Analysis of Partnership, Corporate Disclosure, and Director Liability

This report analyzes several key aspects of business law. The first section defines partnerships, outlining the duties and responsibilities of partners, including aspects of common goals, loyalty, diligent work, earnings, personal profits, sharing losses, and liabilities. The second section examines corporate structures, specifically addressing the registration of business names under ASIC regulations, and the processes involved, including legal and business name distinctions. It emphasizes that a company can have two names and must comply with registration. The third section focuses on corporate disclosure, highlighting the importance of accurate and timely information for investors, the role of ASIC in regulating disclosure, and the mandatory requirements for prospectuses. The final section addresses director liability, specifically in the context of a breach of integrity. It presents a case study of a director stealing customer lists, referencing relevant laws, and exploring potential investigations and penalties by ASIC, including fines, imprisonment, and prohibitions on managing the company. The report concludes by citing relevant academic sources.

Solution – Question No.1
Partnership is an association between two persons agreed to do business and share the profit or loss
arising from doing such business. The people involved in business are called Partner 1. The business
can be carried out by all the partners or any one partner with the consent of other partners.
Partnership is a voluntary contract between two persons or more formed with the motive to make
profits by sourcing the money and the skills with themselves for carrying out the business2.
Under the course of conduct, each partner in a partnership firm is responsible for the following
duties and responsibilities3
In terms of Common target and faith:-
 Each partner should work and do business with an aim of a common target.
 Each partner should be loyal to other partners.
 Each partner should use his or her at most skill while performing for the business.
 Each partner should render an account which is true and complete.
 All information regarding the business need to be evenly communicated to all partners.
In terms of indemnify:-
 Each partner should indemnify the firm for the fault or negligence on their part during the
conduct of the business.
In terms of diligent
 Each partner need to do hard work using their at most skills during the conduct of the
business. The inefficiency of one of the partner’s performance will affect the Partnership as a
whole4.
In terms of earnings
 Each partner is entitled to share the profits or loss made out of the business. They don’t
have any rights to get separate remuneration for the duties they do for the firm. In some
cases wherein one partner works for the business and others are silent partners5, then
separate remuneration can be paid to such active partner with the consent of all other silent
partners. The active partner is entitled to claim the profits apart from this separate
remuneration6.
In terms of personal profits earned
1 Petty, J. William, et al. Financial management: Principles and applications. Pearson Higher Education AU,
2015.
2 Vivoda, Vlado. "Australia and Germany: a new strategic energy partnership." (2017).
3 Latimer, Paul. "Repudiation of Partnership Contracts." (2016).
4 Muzio, Daniel, et al. "Bad barrels and bad cellars: a ‘boundaries’ perspective on professional misconduct."
(2016): 141-175.
5 Latimer, Paul. "Repudiation of Partnership Contracts." (2016).
6 Coffee Jr, John C., Hillary Sale, and M. Todd Henderson. "Securities regulation: Cases and materials." (2015).

 If a partner gets personal profits by using the name or property of the firm, then the partner
should share such profits with all the other partners7.
In terms of sharing losses
 Every partner should share the losses arising out of business just like they share the profits8.
In terms of sharing the Liability
 Every partner is implied by the Partnership act to take care of the liabilities arises from the
conduct of the business at all situations9.
Solution – Question No.2
2.1) Earl has incorporated a company on 12th December 2016, naming the company as Spectacular
Pty Limited. Earl wants to attach a business name to Spectacular Pty Limited calling “Spekkie
events”.
Australian Securities and Investment Commission is a government body in Australia that controls the
Australian Corporate Regulations. ASIC is the short form of Australian Securities and Investment
Commission and works under Corporation Act 200110.
ASIC registers business names under the Business Names Registration Act 2011. One of the main
activities is to make information about the companies and other bodies to the public so as to help
the public to understand about the performances of such companies. It will be useful and timely
information for an investor11.
In the given case, Earl can very well attach a business name for his existing company Spectacular Pty
limited12.
ASIC allows a company to have two names namely one for legal and another for business. But both
the names need to be registered under ASIC regulations and linked to one ABN13. (Australian
Business Number)
 Legal name of a company appears in all official documentations. Legal name can be
difference from the business name.
 Business name of a company appears in all business operations requirements.
Legal Process
7 Latimer, Paul. "Repudiation of Partnership Contracts." (2016).
8 Coffee Jr, John C., Hillary Sale, and M. Todd Henderson. "Securities regulation: Cases and materials." (2015).
9 Vivoda, Vlado. "Australia and Germany: a new strategic energy partnership." (2017).
10 Muzio, Daniel, et al. "Bad barrels and bad cellars: a ‘boundaries’ perspective on professional misconduct."
(2016): 141-175.
11 Petty, J. William, et al. Financial management: Principles and applications. Pearson Higher Education AU,
2015.
12 Vivoda, Vlado. "Australia and Germany: a new strategic energy partnership." (2017).
13 Coffee Jr, John C., Hillary Sale, and M. Todd Henderson. "Securities regulation: Cases and materials." (2015).

The suggested name of a company should not be in the list of
 undesired category of names or
 Includes restricted words or expressions14.
The list of undesired category of names includes the Crown, Commonwealth Government, State
Territories, municipal or local authority, Government of foreign country, a member of Royal family,
charitable organisations, and ex-service personnel, Don Bradman, Mary MacKillop or the United
Nations. The name of the company should not do any destruction to the public or to the
Government. “Fedral or Commonweal” does not figure under undesired category of names15.
The list of words or expressions includes ADI, Bank, Bankers, Building societies, Credit society, Credit
Union, Universities, Red Cross, Red lion and Sun16.
If name suggestion is not the undesired category of name or restricted words or expressions the
application for the name of the company is processed by the authorised AISC officer. However,
Minister, being the Parliamentary Secretary to the Treasurer can make a determination that a
business name is available for registration, even though it is undesirable. The Minister has delegated
the power to make a determination to certain senior ASIC officers.
To conclude Earl can have two names subject to the registration of both names with ASIC. The
names can be categorised under the following heads.
 Legal Name :- Spectacular Pty Ltd
 Business Name :- Spekkie Events
2.2) Corporate listing and its problems
Corporate disclosure is an important factor in money or financial markets. Integrity in such
disclosure is the problem area to be addressed. The corporate disclosure will be a very important
tool for the investors. The key issues related to corporate financial disclosure are as follows17.
 The type of information required by the investors to make investment decision.
 The presentation of financial information with respect to its attractiveness.
 The timing of availability of such information
In Australia, the regulatory on corporate disclosure was bit relaxed over the years. But ASIC is taking
all measures to ensure that the corporate disclosure is being properly regulated18. ASIC made it
mandatory that the prospectus of a company is a must for all the process done by ASIC. ASIC insists
the director and promoters that the prospectus should contain complete and valid information and
14 Muzio, Daniel, et al. "Bad barrels and bad cellars: a ‘boundaries’ perspective on professional misconduct."
(2016): 141-175.
15 Muzio, Daniel, et al. "Bad barrels and bad cellars: a ‘boundaries’ perspective on professional misconduct."
(2016): 141-175.
16 Vivoda, Vlado. "Australia and Germany: a new strategic energy partnership." (2017).
17 Latimer, Paul. "Repudiation of Partnership Contracts." (2016).
18 Petty, J. William, et al. Financial management: Principles and applications. Pearson Higher Education AU,
2015.

should lie which will mislead the public19. ASIC is also made it clear that Prospectus of company will
be treated as information and not as an investment scheme logged by the companies for fund
raising. The promoter and directors should ensure that the prospectus of the Corporate should
contain the expected risk factors that may affect the investors in future20.
ASIC has powers to stop a prospectus or a disclosure if the content of such prospectus does not
meet the objective of the investors. It could be a interim stop. The stop will be relaxed if the
supplementary prospectuses are being logged. ASIC further insists that the estimated financial for
the future should on reasonable grounds and not on imaginary assumptions. Corporate disclosure
should be continuous and need to be updated with ASIC on a regular basis21.
Non compliance of corporate disclosures will end up in civil penalties administrated by ASIC.
2.3) Liability of Earl for his misconduct.
Issue
Earl is the Managing Director of his company Spectacular Pty Ltd. Earl intentionally stolen the
customers list of his previous employer for his personal gains. Earl has committed a breach of
integrity as a director22.
Law
The issue is related to breach of integrity. Under the Corporation Ac 2001 administrated by ASIC, the
director will be held responsible for breach of duties or any other activities that affects other
government body or any individual. The Director will be personally liable for all legal obligations
ordered by court of Law23.
Application
The given case can be compared with Kukama Vs Labelo (based on South African Law – under
company’s act 71 of 2008). Labelo and Kukama were directors of two companies. The Court of Law
held Labelo for the breach under the context of the following:-
 For doing wrong activity to gain personal advantage
 For failing to act in good faith
To conclude Earl has clearly committed a breach of Integrity by stealing the customer list from his
previous Employer. As per the Law, Ellen needs to compensate Golden Lights Pty Ltd for the
damages caused24.
19 Latimer, Paul. "Repudiation of Partnership Contracts." (2016).
20 Vivoda, Vlado. "Australia and Germany: a new strategic energy partnership." (2017).
21 Coffee Jr, John C., Hillary Sale, and M. Todd Henderson. "Securities regulation: Cases and materials." (2015).
22 Vivoda, Vlado. "Australia and Germany: a new strategic energy partnership." (2017).
23 Petty, J. William, et al. Financial management: Principles and applications. Pearson Higher Education AU,
2015.
24 Vivoda, Vlado. "Australia and Germany: a new strategic energy partnership." (2017).

2.4) Investigation and penalties by ASIC
ASIC will investigate the beach of integrity by Earl. ASIC may contact the customers in the stolen list
and enquire about the authenticity of the claim made by the Earl’s previous employer. In case if Earl
found guilty under the breach of integrity as per the Corporation Act 2001, the following will be the
action taken by ASIC. Earl will be personally liable for the below said legal obligations25.
 Penalty to the minimum of $ 200000 or five years imprisonment
 Need to compensate Golden Lights Pty Ltd for the damages done through the said breach
 Earl will be prohibited from Managing the Company.
25 Petty, J. William, et al. Financial management: Principles and applications. Pearson Higher Education AU,
2015.

Reference
Vivoda, Vlado. "Australia and Germany: a new strategic energy partnership." (2017).
Coffee Jr, John C., Hillary Sale, and M. Todd Henderson. "Securities regulation: Cases and materials."
(2015).
Petty, J. William, et al. Financial management: Principles and applications. Pearson Higher Education
AU, 2015.
Muzio, Daniel, et al. "Bad barrels and bad cellars: a ‘boundaries’ perspective on professional
misconduct." (2016): 141-175.
Henning, J. J. "The Cape and Natal Special Partnerships Limited Liability Acts. A statutory history."
Fundamina 21.2 (2015): 251-275.
Khurana, Vijay Kumar, and Sanjeev Kumar Mittal. "Limited Liability Partnerships--New Engines of
Growth for India Inc." BVIMR Management Edge 7.1 (2014).
Pont, GE Dal. "Mandating Lawyer Reporting of their Peers' Misconduct: Should Australia Follow
Suit?." Legal Ethics 17.1 (2014): 23-54.
Latimer, Paul. "Repudiation of Partnership Contracts." (2016).