Company Law Report: Australian Company Law Structure and Regulations

This report provides a comprehensive overview of Australian company law, examining various aspects from Week 1 to Week 9. It begins by exploring alternative business structures such as sole traders, partnerships, joint ventures, trusts, and companies, highlighting their characteristics and liabilities. The report then delves into company incorporation, the role of ASIC, and different company types based on ownership, liability, and listing status. It discusses company constitutions, replaceable rules, and the doctrine of ultra vires. Further analysis includes promoters, directors' duties, corporate liability, and the concept of the corporate veil. The report also covers members' rights, dividends, corporate governance principles, and the duties of directors and officers. It explores financing through equity and debt, share capital transactions, and member remedies such as oppression, winding up, and derivative actions. The report references relevant articles, news reports, and legal cases to support its analysis of the subject matter.

Running head: COMPANY LAW
COMPANY LAW
Name of the Student
Name of the University
Author Note

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Week 1
Alternative Business Structures
The business structure-The Sydney Morning Herald, 2018
This article describes various business structures working within the jurisdiction of Australia.
The various form of business structures in practice in Australia today are (Sealy, and
Worthington 2013):
 Sole traders: This a business structure where the ownership of the business is held by one
person. In such a business structure there is no distinction between the owner and
business and thus the liabilities of the business are taken as liabilities of the owners.
 Partnership: This is a business structure where various individuals agree to undertake
business transactions mutually with a view of earning profits. The liability in case of
partnerships is also unlimited except in case of limited liability partnerships.
 Joint venture: This is a business structure where individual entities undertake business
transactions together, however in this case the profits earned is individual and the liability
in several.
 Trust: In this case a trustee is appointed who holds properties for the benefit of
beneficiaries. Such a business structure has various tax advantages.
 Company: A company is an incorporated business structure where the business has its
own separate legal identity. Thus the owners (shareholders) are different from the
business and hence the liabilities of the company are not attributed as their liabilities.

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 Not-for-profit organizations: These are organizations that are incorporated separate legal
entities however the aim in this form of business structure is not to earn profits. These are
registered entities under the State or Territory Associations Incorporations Acts or ASIC.
Week 2
Companies and Incorporation
Sydney cosmetics company takes on US retail giant over Bondi Beach trademark- ABC News,
2018
This newspaper article discusses the legal battle between Abercrombie and Finch and an
Australian cosmetic company relating to their trademarks. It incidentally touches upon the
incorporation of both these companies.
A company is a separate legal entity incorporated as per the provisions of the
Corporations Act, 2001. The term corporation however includes several other forms of entities as
well. Companies are governed and regulated by the Australian Securities and Investment
Commission (ASIC). The various forms of companies are defined under the following heads as
per the Corporations Act, 2001 (Hanrahan, Ramsay and Stapledon 2013):
 Proprietary or Public company (thus based on ownership).
 Based on liability.
 Based on the size (in case of proprietary companies).
 Listing status.
The corporate veil refers to a concept that the company is liable for its own actions and
its actions cannot be attributed to the administration or management. Thus it acts as a curtain that

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protects the administration from liability. Salomon v Salomon & Co Ltd is the leading case on
this issue (Hannigan 2015).
Week 3
Company Constitution
It Might Be Time to Update Your Company Constitution CCASA, 2018
This article discusses various updates required by company constitutions to comply with
the provisions of the Corporations Act, 2001.
Companies in Australia that are formed before July 1998 were created by virtue of their
Memorandum of Association and Articles of Association. For companies that came into
existence after July 1998 the Corporations Act, 2001 provides for the formulation of rules that
are applicable for the companies functioning (McQueen 2016). These could be the replaceable
rules prescribed by the Corporations Act, 2001 (as set out in Section 141) or a company
constitution that prescribes these rules or a consolidated version of both. ASX listed companies
mandatorily need to have a company constitution. The doctrine of ultra vires applies to
companies that have a constitution which defines the objects of the company. The replaceable
rules in the Act and/or the company constitution provide for three kinds of contracts that put in
place:
 Between the company and each of its individual members.
 Between the company and each individual director and company secretary of the
company.

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 A contract between all the individual members functioning within the framework of the
company.
Week 4
Promoters, Outsiders' dealing with companies and Corporate Liability
Director liability laws onerous, confusing: lobby group- Financial Review, 2018
This newspaper article deals with various provisions of law relating to the liability of the
company in proportion with the liabilities and obligations of the directors.
Promoters are the individuals who bring a company’s incorporation process into motion.
Thus they have a wide range of powers which are restricted by virtue of the Corporations Act,
2001. Passive promoters are those who are not directly involved in the incorporation process but
have an interest in the incorporation of the company. The promoters owe the company a
fiduciary duty as decided by common law principles. Pre-registration contracts are contracts that
are entered into by the promoter and would be a liability of the company after incorporation.
These contracts are not binding on the company as per common law. If the company ratifies such
a contract after incorporation it would be liable for the contract as provided in Section 131 (1).
As provided in Section 131 (2) of the company is not incorporated or if it does not ratify the
agreement the promoter would be liable for such contracts (Armour and Ringe 2013). The
directors and other employees act as agents of the company and where they are authorized to act
in a particular manner the liability for their actions must be borne by the company.

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Week 5
Members and dividends
Payout Power: Singapore Loves Dividends, Australia Most Generous - Business News -The Star
Online 2018
This article discusses payment of high dividends of companies based in Australia in the
Asia-Pacific region.
The owners and/or custodians of a particular incorporated company are its members. In
case of a company limited by shares the shareholders of the company are considered its
members. The powers that these members have are (Ferran and Ho 2014):
 The can vote on resolutions when attending members meetings.
 They have the power to call for a meeting of members and propose resolutions.
 They have the right to receive dividends and other distributions by the company.
 A restricted right to receive material information about the company.
 They can initiate derivative and oppression actions against the company.
 They would also have any other rights prescribed by the constitution of the company.
A company must mandatorily maintain a register of members. Any errors in such a
registered can be altered or rectified by an application to the court. This register is evidence of
title to the shares of the company and liabilities arising from any errors in the register would
have to be paid for by the company as mandated by common law. Shares of a company are
transferable. A company is allowed to pay dividend if the company passes the balance sheet
solvency test as prescribed in Section 254T of the Corporations Act, 2001.

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Week 6
Corporate Governance and Company Management
ASX proposes tougher governance guidelines- ABC News, 2018
This article talks about the corporate governance principles formulated by the Australian
Securities exchange. The third edition of these recommendations is currently in force.
Corporate governance refers to administrative principles of a company that ensure
transparency and accountability. These help protect the interest of the company and shareholders.
In Australia the ASX recommends corporate governance principles that need to be incorporated
into the framework of a company. The primary recommendation of the ASX is a separation of
powers, this helps ensure that the decisions taken by company are not an arbitrary use or misuse
of power (Riaz et al. 2015). The agency theory mandates that the actions of the company (as
undertaken by its agents) should be aligned with the best interest of the company and the
administration.
Week 7
Directors' and Officers' Duties
ASIC eyes case against CBA board- Financial Review, 2018
This article discusses the ASIC’s ability to legally pursue directors of banking
corporations for a breach of the fiduciary duties owed by them.
The directors of a company are required to discharge their duties with care and diligence
as provided for in Section 180 and 181 of the Corporations Act, 2001. They must additionally

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avoid transactions that would be considered insolvent trading. These duties are imposed by
common law and statutory law. Officers of a company have a fiduciary duty to act with due care
and diligence and in the best interests of the company (Haldane 2015). They must also avoid
conflicts of interest of all forms especially financial self-interests. The ASIC can initiate
proceedings against a person who is in contravention of these duties and damages maybe
awarded under common law for such a breach.
Week 8
Financing a company via equity/debt, share capital transactions
Why start-ups shouldn't raise capital- Financial Review, 2018
This article talks about the various ways in which companies raise capital and also
discusses the implications and effects of start-ups raising capital.
A company funds are raised through debt or equity in the form of shares or loans and
other forms of debts. Section 1070 A of the Corporations Act, 2001 defines shares and states that
it is a personal property which is evidence of ownership of a part of the company and is
transferable (Gullifer and Payne 2015). Companies can issue and cancel shares based on the
powers conferred under Section 124 of the Corporations Act, 2001. By virtue of the powers
conferred under this Section the company can additionally issue debentures which are a form of
debt.

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Week 9
Member’s Remedies
'I was effectively a slave': broken Red Rooster and Oporto franchisees- Waters, 2018
This article discusses the consequences of breach of fiduciary duties by directors for the
interests of the stakeholders. This also discusses the remedies available to members under the
Corporations Act, 2001 in case of such breaches.
There are various remedies available to members in case their interests are not adhered to
(Smith and Duke 2014):
 Oppression remedy: This is provided for under Section 232 of the Act.
 Winding up: The members have the right to initiate winding up proceedings against the
company.
 Injunction: The members of a company can ask for an injunction against a particular
action as provided for in Section 1324 of the act.
 Derivative actions: These are applicable when the company cannot initiate proceedings
against itself.
 Personal action: This is when the member claim a breach of the duties of the directors or
officers under common law.

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Reference list
ABC News. (2018). ASX proposes tougher governance guidelines. [online] Available at:
http://www.abc.net.au/news/2018-05-02/asx-toughens-governance-standards/9719284 [Accessed
7 May 2018].
ABC News. (2018). Sydney cosmetics company takes on US retail giant over Bondi Beach
trademark. [online] Available at: http://www.abc.net.au/news/2017-07-26/bondi-beach-at-centre-
of-international-trademark-tussle/8741084 [Accessed 7 May 2018].
Armour, J. and Ringe, W.G., 2013. European company Law 1999-2010: renaissance and
crisis. Law Ukr.: Legal J., p.144.
CCASA. (2018). It Might Be Time to Update Your Company Constitution | CCASA. [online]
Available at: https://www.ccasa.com.au/it-might-be-time-to-update-your-company-constitution/
[Accessed 7 May 2018].
Ferran, E. and Ho, L.C., 2014. Principles of corporate finance law. Oxford University Press.
Financial Review. (2018). ASIC eyes case against CBA board. [online] Available at:
http://www.afr.com/business/asic-may-pursue-case-alleging-cba-directors-breached-duties-
20170810-gxtgrf [Accessed 7 May 2018].
Financial Review. (2018). Director liability laws onerous, confusing: lobby group. [online]
Available at: http://www.afr.com/news/special-reports/corporate-reporting/director-liability-
laws-onerous-confusing-lobby-group-20150205-141pd7 [Accessed 7 May 2018].

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Financial Review. (2018). Why start-ups shouldn't raise capital. [online] Available at:
http://www.afr.com/brand/boss/why-startups-shouldnt-raise-capital-20180116-h0j833 [Accessed
7 May 2018].
Gullifer, L. and Payne, J., 2015. Corporate finance law: principles and policy. Bloomsbury
Publishing.
Haldane, A., 2015, May. Who owns a company?. In Speech, University of Edinburgh Corporate
Finance Conference, May 22nd.
Hannigan, B., 2015. Company law. Oxford University Press, USA.
Hanrahan, P.F., Ramsay, I. and Stapledon, G.P., 2013. Commercial applications of company law.
McQueen, R., 2016. A Social History of Company Law: Great Britain and the Australian
Colonies 1854–1920. Routledge.
Riaz, Z., Ray, S., Ray, P.K. and Kumar, V., 2015. Disclosure practices of foreign and domestic
firms in Australia. Journal of World Business, 50(4), pp.781-792.
Sealy, L. and Worthington, S., 2013. Sealy & Worthington's Cases and Materials in Company
Law. Oxford University Press.
Smith, R. and Duke, A., 2014. Agreements and competition law in Australia. Competition and
Consumer Law Journal, 22, pp.54-79.
The Sydney Morning Herald. (2018). The Business Structure. [online] Available at:
https://www.smh.com.au/business/small-business/the-business-structure-20090622-ctk5.html
[Accessed 7 May 2018].

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Thestar.com.my. (2018). Payout Power: Singapore Loves Dividends, Australia Most Generous -
Business News | The Star Online. [online] Available at:
https://www.thestar.com.my/business/business-news/2018/01/09/firms-in-asia-among-most-
generous-with-dividends/ [Accessed 7 May 2018].