Corporations Law - Week 6 Answer

As per the Corporation Act 2001, Director of the entities have certain duties to follow:-

  • Directors should follow due diligence
  • They should work in good faith and interest of the company
  • Company information should not be used for personal purpose, it should be for the interest of the company.
  • Should not misuse his position for his personal interest or gain
  • Disclose any interest on company

Rule of Business Judgement: According to this rule, the director of the entity should act upon due care and in good faith, the actions to be taken in the interest of the Company or the shareholders of company.

Situation 1: According to the Corporation Act, Directors of the entities should not misuse their position for any personal interest. This situation, Polyester, the director of Style Pty limited has transferred an amount of $65,000 which tells us that he has breached his duties by using the company's money for personal debt. So he has done breach of his duty in this case.

Situation 2: As per the Corporation Act 2001, the duties of the director is to act in good faith ,duty with care and diligence, not to trade at the time of insolvent, not to use the information and position for improper purpose, act in interest of the company. In the given situation, polyester knows about the financial condition of the company and have transferred the assets to the proprietary company which is not in the interests of the company. Thus he has breached the duties as a director according to the company act.

In Situation 3 It is the duty of the director to act diligently and with due care in the interest of the company. According to this rules, the credit limit is only upto $20,000 but the director allowed $45,000 which is more than the limit by $25,000. The actions is not taken in the interest of the company but taken in personal interests. He cannot use the business judgement rule in this particular situation. It is said that she has breached her duties as a director of the company and liable for the breach of statutory duty.

Corporations Law - Week 7 Answer

Purchasing shares in a company means that the buyer is the owner of certain percentage of a company's total equity. And once he or she becomes shareholder and person’s name is registered in the share register of the company. He becomes the legal member of the company.

The individual institution that signs the Association Memorandum (MOA) is a member of the organization. When the company resists the details of part of the organisation's register, it is at this point an individual from the organization. The investor of an organisation, regardless of the number or the rate of property in the organization, is either individual or institution that has purchased the shares of a specific organization. The investor cannot be a person from the organization in such a way until the investor's details or the shareholder are not included in the organization's register book.

  • A person may subscribe to and sign an organization Memorandum of Association (MOA).
  • By transfer of shares through a transferor who is included in the organization register.
  • However, by receiving the shares any transmission which is already recorded in the company's register.
  • By taking the organization's qualified shares and also paying for it.
  • By becoming profitable owner of shares that is now listed in the organization register.

As per the corporation Act, a member may be cease to become a members in one of the following ways

i) Transfer

A transfer here means the transfer of shares from an existing member to a third party resulting a sales transaction..

ii) Forfeiture

If a company’s article of association authorizes directors to forfeit a member’s hare and the directors forfeit all of the shares held by a member, then this member is cease to be a member. This will be effective from the date of forfeiture,

iii. Surrender of Shares, if a member surrenders all his holding or shares with the approval of director, then the member’s name is ceased from the membership.

iv. In case of death , when a member dies his membership is automatically ends and transfer to his nominee or legal successor and there will be change in the membership register of the company.

v. Bankruptcy , if a member becomes bankrupt his membership get ceased and comes to end with virtue of Bankruptcy Act.

vi. Sale by a Company in exercise of lien

. If the Company sells ALL the shares held by a member, the membership will come to an end from the moment the buyer's name is entered in the register.

vii. Redemption of full amount redeemable preference shares can also cease a person to be member after the redemption.

Corporations Law - Week 8 Answer

As per the case study the requirement is to determine the statutory and common law positions of the directors in the given case study, there are few Remedies and Penalties as per Common law and Corporation Act which will applied to all the Directors and officers of the company as follow:

Civil Penalty as per corporation Act

As Per [10.136] to [10.140]

Statutory penalties apply to breach of statutory duties: pecuniary orders, disqualification,

Compensation

Criminal Penalty as per corporation Act

  • As per [10.141]to [10.145]
  • Pecuniary penalty orders
  • Declaration of contravention
  • Disqualification of order
  • Compensation order
  • Criminal penalties apply to offences which are criminal in nature: fines, disqualification,

 Injunctions

Remedies

  • As per [10.129]to [10.135], it deals with
  • Damages or compensation
  • Profit Accounts
  • Return of Property
  • Recession of Contract
  • Constructive trust and injunction

Duties and responsibilities of the Directors under Common Law and Corporation Act

Common Law

Corporation Act

Versna

[10.115] Fiduciary Duty to act in good faith: 

Was the decision made honestly?

[10.116 ]Powers must be exercised for a proper purpose: no conflict of interest is permitted

[10.115] Acting in good faith is the duty to act honestly under s 181

[10.116 Directors have a duty to disclose any material personal interest under sec191

Director- Sergey

[10.110] Duty to exercise power with due care and diligence

[10.124] Duty to ensure the company is solvent according to s 95A criteria

[10.110] S 180(1)

Duty to exercise power with due care and diligence Damages or compensation

[10.80] Breach of duty under section 58 G

Director- Zviad

[10.110] Duty to exercise power with due care and diligence

[10.116 ]Powers must be exercised for a proper purpose: no conflict of interest is

 permitted

[10.124] Duty to ensure the company is solvent according to s 95A criteria

10.47

Director have to disclose any material fact or interest s191

[10.115] Acting in good faith is the duty to act honestly under s 181

10.110] Duty to act with care and diligence: s 180(1)

Llyych

[10.120] Duty not to use any information of the personal interest or gain

[10.121] Duty not to misuse information obtained as a director/officer

[10.120] s 181 an

officer/ director cannot use their position for personal gain and to the detriment of the company

[10.121] Under s 183

officers/directors are not permitted to use any information for personal gained in a position as a director/officer

Mihail

[10.124]

Directors have a duty not allow a company to trade while insolvent (though this vague under the common law)

[10.124] Under s 588G directors have a statutory duty not to allow a company to trade while insolvent

[10.125] Under s 588H there are some defences, eg a reasonable belief that the company was solvent

Corporations Law - Week 9 Answer

Joe should consider the following legal compliance while buying shares:

  • He should check that company’s Article of Association authorises company to buy back its Shares.
  • There is buy back limit which is 25% or less than its paid up share capital and free reserve.
  • Buy back can be done from its existing shareholders or employees who are shareholders and open market, buy back can be done from free reserves , security premium or consideration received from fresh issue of shares.
  • Debt Equity ratio should not exceed the ideal ratio of 2:1 after the buyback, in case the debt is increased because , the company has reduced its issued share capital which reduces its equity and because of it debt equity ratio changes and exceeds the 2:1 , it again will not be a good trend for the company.
  • All the Shares of buyback should be fully paid and minimum gap between two buyback must be at least one year
  • Once the proposal of buyback is floated and informed to shareholders it cannot be called back or withdrawn
  • Company cannot issue any fresh shares within 6 months of buyback and borrowed from the bank cannot be used to buy back shares.

Corporations Law - Week 10 Answer

Any company can raise funds for their business reasons, may be for new investment or for other working capital requirements, generally there are two type of financing available to the corporates:

Debt -Debt is the form of borrowed fund, which can raised through debenture or in the form of bank term loan.

Equity- Equity is the shareholder’s fund and company can either issue fresh shares from its authorised capital or can get this authorised capital increase by following certain laid provision as the Corporation Act 2001

According to corporation act to corporations law, Flywell Ltd needs to be a public company as the number of non-employee shareholders in the company will be more than 50 (as they are planning to raise $11 Million from 110 investors). While fundraising, Flywell Ltd needs to ensure that they provide the disclosure form to the potential investors. This disclosure form describes all the fundraising documents and regulations needed for issuing the securities to the investors. In this case a prospectus kind of disclosure is preferred among the available disclosure formats as it provides detailed information about the system, the schematics in which the securities shall be issued.

RG254 of the Corporation Act is also related to documentation required for fund raising.

There are other disclosure documents as per section 706 of the corporation act moreover there are some exemption available on section708.

Ch 6D states and defines that with regards to fund raising securities are also defined in the same manner in sec 700(1) and S 761A of the Act

  • Shares
  • Debenture
  • Legal or equitable interest based securities

Reference List for Corporations Law

Sa.gov.au. (2014). Sources of law. [online] Available at: https://lawhandbook.sa.gov.au/ch27s02.php.

Queensland Law Handbook Online. (2015). Where Law Comes From. [online] Available at: https://queenslandlawhandbook.org.au/the-queensland-law-handbook/the-australian-legal-system/where-law-comes-from [Accessed 22 Jun. 2020].

‌ c=au;o=Australian Government;ou=Australian Government Australian Securities and Investments Commission (2020). Fundraising | ASIC - Australian Securities and Investments Commission. [online] Asic.gov.au. Available at: https://asic.gov.au/regulatory-resources/fundraising/ [Accessed 22 Jun. 2020].

‌ Thomson Geer. (n.d.). Home - Thomson Geer. [online] Available at: https://www.tglaw.com.au [Accessed 22 Jun. 2020].

‌ Legislation.gov.au. (2012). Corporations Act 2001. [online] Available at: https://www.legislation.gov.au/Details/C2017C00328.

‌ Bird, H. and Gilligan, G. (2014). [online] Available at: https://law.unimelb.edu.au/__data/assets/pdf_file/0004/1743475/FinancialServices MisconductandtheCorporationsAct2001WorkingPaperNo2.pdf [Accessed 22 Jun. 2020].

Remember, at the center of any academic work, lies clarity and evidence. Should you need further assistance, do look up to our Corporations Law Assignment Help

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