TLAW 202 Corporations Law: Incorporation, Registration, and Doctrine

This report addresses two legal issues related to Australian Corporations Law. The first issue concerns the steps Richard and his sons must take to form a company, detailing the registration process as per the Australian Securities and Investment Commission (ASIC) and the Corporations Act 2001, including choosing a company type and name. The second issue explores whether Terry can pursue legal action against CM, CMA, or Lazarus Pty Ltd, examining the concept of piercing the corporate veil and statutory derivative actions, particularly in the context of subsidiary-holding company relationships and negligence. The report references relevant case law and statutory provisions to provide a comprehensive legal analysis.

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Contents
Solution 1.........................................................................................................................................2
Issue.............................................................................................................................................2
Applicable law.............................................................................................................................2
Application of law and conclusion...............................................................................................4
Solution 2.........................................................................................................................................4
Issue.............................................................................................................................................4
Applicable Law............................................................................................................................5
Application of law and conclusion...............................................................................................6
Reference list...................................................................................................................................7

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Solution 1
Issue
To evaluate the procedure that is required needed by Richard so that he and his sons can
formulate a company?
Applicable law
In Australia, there is no single form of business that can be established and run by a person. The
various business forms include a partnership form of business, a sole trade ship, a trust or a
company. Every business form has its own steps of incorporation that are needed to establish a
business.
A company is one of the business forms which require registration for its incorporation. A
company can only be registered by following the steps that are laid by the Australian Securities
and Investment Commission and the Corporation Act 2001. When any business is registered by
following the steps of registration then as per Salomon v A Salomon and Co Ltd [1897], such a
company has its own personality with perpetual succession and has existence in law and is
analyzed in Lee v Lee's Air Farming Ltd [1960]). (Mangal 1995)
Separate Legal personality emphasis that registered companies is treated like a normal human
being in the eyes of law and have all the powers and roles that can be attributed to a normal
human bring. Thus, a company can enter into contracts, sue or be sued, purchase properties,
perpetual succession, tax benefits, finances can be acquired easily, share transferability etc.
(Tomasic et al 2002)
But, all these features can be attributes to a registered company only when the same is
incorporated/registered. A company can be registered effectively by following the steps that are
laid down by ASIC and under the Corporation Act 2001. (ASIC 2017)
I. To analyze the kind of company that is required to be incorporated. (James 2008)
The foremost step that is needed to register a company is to decide upon the kind of
company that must be formulated. There is no single forms of company that can is
normally found to be operated in Australia. Thus, there is a need to decide on the type
of company that must be registered. The various kinds of companies include:
a. When the liability of the company is not limited then it is called unlimited
company;
b. When the burden is limited to the share values of the shareholders then it is a
limited liability company;

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c. The company which have liability with guarantee is called company limited by
guarantee;
d. The public companies;
e. No liability companies are those which are formulated for resource and mining.
f. Not for profit company;
g. Special purpose company;
II. The next step that is required in the process of formulation of a company is to decide
upon the name of the company.
No company can be formulated or registered without deciding its name. The name of
the company is very important as it helps in bringing a distinction amid the various
companies.
The general rule is that no two companies can have similar names. However, there is
an exception to the same and two identical names can be registered provided; firstly,
an individual is holding the name an such person is the member/director; secondly,
when the name is of the joint venture or partnership and the partners of the proposed
director or member; thirdly, when the company is the holder of the name and the
company itself is the proposed director/member.
Also, at times Government approval is also needed for registration of certain names
which includes, royal, trust, Bank, incorporated.
However, there are few words which are strictly prohibited and such names cannot be
registered at all. The names includes words which are related to Royal families or
have some connection with the Government or which misled the general public or
which are related to ex servicemen organization or the words which are offensive and
illegal.
Thus, all the above requirements must be met before deciding the name.
III. The nest step that is needed for the registration of a company is to decide the
administration. The management is the brains of the company. A company being the
official personnel requires human beings to run the company which comprise of its
officers and they form the management of the company. the company management
can be formulated in three different ways which includes; firstly, when the company
is managing its affairs with the help of the constitution, then, it can be managed with
the help of replaceable rules; secondly, A company can also manage its affairs with
the help of a constitution which is a formal written document; thirdly, a company can
also be managed with the help of the both, that is, constitution and replaceable rules.
IV. It is also very important that the details of the shares of the company must be clearly
defined prior the registration of the company. When any proprietary company is
formulated then there should be minimum 50 non employees.

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V. Before the registration of the company the rules and responsibility of the company
officers must be decided. Some of the duties includes the payment of fees,
maintenance of records or maintained of accounts etc.
VI. It is also required the consent of the officers of the company must be taken before
their appointment.
VII. Once all the prior responsibilities are met then it is required that a place must be
decided for the registration office of the company which is considered as the head
office of the company. No company can be registered without a head office.
Generally the head office is the property of the company but of the company is not
the owner of the property then the prior approval of the owner of the property is
required.
VIII. Once all the requirements are met, then Form 201 must be filled and must be given to
ASIC along with fees;
IX. Once the fees are given then there is company registration. Upon registration there is
issue of registration, ACN number and corporate key is also given.
X. Post registration the company name should be mentioned on all the public displays,
on the documents along with CAN number and the company details must be updated
with due course.
Application of law and conclusion
The facts reveal that Richard and the son of Richard are interested in registration of a company
so that they can operate a business in Australia. Thus, in order to register the company, they have
to follow al the steps that are required in the process of registration. Once their company is
registered, then, their company is able to avail all the features that are attributed to the company.
Now, the pair is interested in keeping the name of the company as Ridali. The name is opt for the
company as it is not similar to other companies nor it is offensive/prohibited neither illegal nor
any prior approval is needed from the government.
But, the name Richs Guarantee Olives is not a right names for the company s it gives an
impression that the olives given by the company are rich and the same is guarantee. Thus, by
giving the name a misconception is given to the public and thus the same is not permissible.
So, the best name that can be kept for the company is Ridali.
Solution 2
Issue
Whether Terry is permitted to take any legal recourse against CM, CMA or Lazarus Pty Ltd?

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Applicable Law
When any company is formulated by complying with the process of registration, then, such
company has its own personality in law and attains all the rights and obligations of a normal
human being. The company runs its operations with the help of its officers but such acts are
carried on in the name of the company. (Mangal 1995)
But, this separate legal personality of the company is many a times rebutted by law and such
process is called the piercing of the corporate legal personality of the company. When the veil of
the company is pierced then the acts which are undertaken by the officers are not submitted to be
company acts. Rather, such acts are officer’s personal acts and they are held personally
accountable for the same.
The concept of piercing the veil is also applicable to subsidiary-holding company and the
phenomenon can be analyzed in three different heads: (Ramsay & Noakes 2001),
I. At times when a subsidiary company is undertaking actions and while carrying on
acts is involved in actions which re tortuous in nature then in such cases it was held
that the veil of the subsidiary and the holding company is pierced and the holding is
held liable for the tortuous actions of the subsidiary. In the leading case of CSR Ltd v
Wren (1997) CSR and APL are the companies wherein the previous company is the
parent company of the later. APL was held liable for tortuous acts as the company has
not take adequate actions to make the workplace safe and thus suffered liabilities.
CSR is held liable as the parent company can reasonably foresee the damage and thus
the liability that is imposed upon ASL is shifted to CSR by applying the rule of
piercing the veil of the company. Likewise, in CSR v Young (1998) the parent
company was held liable for the tortuous cats of the subsidiary as the subsidiary was
not able to protect the employee’s children.
II. At times the circumstances establish that the subsidiary is the implied agent of the
parent and in such situation the liabilities that are imposed on the subsidiary is then
shifted to the parent company by piercing the veil of the company and is held in Stone
and Knight v Birmingham Corporation (1939).;
III. When the subsidiary is formulated by the parent company in order to incur sham or
faced and in such situations, the veil is pierced and the liability of the subsidiary is
shifted to the parent. The concept is rightly established in the leading case of Dennis
Willcox Pty Ltd v Federal Commissioner of Taxation (1988).
At times it is seen that the parent company establishes subsidiary company mainly to fulfill an
intention which is an act of faced or sham. In such situations, the veil is pierced so that the true
intention of the formulation of the company can be established and thus the distinction amid the
two companies can be vanished. In Sharrment Pty Ltd v Official Trustee in Bankruptcy (1988) it

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was held that the formulation of a company when fund to be an act of fraud then in such
situations the veil amid the parent and subsidiary is pierced to bring justice.
Apart from piercing the veil of the company there is yet another step that can be taken by the
aggrieved party, that is, by taking the recourse of statutory derivative action. Section 236-237 of
the Corporation act 2001 deals with the statutory derivative action which states that when the
company is not taking action on its own for the stated wrong then the Act itself has given power
to the aggrieved party take action for the wrong so caused and to bring justice. In Westgold
Resources NL v Precious Metals Australia Ltd [2002] it was held that the aggrieved party must
prove that the application for SDA is made by him with all honest intention and in the interest of
justice. (Hofmann 2005)
Application of law and conclusion
CM is the parent company of CMS. CMS has employed Terry. Because of CMS negligence, loss
is incurred to Terry. CM is the controller of all the actions of CMS. So, CM is the principal of
CMS and CMS is the agent of CM. By applying the law in Stone and Knight v Birmingham
Corporation (1939) and CSR v Young, (1998), all the acts of CMS will be borne by CM.
Lazarus Pty Ltd is also liable for the injuries of Terry and the new company was incorporated by
CMS so that to avoid the obligations raised because of the negligent acts. So, the new company
is a fraud and so the veil amid Lazarus Pty Ltd and CMS must be pierced.
Now, CMS is not bringing the actions on its own for the wrongful conduct, thus, Terry has the
right under section 236-237 to bring SDA.

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Reference list
Book/Articles/Journals
Melissa Hofmann, (2005) The Statutory Derivative Action in Australia: An Empirical Review of
its Use and Effectiveness in Australia in Comparison to the United States, Canada and
Singapore. Bond University.
Rambarran Mangal, (1995) An Introduction to Company Law in the Commonwealth Caribbean,
Canoe Press, University of the West Indies.
Ramsay & Noakes, (2001) Piercing the Corporate Veil in Australia. 19 Company and Securities
Law Journal 250-271
Tomasic et al. (2002) Corporations Law in Australia, Federation Press.
Case laws
CSR Ltd v Wren (1997) 44 NSWLR 463.
CSR v Young, (1998).
Dennis Willcox Pty Ltd v Federal Commissioner of Taxation (1988) 79 ALR 267.
Lee v Lee's Air Farming Ltd [1960] UKPC 33
Salomon v A Salomon and Co Ltd [1897] AC 22.
Peate v Federal Commissioner of Taxation (1964) 111 CLR 443.
Sharrment Pty Ltd v Official Trustee in Bankruptcy (1988) 82 ALR 530.
Stone and Knight v Birmingham Corporation (1939).
Westgold Resources NL v Precious Metals Australia Ltd [2002] WASC 221.
Online material
ASIC (2017) Steps to register a company <http://asic.gov.au/for-business/registering-a-
company/steps-to-register-a-company/>.

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James (2008) Six Different Types Of Public And Proprietary Companies.
<http://www.jamescox.com.au/six-different-types-of-public-and-proprietary-companies/>.