualified of directors that are connected with criminal or civil misconduct Under 206F of
corporation act. So heavy fines are imposed for breach of corporation act 2001 by the directors
such as in case study the Bill and Margate have done.
1(B) Right of disgruntled shareholders Mike of Build It Ltd
Mike is one of the disgruntled shareholders or unhappy and satisfied shareholders that
has come to office one day in order to see thing that are happening in particular manner.
Moreover, the Mike is disgruntled shareholders because there are several things that are not
happening as per its interest and viewpoints. So there are various rights that a disgruntled
shareholder in context of Build It Ltd can apply such as:
Voting power on major issue: It can be stated that one of the right of disgruntled shareholders
is that it has voting power to vote for particular issue that it has face in annual meeting. It may
give notice to the company of resolution of the problem through organising the meeting for
satisfaction of each shareholder (Chen, 2019).
Right to annual report: The disgruntled shareholders have right to get annual report and other
information of business in order to take right decision or share its view, point as it has invested
money in the capital. So it has right to get all detail of built It ltd operation, its profit and sales
during the year.
Right to elect new board member: The mike is one of the disgruntled shareholders of Built It
Ltd as it is not happy with the performance of directors. So it has right to request to elect the
directors or board of member that will be responsible for handling all the operation in effective
manner. Therefore disgruntled shareholders have right to elect new directors if they are not
performing action or steps as per the shareholders that have invested huge amount of capital in
the organisation.
Call a meeting: Another right that an disgruntled shareholders is having is calling or organising
the general meeting in order to key issue that are facing in the company. Such as in the case
study of Built It Ltd directors are not performing as per expectancy of shareholders that has lead
5

Mike in making unsatisfied (DeBoos, 2017). Thereby, filling the complaint against them Mike is
able to get a proper solution of it in limited time.
So the member has right to distribute the statement of issue or major problem that they
are facing to all member in general meeting so that they can be aware and take necessary action
against the same. Furthermore on the basis of request of Mike the disgruntled shareholder,
director of company is responsible for holding a meeting so that right decision can be taken.
Therefore it can be stated that disgruntled shareholders such as Mike can get resolution of its
problem through electing meeting, sharing it with director if then not take appropriate action then
new ones will be elected to perform task as per desired of shareholders. But minimum 5% of
vote or 100 members entitled to vote is required to arrange a meeting in which it can be
discussed about what solution can be made of problem. Thereby all this right given to
shareholder lead in making the happy and satisfied and no undue harm can be caused to them in
any circumstances through action of directors.
6

REFERENCES
Book and journals
Chen, V., 2019. Enforcement of directors’ duties in Malaysia and Australia: the implications of
context. Oxford University Commonwealth Law Journal, 19(1), pp.91-117.
Chen, W., 2017. An Overview of Shareholder Litigation. A Comparative Study of Funding
Shareholder Litigation, pp.15-66.
DeBoos, R., 2017. An Employer's Entitlement to an Employee's Invention in Australia. les
Nouvelles-Journal of the Licensing Executives Society, 52(3).
Graham, A., 2020. Incorporation and Company Formation in Australasia, 1790–1860. Australian
Economic History Review, 60(3), pp.322-345.
Keay, A., 2019. Having regard for stakeholders in practising enlightened shareholder
value. Oxford University Commonwealth Law Journal, 19(1), pp.118-138.
Lewis, P., 2020. An Australian web. Meanjin, 79(2), p.164.
Ramsay, I. and Upadhyaya, M., 2021. The Failed Attempt to Enact Benefit Company Legislation
in Australia and the Rise of B Corps. Available at SSRN 3795039.
7