Corporation Law Issues - Essay Example

1 question The relevant areas of law to be applied include organizing of the general meeting protection of the minority against the fraud. Fraud can be defined as intentional deception to cause a person to give up property or some lawful right1 To advice to ACC let's consider some principles of the common law. The issue is that if stock issue to GE was legal or no. The law protects the minority against fraud. According to The Webster dictionary2 the minority can be defined as the lesser part or smaller number; less than half of a total a group, party, or faction with a smaller number of votes or adherents than the majority. In our case the united steels is a minority because it owns less than 50. Now lets consider the possibility for GE to protect their rights. Special notice (2 mos) must be given for resolution removing D of public Co (s 227) or auditor of any Co (s 329). However, if notice was given but the meeting was called for a date before the 2 mos expires, the resolution can be dealt with (s 203D(2) and s 329(1A)). This decision of such issue requires the shareholders meetin approval. There are two types of resolutions.3 Ordinary resolution = simple majority of those voting. Special resolution = 75% of votes cast (s 9) Special resolutions required for: adoption or amendment of const - s 136 change in Co name - s 157 change in Co type - s 162 variation of class rights where const doesn't specify procedure - s 246B selective capital reduction - s 256C selective buy-back of shares - s 257D giving of financial assistance for acquisition of shares - s 260B voluntary winding up - s 491. So if the meeting wasn't organized according to the main principles such as Document signed by all members of a Pty Co will be effective as resolution - s 249A Every public Co (other than one with only 1 member) must hold an AGM - s 250N. Not required of Pty Co's. Ds of public Co must lay before meeting financial report, Ds' report, auditor's report - s 317. If the decision wasnt approved by 75% of the total numbers this bargain can be invalided and that means that all the consequences of such a bargain wouldnt have any legal force. Question 2 The second question concerns different articles of the corporate law. There is some information about the corporations' law. The main issue is if the selling of stocks and the responsibility of the directors. Its nesassry to tell a few words about dealing with outsiders. Also the seconde question deals with the problem of outsider trading. Express authority4 In the context of a Co, actual authority will be conferred by the Co const or, in its absence in accordance with the replaceable rules of the CA. In general, in the case of any Co with more than 1 D, authority is vested in the Board collectively - s 198A Any act lying outside the authority of the D's or the Board can be performed by the members in general meeting - s 198A(2) Implied authority of Co officers The Board may appoint someone as Managing Director (must be one of their own number - replaceable rule s 201J), conferring on that person the powers of the Board - s 198C(1). According to the articles concerning duties of directors one of theliste every managing director is obliged to act in good faith in the best interests of the corp and to use powers for a proper purpose - s 181.5 In this case the managing director haven't acted in the best iint of the company because the board of directors had rejected the contract. So mister Lam is responsible for comensation the losses to the company. Also he have to take responsibility of information given about the information given on the new project because he promised the increase in productivity of about 100%. The law prohibits insider trading. Generally, D's do not owe a fiduciary duty to individual s'holders Percival v Wright [1902] 2 Ch 421 - shareholders offered to sell shares to directors - directors already negotiating to sell shares at much higher price but did not inform s'holders - court held no fiduciary duty to shareholders, and so they could not recover. Insider trading overlaps with prohibitions in ss 182 and 183, but prohibition covers anyone dealing in securities, not just D's. Also note that only the Co (and not the person with whom the D traded) has an action for breach of ss 182 and 183. Very broad definition of inside information - s 1042A: info (i) not generally available which (ii) would reasonably be expected to affect price Primary prohibition in s 1043A(1) - insider may not purchase or sell shares in Co or get anyone to do that for him. R v Rivkin [2003] NSWSC 447 - Rivkin was told by McGowan, CEO of Impulse Airlines, that Qantas was about to acquire control over Impulse, thus removing one of its competitors. Rivkin then purchased shares in Qantas, which went up in value when its acquisition of Impulse became public. Rivkin was convicted for breaching s 1043A(1). Additional prohibition against tipping iro listed securities: s 1043A(2) prohibits one (tipper) from passing on inside info to another (tippee) whom he reasonably knows would be likely to use info to trade. Note that it does not matter whether the tippee used the info or not. "Info not readily available" - s 1042C says that info is readily available if it is readily observable or has been made known in a way readily ascertainable to investors for a period permitting its dissemination among them. Info has an effect on price if a reasonable investor would think that it would - s 1042D Note s 1042G deems corporations to know what their officers found out in the course of their employment, similar re p'ships - s 1042H. Excluded from definition of info (most important exclusions): the insider's own intention to trade (which could itself affect price) - ss 1043H. circumstances where a "Chinese wall" is in place in a Co (s 1043F) or p'ship (s 1043G) - an administrative arrangement preventing transfer of inside info Breach of prohibitions against trading and tipping are criminal offences - s 1311 and Sch 3. info was generally available other party to transaction knew or ought reasonably to have known the info (so was not taken advantage of) Civil liability under s 1043L: anyone who suffers loss as a result of insider trading may recover from inside trader - explained in s 1043L as the difference between what would have been paid had the other party known the inside info. Note overlap with ss 182 / 3 where the inside trader is also a Director, because the Co will be able to recover his or her profit using s 1317H. According to this principle Lam could be punished by the law because of providing false information. Or for selling shares of a company doomed to the failure. . Question three The third question concerns fundraising. Fundraising can be defined as the act or occupation of soliciting money for charitable organizations, political parties, etc.: also fund-raising.6 i. The offer will not lead to securities in the Co having been issued or transferred to more than 20 people in an amount of over $ 2 m in the past 12 months (s 708(3) and (4)) - note that it is an offence to make an offer without disclosure if the offer would lead to breach of this condition (s 727(4)). Note that there are two separate categories here: (i) shares issued by the Co and (ii) shares in the Co transferred by shareholders - and the 20 / $ 2m allowance exists in regard to each, subject to ASIC's s 740 discretion to aggregate transactions by a body and its controller. Note also that in calculating the $ 2 m ceiling, amounts not yet paid (ie subject to call), plus amounts payable in respect of options for, or conversions to, securities are counted (s 708(7)). Not taken into account in determining the 20 / $ 2 m ceiling are issues made under any other s 708 exemption or issues made with a disclosure document (s 708(5)) and ii. The offer is a "personal offer" (s 708(2)) - ie is one that can be accepted only by the person to whom it was made and that person is likely to be interested in light of previous contact or professional connection with the offeror or conduct by the investor indicating an interest in offers of that type. Consistent with the personal nature of the offer, s 734(1) prohibits advertising of small-scale offerings. 1. Offers to "sophisticated investors" s 708(8). Under this exception offers may be made without disclosure to investors who are assumed to be wise enough to take the risk of making such investment decisions. This exception applies where the amount payable on acceptance is $ 500 000 or more, or the amount payable plus any amounts previously paid by the investor for securities in the Co is $ 500 000 or more, or the investor has net assets of $ 2.5m or gross income for the last 2 financial years of $ 250 000 pa. Note that in calculating amounts payable for securities amounts paid out of money lent by the offeror or an associate is disregarded - s 708(9) 2. Offers to experienced investors through licensed dealer - s 708(10). This exemption applies where the offer is made through a licensed dealer to a person whom the dealer believes on reasonable grounds has the experience to assess the investment and provides the investor with a written notice to that effect. 3. Offers to professional investors - s 708(11) - this exemption covers offers made to licensed dealers or institutional investors (eg superannuation funds). 4. Offers to related persons - s 708(12) - disclosure need not be made where the offer is to an executive officer of the body whose securities are being offered, or an executive officer of a related body, or the spouse, parent, child or sibling of such an officer, or where the offer is made to a body corporate controlled by one of those persons. 5. Offers to existing share or debenture holders - s 708(13) and (14) - disclosure need not be made where the offer is to a shareholder as part of a dividend reinvestment scheme or a bonus share offer or is to an existing debenture holder. 6. Offers for no consideration - s 708 (15) and (16) - offers of securities for no consideration and of options for no consideration where no consideration would be paid upon exercise of the option are also exempt. If disclosure is required, then the type of disclosure document to be used depends upon the circumstances of the offer. Four types of disclosure document are contemplated by the CA: prospectuses short form prospectuses profile statements offer information statements Disclosure documents must be lodged with ASIC - s 718 All directors must give written consent to the lodgment - s 720 Disclosure documents may be circulated to investors as soon as lodgment has taken place, but note that in the case of non-quoted securities no offers can be accepted or securities issued until at least 7 days after lodgment (extendable to 14 days by ASIC) - s 727(3)7 Sources. 1. .http://multilex.mail.ru/view_dictlang=4.0er&id=933432362&dict=ENRUaus,ENRUusa,RUENtele,ENRUtele,ENRUgen2,ENENwebd,ENRUcomp,RUENjur,ENRUbrit,ENRUbld,RUENsun,ENRUecn,ENRUmed,ENRUsun,RUENmed,ENRUabbr,RUENnlex,RUENgen,ENRUbank,ENENwebt,ENRUbrif,RUENbrif,RUENoil,RUENtech,ENRUsoc&wdict=ENENwebd&word=fraud 2. http://multilex.mail.ru/view_dictlang=4.0er&id=396562253&dict=ENRUgen2,ENRUbrif,ENRUaus,RUENgen,RUENbrif,RUENjur,ENENwebd,ENENwebt&wdict=ENENwebd&word=minority 3. corporate law s 198708229229fa and so on Read More