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英文代写-WEEK 2 TOPIC
时间：2022-01-13
COMPANIES AND SECURITIES
LAW
77947
Week 2
1
WEEK 2 TOPIC
Impact of incorporation
Registration (incorporation) and its effect
Lifting the veil of incorporation
Constitution and Replaceable Rules
Promoters
2
FROM LAST LECTURE – COMPANY
¢ An artificial entity recognised by the law
as a legal person with rights and
liabilities. S124 says that it has powers in
excess of the individual.
¢ It has Shareholders (aka members) –
regarded as the owners of the company
and usually enjoys limited liability.
¢ It has Directors – usually given the power
to control the management of the
company’s business.
Note: Companies and Corporations are used interchangeably
BUT strictly: A company is a type of corporation
3
FORMING COMPANIES
Companies are registered or “incorporated”
under the Corporations Act 2001.
Requirement for registration – maximum
size of partnerships is 20, but certain
professional practices can have more
partners
Company registration: Figure 2.1
4
COMPANY REGISTRATION – SEE FIG 2.1
¢ Select type of company
¢ Select names: limitations, reserving name
¢ Obtain consents of proposed members, directors
and secretary
¢ Select registered office: consent
¢ Constitution or replaceable rules?
Obtain agreement of members
¢ Lodge application
Pay application fee
ASIC issues certificate of incorporation
5
POST REGISTRATION – SEE FIG 2.2
¢ Appointment of directors and secretaries
¢ Common seal
¢ Registers
¢ Minute books
¢ Issue of shares
¢ Notice of details of directors and secretary
¢ Financial records and auditor
¢ Use of name
¢ Public officer
¢ Bank account
6
ASIC NOTIFICATIONS – SEE TABLE 2.1
¢ Issue of shares: 28 days
¢ Changes location of register: 7 days
¢ Changes registered office/PPB: 28 days
¢ Change director/secretary: 28 days
¢ Change name/address of director/secretary: 28
days
¢ New/changed details of ultimate holding
company: 28 days
¢ Incidental changes register: as determined by
table in 178D
7
WEEK 2 TOPIC
Impact of incorporation
Registration (incorporation) and its effect
Lifting the veil of incorporation
Constitution and Replaceable Rules
Promoters
8
WHAT/HOW MANY COMPANIES ARE
THERE?
¢ Approximately 2 million companies registered.
¢ The majority operate small businesses.
¢ There are significantly more proprietary
companies than public companies.
¢ More than 2000 companies listed on the ASX.
¢ Company groups – common for large-scale
businesses.
¢ Why are companies so popular?
Read Text at 2.285-2.345 for comparison between
company, partnership and trust.
9
WHAT ARE COMPANIES USED FOR?
¢ Companies - mainly used to conduct a business.
¢ But why is it popular?
Provides tax advantages.
Provides limited liability for shareholders.
Risk Management - Companies can quarantine their
major assets and most profitable divisions in separate
companies (subsidiaries) away from the more risky
operations (separate legal entity).
Risk Management - Individual persons can keep their
various businesses and assets separate (separate
legal entity).
10
DISADVANTAGES OF COMPANIES
¢ Set up costs may be more than other business
structures.
¢ Possible continuing reporting and disclosure
obligations.
¢ Ongoing administration costs including
compliance costs may be more than other
business structures.
¢ Directors and Officers (management) are subject
to strict duties to outsiders and to the company
itself.
11
CONSEQUENCES OF REGISTRATION
¢ Company is a legal entity separate to the owners
(shareholders), directors and managers,
employees.
An artificial person with all the rights of a person (s
124 ) including owning property, entering into contract ,
sue and be sued, and more.
Favourable structure for raising capital
¢ Limited liability for shareholders.
Facilitates enterprise
Reduces monitoring by shareholders and co-directors
Promotes market efficiency
Encourages equity diversity
12
COMPANY AS A SEPARATE LEGAL ENTITY
¢ Saloman v Saloman [1897]: LHW 2.50
¢ Lee v Lee’s Air [1961]: LHW 2.60
Sole shareholder, sole director, can also be employee
¢ Macaura v Northern Assurance [1925]: LHW
2.70
Saloman’s principle working against shareholders
¢ Walker v Wimborne [1976]:
Saloman’s principle and corporate groups
13
WEEK 2 TOPIC
Impact of incorporation
Registration (incorporation) and its effect
Lifting the veil of incorporation
Constitution and Replaceable Rules
Promoters
14
LIFTING THE VEIL OF INCORPORATION
¢ In some instances, the law will allow the “veil of
incorporation” to be pierced/lifted, to make
shareholders or directors liable for debts of a
company
¢ Piercing the veil in statute:
Insolvent trading
Uncommercial transactions
Security interests granted by officers
Financial assistance
Tax legislation
¢ Lifting the veil at common law occurs in cases of
fraud, avoidance of legal obligations and
involvement in breach of directors duties (see
cases in LHW 2.140-2.185)
15
LIFTING THE VEIL OF INCORPORATION –
GROUP COMPANIES
¢ Instances where groups treated as one:
Insolvent trading
Consolidated financial statements
Tax consolidation
Directors’ duties – benefits of group as a whole
Pooling in liquidation
¢ Subsidiaries as agent for holding company:
Principle of Smith Stone & Knight v Birmingham
[1939]: see 6 points in LHW 2.230
¢ Tort liability:
Possibly, but not in this case: Briggs v James Hardie
Sometimes in employment cases: CSR v Wren (1997)
and CSR v Young (1998). But not in James Hardie v
Hall (1998)
16
WEEK 2 TOPIC
Impact of incorporation
Registration (incorporation) and its effect
Lifting the veil of incorporation
Constitution and Replaceable Rules
Promoters
17
RULES GOVERNING THE INTERNAL
MANAGEMENT OF COMPANIES
¢ Pre-1 July 1998 companies had two-part
management arrangement - it was called:
memorandum of incorporation
articles of association
¢ Companies formed Post-1 July 1998 s. 134 use
now:
replaceable rules (s 135) and s141 or
their own constitution or
combination of both
18
REPLACEABLE RULES (REP RULES)
– S 135
¢ Sections of the Corporations Act
¢ A table of such rules can be found at s 141 (see LHW
4.15)
¢ Most RR are applicable to all companies.
However, some apply only to proprietary
companies
Some rules are mandatory for public companies (proxy
appointment)
¢ RR are not used in following instances:
One person proprietary companies
Companies limited by guarantee
No liability companies 19
THE COMPANY’S CONSTITUTION
¢ Post-July 1998 companies - single document
Adoption on formation - consent of proposed members
– s 136(1)(a)
Adoption after formation – special resolution – s
136(1)(b)
Ordered by the court
ASIC lodgment – s 136(5) - only public companies
Copy to members on request – s 139
20
CONTENTS OF CONSTITUTION
¢ No prescribed requirements
¢ Statement of company’s objects optional
¢ Purpose of objects clause
¢ Doctrine of ultra vires (now abolished)
s 124: company has full legal capacity
Constitution may contain restrictions/prohibitions on
exercise of powers: s 125(1)
Constitution may also contain “objects”: s 125(2)
21
ALTERING THE CONSTITUTION
¢ Adopt constitution – s 135(2)
¢ Company may modify or repeal const by special
resolution – s 136(2) 75% of members
¢ ASIC lodgment of resolution – s 136(5) public
company
22
LIMITS ON ALTERATION OF CONSTITUTION
¢ Corporations Act:
Entrenching provision – s 136(3)
s 140(2) restrictions
Variation of class rights: ss 246B-246G
s 232 oppressive/unfair conduct
¢ In Equity:
Gambotto v WCP (LHW 4.220) – Alteration to
expropriate shares:
¢ Must prove a proper purpose
¢ And must show fairness
23
EFFECT OF CONSTITUTION AND RR
¢ Effect of non-compliance
s 135(3) – a failure to comply with the RR or
constitution is not a contravention of the Act
Not a criminal offence, civil liability and
injunctions do not apply
RR and constitution have the contractual
effect binding the parties designated in s.140
24
STATUTORY CONTRACT
¢ S 140(1): The constitution and RR have effect as
a contract
between company and each member
between company and directors/secretary
between 1 member and each other member
¢ Must observe and perform the constitution and
RR as far as they apply to that person.
25
CONSEQUENCES OF BREACH: CONTRACT
BETWEEN MEMBERS AND COMPANY
¢ Company can force members to comply with
constitution
Hickman v Kent or Romney Marsh (LHW 4.90)
¢ Members can force company to comply with
constitutional provisions that affect them in
capacity as members
E.g. RR s 250E – shareholder’s right to vote: Pender v
Lushington, Wood v Odessa Waterworks (both
mentioned LHW 4.95)
Eley v Positive Govt Security (LHW 4.105)
¢ Outsiders cannot force compliance with the
constitution:
Forbes v NSW Trotting Club (LHW 4.120) 26
CONSEQUENCES OF BREACH: CONTRACT BETWEEN
DIRECTOR/SECRETARY AND COMPANY
¢ Provisions applicable to directors/secretary, e.g.
replaceable rules
s 201G appointment of directors
s 202A remuneration of directors
¢ Employment contracts:
Wholly within constitution are vulnerable:
Shuttleworth v Cox
Still liable for damages if contract outside constitution:
Allen v Gold Reefs (LHW 4.160), Carrier v Hunt (LHW
4.165)
27
CONSEQUENCES OF BREACH: CONTRACT BETWEEN
MEMBERS AND OTHER MEMBERS
¢ Provisions applicable to members
e.g. Compulsory acquisition of minority interest: Re
Caratti Holding Co (LHW 4.130). However, this was
ultimately held to be oppressive
e.g. pre-emption clauses in constitution on sale of
shares: Gibbins Investments v Savage (LHW 4.132)
¢ But: Andy Kala v E J Doherty (LHW 4.140),
professional body rules on non-poaching of clients
are not agreement between members as members
28
REMEDIES
¢ The most common remedy used where
there has been a breach of the constitution
is the Injunction or Declaration
29
WEEK 2 TOPIC
Impact of incorporation
Registration (incorporation) and its effect
Lifting the veil of incorporation
Constitution and Replaceable Rules
Promoters
30
PROMOTERS AND PRE-REGISTRATION
CONTRACTS
¢ A promoter is a person who is involved, actively or
passively, in forming a company, raising its capital
and establishing its business
¢ Promoters owe fiduciary duties to companies: act in
best interests of company, disclose conflicts cannot
make secret profits
¢ The nature and extent of the promoter’s interests in
the company’s formation and any property acquired
by it must be disclosed in a prospectus if the company
seeks capital
¢ Pre-registration contracts may be enforced by the
outside party against the company after registration
or against the person who entered into them 31
WEEK 2 TOPIC
Impact of incorporation
Registration (incorporation) and its effect
Lifting the veil of incorporation
Constitution and Replaceable Rules
Promoters
32
LAW
77947
Week 2
1
WEEK 2 TOPIC
Impact of incorporation
Registration (incorporation) and its effect
Lifting the veil of incorporation
Constitution and Replaceable Rules
Promoters
2
FROM LAST LECTURE – COMPANY
¢ An artificial entity recognised by the law
as a legal person with rights and
liabilities. S124 says that it has powers in
excess of the individual.
¢ It has Shareholders (aka members) –
regarded as the owners of the company
and usually enjoys limited liability.
¢ It has Directors – usually given the power
to control the management of the
company’s business.
Note: Companies and Corporations are used interchangeably
BUT strictly: A company is a type of corporation
3
FORMING COMPANIES
Companies are registered or “incorporated”
under the Corporations Act 2001.
Requirement for registration – maximum
size of partnerships is 20, but certain
professional practices can have more
partners
Company registration: Figure 2.1
4
COMPANY REGISTRATION – SEE FIG 2.1
¢ Select type of company
¢ Select names: limitations, reserving name
¢ Obtain consents of proposed members, directors
and secretary
¢ Select registered office: consent
¢ Constitution or replaceable rules?
Obtain agreement of members
¢ Lodge application
Pay application fee
ASIC issues certificate of incorporation
5
POST REGISTRATION – SEE FIG 2.2
¢ Appointment of directors and secretaries
¢ Common seal
¢ Registers
¢ Minute books
¢ Issue of shares
¢ Notice of details of directors and secretary
¢ Financial records and auditor
¢ Use of name
¢ Public officer
¢ Bank account
6
ASIC NOTIFICATIONS – SEE TABLE 2.1
¢ Issue of shares: 28 days
¢ Changes location of register: 7 days
¢ Changes registered office/PPB: 28 days
¢ Change director/secretary: 28 days
¢ Change name/address of director/secretary: 28
days
¢ New/changed details of ultimate holding
company: 28 days
¢ Incidental changes register: as determined by
table in 178D
7
WEEK 2 TOPIC
Impact of incorporation
Registration (incorporation) and its effect
Lifting the veil of incorporation
Constitution and Replaceable Rules
Promoters
8
WHAT/HOW MANY COMPANIES ARE
THERE?
¢ Approximately 2 million companies registered.
¢ The majority operate small businesses.
¢ There are significantly more proprietary
companies than public companies.
¢ More than 2000 companies listed on the ASX.
¢ Company groups – common for large-scale
businesses.
¢ Why are companies so popular?
Read Text at 2.285-2.345 for comparison between
company, partnership and trust.
9
WHAT ARE COMPANIES USED FOR?
¢ Companies - mainly used to conduct a business.
¢ But why is it popular?
Provides tax advantages.
Provides limited liability for shareholders.
Risk Management - Companies can quarantine their
major assets and most profitable divisions in separate
companies (subsidiaries) away from the more risky
operations (separate legal entity).
Risk Management - Individual persons can keep their
various businesses and assets separate (separate
legal entity).
10
DISADVANTAGES OF COMPANIES
¢ Set up costs may be more than other business
structures.
¢ Possible continuing reporting and disclosure
obligations.
¢ Ongoing administration costs including
compliance costs may be more than other
business structures.
¢ Directors and Officers (management) are subject
to strict duties to outsiders and to the company
itself.
11
CONSEQUENCES OF REGISTRATION
¢ Company is a legal entity separate to the owners
(shareholders), directors and managers,
employees.
An artificial person with all the rights of a person (s
124 ) including owning property, entering into contract ,
sue and be sued, and more.
Favourable structure for raising capital
¢ Limited liability for shareholders.
Facilitates enterprise
Reduces monitoring by shareholders and co-directors
Promotes market efficiency
Encourages equity diversity
12
COMPANY AS A SEPARATE LEGAL ENTITY
¢ Saloman v Saloman [1897]: LHW 2.50
¢ Lee v Lee’s Air [1961]: LHW 2.60
Sole shareholder, sole director, can also be employee
¢ Macaura v Northern Assurance [1925]: LHW
2.70
Saloman’s principle working against shareholders
¢ Walker v Wimborne [1976]:
Saloman’s principle and corporate groups
13
WEEK 2 TOPIC
Impact of incorporation
Registration (incorporation) and its effect
Lifting the veil of incorporation
Constitution and Replaceable Rules
Promoters
14
LIFTING THE VEIL OF INCORPORATION
¢ In some instances, the law will allow the “veil of
incorporation” to be pierced/lifted, to make
shareholders or directors liable for debts of a
company
¢ Piercing the veil in statute:
Insolvent trading
Uncommercial transactions
Security interests granted by officers
Financial assistance
Tax legislation
¢ Lifting the veil at common law occurs in cases of
fraud, avoidance of legal obligations and
involvement in breach of directors duties (see
cases in LHW 2.140-2.185)
15
LIFTING THE VEIL OF INCORPORATION –
GROUP COMPANIES
¢ Instances where groups treated as one:
Insolvent trading
Consolidated financial statements
Tax consolidation
Directors’ duties – benefits of group as a whole
Pooling in liquidation
¢ Subsidiaries as agent for holding company:
Principle of Smith Stone & Knight v Birmingham
[1939]: see 6 points in LHW 2.230
¢ Tort liability:
Possibly, but not in this case: Briggs v James Hardie
Sometimes in employment cases: CSR v Wren (1997)
and CSR v Young (1998). But not in James Hardie v
Hall (1998)
16
WEEK 2 TOPIC
Impact of incorporation
Registration (incorporation) and its effect
Lifting the veil of incorporation
Constitution and Replaceable Rules
Promoters
17
RULES GOVERNING THE INTERNAL
MANAGEMENT OF COMPANIES
¢ Pre-1 July 1998 companies had two-part
management arrangement - it was called:
memorandum of incorporation
articles of association
¢ Companies formed Post-1 July 1998 s. 134 use
now:
replaceable rules (s 135) and s141 or
their own constitution or
combination of both
18
REPLACEABLE RULES (REP RULES)
– S 135
¢ Sections of the Corporations Act
¢ A table of such rules can be found at s 141 (see LHW
4.15)
¢ Most RR are applicable to all companies.
However, some apply only to proprietary
companies
Some rules are mandatory for public companies (proxy
appointment)
¢ RR are not used in following instances:
One person proprietary companies
Companies limited by guarantee
No liability companies 19
THE COMPANY’S CONSTITUTION
¢ Post-July 1998 companies - single document
Adoption on formation - consent of proposed members
– s 136(1)(a)
Adoption after formation – special resolution – s
136(1)(b)
Ordered by the court
ASIC lodgment – s 136(5) - only public companies
Copy to members on request – s 139
20
CONTENTS OF CONSTITUTION
¢ No prescribed requirements
¢ Statement of company’s objects optional
¢ Purpose of objects clause
¢ Doctrine of ultra vires (now abolished)
s 124: company has full legal capacity
Constitution may contain restrictions/prohibitions on
exercise of powers: s 125(1)
Constitution may also contain “objects”: s 125(2)
21
ALTERING THE CONSTITUTION
¢ Adopt constitution – s 135(2)
¢ Company may modify or repeal const by special
resolution – s 136(2) 75% of members
¢ ASIC lodgment of resolution – s 136(5) public
company
22
LIMITS ON ALTERATION OF CONSTITUTION
¢ Corporations Act:
Entrenching provision – s 136(3)
s 140(2) restrictions
Variation of class rights: ss 246B-246G
s 232 oppressive/unfair conduct
¢ In Equity:
Gambotto v WCP (LHW 4.220) – Alteration to
expropriate shares:
¢ Must prove a proper purpose
¢ And must show fairness
23
EFFECT OF CONSTITUTION AND RR
¢ Effect of non-compliance
s 135(3) – a failure to comply with the RR or
constitution is not a contravention of the Act
Not a criminal offence, civil liability and
injunctions do not apply
RR and constitution have the contractual
effect binding the parties designated in s.140
24
STATUTORY CONTRACT
¢ S 140(1): The constitution and RR have effect as
a contract
between company and each member
between company and directors/secretary
between 1 member and each other member
¢ Must observe and perform the constitution and
RR as far as they apply to that person.
25
CONSEQUENCES OF BREACH: CONTRACT
BETWEEN MEMBERS AND COMPANY
¢ Company can force members to comply with
constitution
Hickman v Kent or Romney Marsh (LHW 4.90)
¢ Members can force company to comply with
constitutional provisions that affect them in
capacity as members
E.g. RR s 250E – shareholder’s right to vote: Pender v
Lushington, Wood v Odessa Waterworks (both
mentioned LHW 4.95)
Eley v Positive Govt Security (LHW 4.105)
¢ Outsiders cannot force compliance with the
constitution:
Forbes v NSW Trotting Club (LHW 4.120) 26
CONSEQUENCES OF BREACH: CONTRACT BETWEEN
DIRECTOR/SECRETARY AND COMPANY
¢ Provisions applicable to directors/secretary, e.g.
replaceable rules
s 201G appointment of directors
s 202A remuneration of directors
¢ Employment contracts:
Wholly within constitution are vulnerable:
Shuttleworth v Cox
Still liable for damages if contract outside constitution:
Allen v Gold Reefs (LHW 4.160), Carrier v Hunt (LHW
4.165)
27
CONSEQUENCES OF BREACH: CONTRACT BETWEEN
MEMBERS AND OTHER MEMBERS
¢ Provisions applicable to members
e.g. Compulsory acquisition of minority interest: Re
Caratti Holding Co (LHW 4.130). However, this was
ultimately held to be oppressive
e.g. pre-emption clauses in constitution on sale of
shares: Gibbins Investments v Savage (LHW 4.132)
¢ But: Andy Kala v E J Doherty (LHW 4.140),
professional body rules on non-poaching of clients
are not agreement between members as members
28
REMEDIES
¢ The most common remedy used where
there has been a breach of the constitution
is the Injunction or Declaration
29
WEEK 2 TOPIC
Impact of incorporation
Registration (incorporation) and its effect
Lifting the veil of incorporation
Constitution and Replaceable Rules
Promoters
30
PROMOTERS AND PRE-REGISTRATION
CONTRACTS
¢ A promoter is a person who is involved, actively or
passively, in forming a company, raising its capital
and establishing its business
¢ Promoters owe fiduciary duties to companies: act in
best interests of company, disclose conflicts cannot
make secret profits
¢ The nature and extent of the promoter’s interests in
the company’s formation and any property acquired
by it must be disclosed in a prospectus if the company
seeks capital
¢ Pre-registration contracts may be enforced by the
outside party against the company after registration
or against the person who entered into them 31
WEEK 2 TOPIC
Impact of incorporation
Registration (incorporation) and its effect
Lifting the veil of incorporation
Constitution and Replaceable Rules
Promoters
32
