October 17, 2012 CORPORATE GOVERNANCE ASSIGNMENT

Question 1

a). The Australian Investments function is to make sure the Australian financial markets are fairness and transparent. The Australian Securities and Investments Act 2001 (ASIC Act) has provided ASIC a number of enforcement powers to carry out their role, which includes: 1. Grant Australian financial service license and Australian credit license ASIC has the power to legalize or licensing a person who carries on financial services business. It is aim to give an investor a confidentiality to deal with the persons who are legally licensed by ASIC. In relation to the license that provided by ASIC, it is intended to ensure the financial services business fulfill their obligation according to the standards and meet the public prospect. Then this will help ASIC to take any action to protect the investors from engaging any misconduct that possibly occurs. 2. Investigate any suspect breaches of law and require the company books at the examination Under the ASIC Act, ASIC has the power to examine or investigate any breaches and institute civil or criminal proceedings being committed. The breaches can be involves in actions against the companies such as misappropriation and insolvent trading. The person that had been conducted the crime is require to provide ASIC with relevant information and give a realistic assistance. Therefore in order to do a proper examination ASIC oblige the company or a certain person (employees, officers and external administrators) to produce the company books. 3. Make rules for the purpose of ensuring the integrity of financial markets ASIC has the accountability for supervising licensed financial market in Australia. As the component for that responsibility ASIC has the power to create the market integrity rules, which is regulate to market operator, participants and any financial products deal with the relevant markets. This aim of this market integrity rules is to promote the fairness, equitability and efficient markets.

October 17, 2012 CORPORATE GOVERNANCE ASSIGNMENT

b). Under the Australian Securities Investments Commission Act 2001 the Australian Accounting Standards Board (AASB) is an Australian Government agency that has the role to expands and maintain the financial reporting standards which appropriate to the body in the public or private sectors of the Australian economy. It contributes to the improvement of global financial reporting standards and assists the involvement of the Australian community in global standard situation.

According to Australian Accounting Standards Board, 2012, firstly as part of their role, AASB widen a conceptual framework, which aim to assess proposed accounting and international standards. AASB use its authority to enable employ staff and consultants, set up committees, advisory panels and consultative groups for the necessary of their performance functions.

Secondly, the AASB role is to construct the accounting standards under section 334 of the Corporations Act 2001 for the purpose of corporation’s legislations. During the making process of the accounting standards AASB must have the relevant proposed standards, accounting requirement for different types of entity, and make sure those are suitable for each type of the entity to meet the accounting standards expectations.

Thirdly they has the role to formulate accounting standards for other purposes, AASB has the authorization power to devise the accounting standard by issuing the text of an international standard. This text can be modified to take account of the Australia institution which mainly to make sure any disclosure and transparency provisions in the standard are proper according to the Australian legal environment.

Fourthly, AASB role is to involve in and contribute to the progression of a single set of accounting standards for worldwide use and their last role is to advance and endorse the major object of part 12 of the ASIC Act that comprise lessening

October 17, 2012 CORPORATE GOVERNANCE ASSIGNMENT the cost of capital allow Australian entities to compete efficiently overseas and maintaining investor confidence in the Australian economy.

Question 2 Refer to the Vickery, & Pendleton 2009, p. 181 association formed by a group of people to pursue their common aims and consent to be bound by mutual perceptive, such as religious or trade, cultural, sporting and it is usually for non-­‐ profit purposes but it can also make a profit. The characteristic of associations consist of: • A group of people: a group of people is the essential circumstances of associations, because without a group of people it would not possibly the association be exist. • Common interests: an association is build from the identical objectives with one individually to another. • Co-­operative spirit: the groups of people have their own spirits to work together to obtain their common goal. • Organization: the association is create by those people who are structure and organize to meet their specific interests • Contain some rules and regulations: the association is necessarily regulates some rules in regard of the association’s member conduct. Each member has to takes account into their duties that comply with the rule established in that association. • Voluntary membership: the membership of an association is not compulsory join the association. In other words those individual voluntarily join in an association for the achievement of their desired objectives. • Generally an association could be incorporated or unincorporated. Unincorporated associations commonly used by clubs and association and have no profit motive, and are no separate legal entities. Durability: In nature an association can be permanently or temporary exist.

October 17, 2012 CORPORATE GOVERNANCE ASSIGNMENT

However it is more beneficial an association is incorporated, because once the associations is incorporated it becomes a legal entity, separate from the members and the people who associate gain the advantage under the Association Incorporate Act 1987 (WA). After analyzing Juliet’s friend purpose, the appropriate entity that suitable for their purposes is incorporated association because it they want form a business that concern on the associations’ member interest. Actoss 2012, provides some advantages and disadvantages of incorporated associations, those are includes: Advantages 1. Association as separate legal entity If an associations as a separate legal entity it able the members to: • Have limited liability, the members will not be personally accountable for the debts or liabilities of the associations due to its operation such as expenses when the association is winding up. • The associations has the right to enter a contract, such as sue or be sued, borrow money, or hold assets under its own name • The association may have their perpetual succession, when they carry on the association regardless of changes in its membership their asset or property they attain will remain with the association. 2. Lower administrative Costs Compare to the incorporation under Corporation ACT 2001 the administrative costs of establishing an incorporate associations are lower. The way it structure is more simple and uncomplicated. Perhaps, it may some costs incurred in ongoing reporting obligations. 3. Lesser task perform and reporting requirements Basically the duties and reporting requirement perform in incorporate associations is lesser rather than a company. On the other hand if the association incorporated under Corporations Act 2001 need to disclose the keeping accounting records, holding annual general meetings, auditing, lodging annual returns and preparing statement of accounts.

October 17, 2012 CORPORATE GOVERNANCE ASSIGNMENT Disadvantages 1. The structure of the association is more inflexible A lot of changes can only be applied with the approval of the Registrar. Also the registral can cancel the incorporation if the associations continually inappropriate in relation to the value of the activities of associations. 2. The profits cannot be distributed to members The profit the associations achieve is for the associations itself and cannot be given to its member. 3. Compliance with the statutory obligations The associations is only operate in one state if the member want to operate nationally they must either incorporated in every state and registered as Registrable Australian body to ASIC. 4. Penalties may be imposed on the officers As under the act association has the right to enter any contract, if there is a criminal of breaching the contract any penaties could be imposed.

Member’s liability

Normally, if a person applying a membership in associations, it means that person is bound and responsible by the regulated rules in that association. Department of Commerce Western Australia (2012) indicate that every member is take account to make sure the appropriate documents are lodge with the department under the Act. The failure to oblige their responsibility it may result in criminal prosecution and will be fine of maximum $500. Because the association is independently of government intervention then the member’s role also to ensure the association itself has to conducts in acceptable way for them.

In the other point Fair Trading NSW 2011 explained that the association management committees have limited liability for the outstanding amount of their association as long as they are on the right business tract and community standards.

October 17, 2012 CORPORATE GOVERNANCE ASSIGNMENT Furthermore the members are liable for the amounts each member owes the associations in respect of their membership. Those could be subscriptions or fees due to the association operation.

Legislation and Regulation detail Western Australia the incorporate association operates under the Associations Incorporation Act 1987. WA Government Department: The WA government department that regulate and responsible for this type of entity is “The Consumer Protection Division of Department of Commerce”. Julliete and her friend have to contact the Association Branch of Consumer Protection for further information. Address: Unit 4, 321 Selby Street North Osbone Park WA 6017 Postal address: Locked Bag 14 Cloisters Square WA 6850 Telephone: (08) 9282 0764 or 1300 304 074 (country caller) Facsmille: (08) 9282 4337 Email: consumer@commerce.wa.gov.au Website:www.commerce.wa.gov.au/associations

October 17, 2012 CORPORATE GOVERNANCE ASSIGNMENT

Question 4 a). Generally there are two types of companies, those could be proprietary and public companies. However in this situation the type of company that could possibly best suit Brad and Angelina since they only operating small business, is Proprietary companies. It is also because they only run a bar business, the level of the control needed to operate the bar business is not large scale. Also the business is not need a large capital base or fund. As I analyze their business can be type as a proprietary company because their business is likely similar with small family business over a partnership.

Proprietary Companies

A proprietary company is also known as private company. Small Business Development Corporation Western Australia 2012 state that a proprietary company should have at least one director and one shareholder who live in Australia and not necessarily require any company secretary. If it has company secretary, then at least on of the secretary must ordinarily reside in Australia. The proprietary company not mandatory need appoint an auditor and not require keeping it register open for public. It is formed no more than 50 employees shareholders and they have no rights to either offer securities or shares to the public or list them on the ASX. In relation to this based on s 113(3) of the Corporation Act 2001 the proprietary company is prohibited any activities that would require a prospectus lodgment apart from an offer of its shares to existing shareholders of the company or employees of the company or one of it minor. This type of company structure is usually suited for family or small business and private investment entity. According to the size the accounting requirements imposed the proprietary companies can be classified as:

October 17, 2012 CORPORATE GOVERNANCE ASSIGNMENT

Small proprietary Companies Under s45A a proprietary company as small proprietary company if it fulfill at least two of the following conditions: 1. The total (consolidate) income or revenue for the financial year of the company that been controlled is less than $25 million. 2. At the end of financial year, the total value of gross asset of the company been controls is less than $12.5 million 3. Only have fewer than 50 employees at the end of financial year. A Small Proprietary company is not necessarily to prepare their annual financial report and directors’ report, unless their shareholders with at least 5% of the votes in the company direct to do so and ASIC direct to do so (Schweizer Kobras Lawyers & Notaries, 2010) Large Proprietary companies Different from a small proprietary company, a large proprietary company is proprietary company that meets at least these two following requirements: 1. The consolidated income or revenue at the end of financial year is $25 million or more 2. At the end of financial year the value of the company’s gross assets is $12.5 million or more 3. Can have 50 or more employees at the end financial year This large proprietary companies have to prepare their annual financial reports and directors’ report and further it will be audited by their auditor. Moreover this type of company should lodge their annual financial reports with ASIC. Furthermore a proprietary company is mainly must either be a: A proprietary company limited by shares Accoring to Ninemsn Pty Ltd 2012, it means the shareholders would afford more protection once they reach certain level of liability they face for company debts. The transfer of sale shares in the company is usually restricted such as a requirement that the directors of the company must approve any transfer shares and that new shareholder only become members of the company on registration

October 17, 2012 CORPORATE GOVERNANCE ASSIGNMENT

of the transfer of the shares to them by company. Also the liability of the shareholders of the company is limited to the uncalled amount, if any owing on their shares. Or An unlimited proprietary company with a share capital Which means similar with the proprietary limited company, however the company members or shareholders’ liability is not limited.

From the above explanation, in my opinion the most appropriate type of company they would be fit their objectives would be a Small Proprietary Company which Limited by Shares. The reasons are because their business can be considered as a company that has separate legal existence, distinct from its owner managers, and operators. And its own income tax liability and separate from their personal income tax

b). The name that I would suggest is Brangel Bar Pty Ltd. In relation to the naming process the business name have to be registered nationally with the Australian Securities & Investments Commission (ASIC) and these following sections below are the sections that apply to the naming process: • s 147 of the Corporations Act 2001 The name that would be registered cannot be identically a name that have been registered. • s 148 and 149 of the Corporations Act 2001 The name of the company must be include by the type of their company structure and formed at the end. Like Brad and Angelina company after I combined the two owner’s name then continue with the abbreviation of their company Pty Ltd because they are appropriate for a small proprietary limited company. • s 152 of Corporation Act 2001 A person may lodge an application in the prescribed form with ASIC to reserve their company name, and if the name is available ASIC have the obligation to reserve it.

October 17, 2012 CORPORATE GOVERNANCE ASSIGNMENT

C). It could possibly there are agreements or arrangement before the company becomes existence. It is the same circumstances occur in this case if Brad and Angelina involve in a purchasing new equipment before ASIC had granted their certificate of Incorporation for the company. The right fact stated that if a company is not yet registered it means the company has no legal rights to enter into a contract and promoter the person whose one of the fiduciary duties be responsible to the company for the benefit for any property the company might purchase or acquire with the intent of selling the property for the future profit could be held personally liable for the breach. Under s 131 of Corporation Act 2001 promoter may be liable if: • • • The company never registered The company is registered but not ratify the contract The company ratifies the contract but then breaches it

Therefore the promoters must inform the people who will be involved, before they deal with any contract (Fawcett,Watson & Nicita p.501)