Corporations Act 2001 - Assignment Example

Title: Corporation Acts 2001 Customer Inserts His/her Name Customer Inserts Name of Tutor Customer Inserts Grade/Course (Date) Part B: Answer the following questions. You will need to refer to the Corporations Act 2001 (Cth). 1. What section of the Corporations Act 2001 deals with compliance of financial reports with accounting standards? Do all company financial reports have to comply with the accounting standards? Section 296 deals with the financial reports for any financial year which must comply with the accounting standards. In section 296 (1A), small proprietary company do not have to comply with particular accounting standards if the report is being prepared in response to shareholders directions and if the directives dictates that it is not a must to comply with those standards. 2. Is a liquidator an ‘officer’ for the purposes of the Corporations Act 2001? What is the relevant section?? Section 499 deals with liquidators. A liquidator can be appointed for winding up the affairs and even in the distribution of the company properties. Upon the appointment of liquidators, all the powers of directors cease except when there is a general meeting. 3. What section of the Corporations Act 2001 governs the calling of general meetings by members? What does the section require? Section 249F is the one which handles issues about general meeting by members. Members with at least 5% of the votes may call, hold and arrange a general meeting. The meeting must be called in the same ways which are used to call such a meeting. Finally the percentage of the members with votes must be made a midnight before calling the meeting. 4. What is the deadline for reporting to members? What is the relevant section of the Corporations Act 2001? Under section 315, a public company must report to its members 21 days before the next AGM after the end of the financial year or 4 months after the end of the financial year. 5. A member requests a copy of the constitution. Does the company have to comply? What Section of the Corporations Act 2001 applies and what does it say? According to Section 139, any member who requests for an up to date constitution must be given within 7 days. However, if there are fees which go with it, or have been set out in the Corporation Regulations 2001 has to be paid. 6. How does a company change the address of its principal place of business? Section 146 states that a company must file a desire to change the address of it principle location with the ASIC not later than 28days after the change had occurred. This is done in a prescribed form. 7. Jim and Pam are members of Alosa Ltd. The company’s AGM is in 3 weeks and Jim wants to challenge Pam’s right to vote. According to section 253G, Jim can challenge Pam’s right to vote. However, this can only happen during the meeting, to the chair that has an obligation to make the final decision whether the challenge is accepted or not. a. What is the relevant section of the Corporations Act 2001 and what does it say with respect to Jim’s objection to Pam’s right to vote? 253G b. What does it mean that the section is a replaceable rule? (2 marks) Replaceable rules means that a company internal government can be governed by provisions of the Corporation Act 2001. 8. Find the section that allows ASIC to make specific exemption orders and write out the section. Section 1200U gives the ASIC powers to make order than no offers, issues; sales to transfer of securities are made in the jurisdiction in relation with the offer. Section 124 of The Corporations Act of 2001 gives companies equal legal capacity with individuals including the power to make contracts and enter into an agreement (Farrar 2012, P. 43). Section 125 of the same act further states that an act done by the company, including entry into a contract, will not be invalidated on the mere basis that it is beyond the powers given by the constitution of the company. A corporate is an abstract legal entity which can only enter into agreements or contracts through natural persons .Section 126 provides that a company can enter into contracts directly through organs such as the board of directors or through affixing the official seal. Corporations can also enter into contracts indirectly through agents who maybe employees or officers of the company (Mundray 2010, P. 55). The general law of agency governs the liability of a company for acts done by its agent or its officer. The particular agency laws applicable to corporate are governed by two common law doctrines; the rule in Turquand’s case and the doctrine of constructive notice. At common law, the acts of an agent could only be binding on the company if they were within constitutional limits as stated in the objects of the company. Acts outside the scope of the objects of the company were considered ultra vires and could not bind the company (Montrose 2008, P. 85). Section 125(2) of The Corporations Act of 2001 however categorically states that the acts of an agent will not be invalidated by the mere fact that they are outside the scope envisioned in the objects clause of the company’s constitution. Section 125(1) also provides that a contract is not invalid by the mere failure of an agent to comply with the restrictions imposed on his or her power by the company’s constitution (Chapple & Lipton 2008, P. 58). The doctrine of ultra vires have no effect on validity and enforceability of contracts and can only be enforced under section 140(1) of The Corporations Act as an act in contravention of the company’s constitution. The main objective of abolishing the ultra-vires doctrine is to protect outsiders in their business dealings with companies as they were disadvantaged by unilateral acts of agents. Companies cannot therefore avoid contractual duties and obligations by relying on restriction and exemption clauses in their constitutions (Mundray 2010, P. 59). Distinction has made between acts that are ultra vires for the company’s officers or agents but are within the power of the company; and acts that are ultra vires for the company and beyond the company itself. An agent binds a principal (in this case the corporate or company is the principal where the agent has apparent authority or actual authority. Apparent authority is also known as authority by estoppels or ostensible authority. In corporate law, certain positions in key organs of the company such as the board confer what is known as customary authority (Johnston, Jager & Taylor 2007, P. 115). Actual authority arises in contexts where the principal gives consent to the agent to act on behalf or for the principal. The authority maybe implied or express and may involve entering particular transactions or doing certain acts (Loughrey 2011, P. 24). In most companies, officers and agents usually have implied actual authority. Consent is given to the agent by the company through appointment to a certain position. Generally wide powers of management are conferred to the board of directors by the company’s constitution. The board usually has actual authority to act as an agent on behalf of the company Outsiders do not deal with the board director but deal with the person to whom the board has delegated responsibility usually the managing director. The managing director has both customary authority and actual implied authority to act on behalf of company (Lipton 2007, P. 232). In Brick and Pipe Industries Ltd V. Occidental Life Nominees Pty Ltd (1992) 10 ACLC 253, a director of a company was taken to have had actual authority to act for the company as he controlled a large share holding; and even though he had not been specifically appointed as a managing director; he acted as one with full acquiescence of the other directors of the board. He entered into transactions without consulting with the other board members. The acquiescence of the board members was held to amount to conferral of actual authority (Ciro & Symes 2008, P. 163).In Equiticorp Finance Ltd V. Bank of New Zealand (1993) 11 ACLC 952, Mr. Hawkins was the chairman of a group of companies. One of the companies borrowed a loan from a bank and Hawkins applied assets of two other companies in repayment of the loan. The court held that Mr. Hawkins had implied actual authority to apply the assets of the companies in the manner he did. Apparent authority also known as ostensible authority creates a valid agency relationship because it appears to the other party that the principal has conferred the agent with authority to conduct transactions. The authority does not depend on existence of a formal relationship or binding agreement between the principal and the agent (Tomasic et al 2008, P. 110). The outsider usually doesn’t know whether the agent actually has authority and neither is the outsider aware of the extent of the agent’s authority. The outsider only relies on appearance of existence of agency. The apparent authority of an agent may be similar to the actual authority of the agent or may exceed the extent of the agent’s actual authority. In some instances a person who has not been given actual authority to contract may have apparent authority to perform particular acts on behalf of the principal. (Chapple & Lipton 2008, P. 61). If it is possible to establish the apparent authority of an agent, then agency by estoppels is created. Creation of agency by estoppels means that between the principal and a third party, the principal is prohibited to deny that the agent did not have authority (Lipton 2007, P. 233). Agency by estoppels creates a valid contract between the outsider and the principal in a similar manner as agency with actual authority. A principal is not merely liable on the sole basis of representation of the agent; the principal must make a representation to the outsider through conduct. Representation by conduct takes three forms; When the principal allows an agent to hold a particular position as it implies that the person has the person to fulfill the duties of the person holding that position; When the principal allows the agent to carry out tasks that are beyond the extent of the agent’s authority; and when the agent does not hold a formal position in the company but the principal behaves in a manner that makes outsiders believe that the agent has authority( Montrose 2008, P. 87).In corporate law, the second scenario is the most common whereby the board allows a person to act as a managing director even when he has not been officially appointed to act in the position. In Freeman and Lockyer V. Buckhurst Park Properties (Mangal) Ltd (1964) 2 QB 480, they were two controllers of a company who held equal shares. One was absent for a long time and the other began acting as a managing director even though he was not appointed. He entered into contracts on behalf of the company. He entered into a contract with a firm of architects and when the company refused to pay fees the architects sought enforcement of the contract. It was held that there was apparent authority and the company was bound by the acts of the controller who purported to be its managing director (Lipton 2007, P. 235).Apparent authority exists to protect third parties and outsiders from incurring losses due to the conduct of unscrupulous agents. References Australia. (2005). Australian corporations legislation. Chatswood, N.S.W., LexisNexis Butterworths, pp 34-42. Chapple, L., & Lipton, P. (2008). Corporate authority and dealings with officers and agents. Melbourne, Vic, CCH Australia and Centre for Corporate Law and Securities Regulation, Faculty of Law, the University of Melbourne, pp 56-62. Ciro, A., & Symes, C. (2008). Corporations’ law: in principle. Pyrmont, N.S.W., Thomson Reuters (Professional) Australia, pp 163-175. Farrar, J. (2012). Corporate governance in Australia and New Zealand. Melbourne, Oxford University Press, pp 43-51. Johnston, T., Jager, M., & Taylor, R. (2007). The law and practice of company accounting in Australia. Sydney, Butterworth, pp 115-127. Lipton, P. (2007). The authority of agents and officers to act for a company: legal principles. Parkville, Vic, Centre for Corporate Law and Securities Regulation, Faculty of Law, The University of Melbourne, pp 229- 237. Loughrey, J. (2011). Corporate lawyers and corporate governance. Cambridge, Cambridge University Press. http://site.ebrary.com/id/10476477, pp 22-28. Montrose, J. (2008). The basis of the power of an agent in cases of actual and apparent authority. Sydney, Butterworth, pp 83-90. Munday, R. (2010). Agency: law and principles. Oxford [England], New York, pp 55-67. Tomasic, R. et al. (2008). Corporations law in Australia. Leichhardt, NSW, Federation Press, pp 105-112. Read More