Company Law Assignment Solution: Directors, Shareholders, and Duties

This document presents a detailed solution to a Company Law assignment, covering various aspects of corporate law. Part A addresses fundamental concepts such as corporate entities, piercing the corporate veil, partnerships, and the distinction between different types of companies. It also explores company rules, constitutions, and the processes of issuing shares. The solution further delves into the roles and responsibilities of directors, including their duties, appointment, and the implications of trading while insolvent. Part B analyzes practical scenarios involving directors' actions, shareholder oppression, and the rights of minority shareholders. It examines a case study involving a retired director, Gary, and his breach of duty. The solution also discusses shareholder oppression and the remedies available to minority shareholders, including legal actions and court orders. The document emphasizes the importance of directors acting in good faith and the rights of shareholders to protect their interests. The solution concludes with a brief discussion on the role of directors and the disclosure of personal interests.

COMPANY LAW

TABLE OF CONTENTS
Part A.........................................................................................................................................4
Answer 1................................................................................................................................4
Answer 2................................................................................................................................4
Answer 3................................................................................................................................4
Answer 4................................................................................................................................4
Answer 5................................................................................................................................4
Answer 6................................................................................................................................4
Answer 7................................................................................................................................5
Answer 8................................................................................................................................5
Answer 9................................................................................................................................5
Answer 10..............................................................................................................................5
Answer 11..............................................................................................................................5
Answer 12..............................................................................................................................5
Answer 13..............................................................................................................................5
Answer 14..............................................................................................................................6
Answer 15..............................................................................................................................6
Answer 16..............................................................................................................................6
Answer 17..............................................................................................................................6
Answer 18..............................................................................................................................6
Answer 19..............................................................................................................................6

Answer 20..............................................................................................................................6
Answer 21..............................................................................................................................7
Answer 22..............................................................................................................................7
Answer 23..............................................................................................................................7
Answer 24..............................................................................................................................7
Answer 25..............................................................................................................................7
Answer 26..............................................................................................................................7
Answer 27..............................................................................................................................7
Answer 28..............................................................................................................................8
Answer 29..............................................................................................................................8
Part B..........................................................................................................................................9
Answer 1................................................................................................................................9
Answer 2................................................................................................................................9
Answer 3..............................................................................................................................10

PART A
Answer 1
After registering a company, it requires to assure that company‘s ACN /ABN is displayed on
the documents published by company and also wherever the company conducts business and
is open to public place.
Answer 2
Corporate Entity can be referred as a separate legal entity distinct from its members, as it has
legal personality and sue as well as be sued in its own name. Corporate entity protects the
individual to the extent they take decision in benefit of corporation
Answer 3
The case Salomon v Salomon passed the ruling that corporate is a separate legal entity and
distinct its members, thus due to same Salomon the founder of the company Salomon and
Company Ltd was not made personally liable for creditors of the company formed by him.
Answer 4
Piercing the veil means ascertain the person who is actually liable for the circumstances i.e.
the company or the members, directors or the shareholders. For instance: the documents
relating to loan authorised by the owner and not the company.
Answer 5
Partnership is association of two or more people as partners. The partners are liable to the
extent of percentage of their share of partnership for acts of other partners.

Answer 6
The feature which distinguishes partnership from Joint venture and company is that partners
can be held personally liable for business liabilities and other forms of business cannot.
Answer 7
Unincorporated association are informal community organization or non-profit organization
which forms due to common interest of all the members. On the contrary incorporated
organization is registered legal entity formed for recreational or charitable persons.
Answer 8
Companies can be bifurcated significantly as limited liability and corporation. Both of them
are distinguished on the basis of liability to their respective creditors i.e. limited to the
amount specified and unlimited in other case.
Answer 9
Company are chosen by promoters on the basis of extent to which the company might get
success. The same is different for every company.
Answer 10
It is totally choice of the company whether to pay dividend or not.
Answer 11
Company can buy its own share in form of Buyback of shares.
Answer 12
The key difference between public and proprietary company is that with proprietary company
a mechanism is available to stop unwanted person to be part of company as shareholders or
owners of company.

Answer 13
Company rules can be referred as guidelines in accordance with which the company operates.
Constitution of a company is formal document which set the rules for governing a company
and it can be changed.
Answer 14
A constitution assists the company to operate in benefit of its members and to take decision
accordingly.
Answer 15
Company constitution comprises the extent to which directors, employees and other member
are liable for the company and information relating to their rights.
Answer 16
A company can for (Initial public offer) IFO in order to offer securities to public. In order to
offer to existing shareholders it does same with right issue on the basis of pro-rata basis.
Answer 17
Director is a person from group of manager who leads or organizes a particular area of
company.
Answer 18
Board of directors appoint corporate officers who are responsible for day to day operations of
a company.
Answer 19
Director must appoint pursue for insolvency test in case they seems that company might be
insolvent. A company is believed to be insolvent as per provision of English Law in case it is
not able to pay off its debt.

Answer 20
Trading while insolvent is unlawful and included as wrongful trading under section 214 of
Insolvency Act 1986.
Answer 21
Yes, shareholders can instruct BOD and article of association might stipulate that directors
might be bounded with instructions of shareholders.
Answer 22
In case director act prejudicial against the affairs of company than shareholder have right to
bring legal action against the directors of the company as per provision of Companies act
2013.
Answer 23
Section 180 of Corporation Act specifies the duties of directors i.e. to act with degree of care
and diligence while taking decision on behalf of company. Further officer is responsible for
keeping proper records and for day to day affairs of company.
Answer 24
Section 180 of Corporation Act 2001 specified the duties of a director of a company.
Answer 25
Duty of diligence refers to perform the duty in good faith and best interest of company and
for an appropriate purpose. In case directors are challenged they require proving that they
took decision with due diligence and care as a defence.
Answer 26
It was concluded in case law AWA vs. Daniels the appropriate interpretation of section 180
which specifies the duties of director.

Answer 27
The company is liable even in case agent exceeds their authority only in case the decision
made by agent is for benefit or necessary for the company.
Answer 28
Company can issue different types of shares such as ordinary shares, cumulative preference
shares, bearer shares, redeemable shares and non-voting shares. The issue of shares depends
on the kind of right which is to be provided by the company to the shareholders.
Answer 29
Annual general meeting and Board meeting are the meeting which must a company hold.

PART B
Answer 1
Gary is a retired director but as he is having responsibility of purchasing equipment for the
company, thus he can be referred as executive or employee of the company. As it was the
duty of Gary to approve purchase of machines above $ 3000 for the company. As far as law
is concerned company is having distinct legal entity from its employees, director and agent.
In present case as Gary has breached section 180(1) as he did not made decision relating to
purchase of machines without application of due diligence care while exercising his power of
duties. Thus, as the decision made by Gary is not appropriate and not taken with reasonable
care as even after knowing that company will not be able to pay debt he purchased
equipments over $1million, the company will not be able for the debts created by Gary. The
creditor can sue Gary for breaching his duty as an executive of the company. In the company
thinks it is insolvent, it requires for insolvency test which comprises:
 Low operating profit.
 Issues in paying trade suppliers and other creditors
 Issues in meeting loan repayments and keeping with overdraft limits.
Answer 2
Minority shareholders are those shareholders who hold minority of votes, may have little, if
any, control or affects over the direction and development of an organisation. Shareholder
oppression takes place when majority shareholders in a company take action that illegally
prejudices the minority. Further, the significant concept of law relating to shareholder
oppression is the rational anticipations of the minority shareholders. It can be assessed that in
present situation oppression has taken place thus, as per specification of section 234 of

Corporations Act 2001which specifies the person who might apply order under section 232 of
the Act and it comprises member of the company, even in conditions where the application
relates to an act to oversight that is against the individual, it might also relate to an act or
omission that lies against other individuals in their ability as a member. The rights of
minority shareholders are:
 Implement compliance with organisation’s articles and to resolve an abuse by senior
executives of their fiduciary authorities.
 Present a petition to courts proclaiming that organisation’s business is being
exercising in such a way which is illegally prejudicial to member.
 Bringing a proclaim against a third party which could involve director of the firm in
support of an organisation.
Yes, the shareholders can stop the resolution.
Even it was concluded in case law of Mopeke Pty Ltd v Airport Fine Foods Pty
Ltd [2007] that the claims under section 232 of the act have been made out that the
elimination from the administration of a form is an instance of oppressive or exercising in
unfair conduct.
Answer 3
Minority shareholders can be disregarded in the favour of opinion of majority shareholders
and due to same they does not consist significant power over the company and its decision. In
a situation when minority shareholders are treated in way i.e. oppressive or unfair
discriminative that court provides order in favour of minority shareholder but for same
minority share holders have to prove that the decision made by director is lacking in good
faith and not made on a reasonable basis. In order to provide protection to same the
followings rights are available to them:

One of the legal right of minority shareholder consist to make claim against the director or
officer whom minority shareholder believe that is not performing operations within fiduciary
responsibility or misleading the investors. Further section 233 of Corporations Act specifies
range of remedies for the purpose of relieving the minority shareholder from the oppression
mismanagement and it comprises:
 Company to be wound up.
 Appointment of a person to do specific act.
 Company purchases the shares of minority at fair prices.
 Appointment of receiver or manager.
 Company purchases the shares of minority shareholders.
Short Answer
Only attending directors meeting cannot eventually lead to become a director. Even if Fred is
a director than he cannot vote for the issue in which his own interest is available. Moreover, it
is necessary to disclose material personal interest to other directors and should not be part of
that decision.