...Corporation Law, (HI 5027) Assignment -2 Part-A The director’s duty to prevent insolvent trading is in s588G of Corporations Act, however there no separate law to prevent insolvent trading.s588G of corporation Law deals with protecting creditors in dealing with companies. Creditors usually don’t require protection of s588G because many creditors can protect themselves from the risk of their loan being not paid by obtaining security for the loan for example giving mortgage. So in Case the company becomes bankrupt then secured creditor will have their loan repaid but all creditors do not have this security so the parliament has enacted the s588G which says that it is the fundamental duty of the director to prevent his company from trading while it is insolvent (Hanharan,Ramsay& Stapledon 2012). The duty of the director to prevent insolvent trading is to be followed by all directors but does not apply to officers other than directors also according to s9 definition of director applies to shadow and de facto directors . Section 588G says that the director of the company is liable if the company incurs a debt, company becomes insolvent when it incurs debt, the director suspects the company will become insolvent if it incurs debt and director knows that has reasonable grounds to suspect that company will become insolvent (Hanharan et al 2012). If a director does not prevent a company from incurring a debt then they, or any reasonable person in their place, should have suspected...
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... Moreover, the reduction would in effect diminish the pool of funds available to the company to pay its creditors. The rule in Trevor v Whitworth has been incorporated into Ch 2J of the Corporations Act 2001.Certain provisions of the Corporations Law 2001 seek to enforce the rule Trevor v Whitworth. There are a few Sections of the Corporations Act 2001 that enforce the maintenance of capital principle (or the rule of Trevor v Whitworth). Section 254T of the Corporations Act 2001 stated that a dividend may only be paid from profits. The Section 254T of the Corporations Act 2001 states that a company must not pay a dividend unless: the company’s assets exceed its liabilities before the dividend is declared and the excess is sufficient for the payment of the dividend, and; the payment of the dividend is fair and reasonable to the company’s shareholders as a whole and; the payment of the dividend does not materially prejudice the company’s ability to pay its creditors. This means that a dividend can be sourced otherwise than from profits. Moreover, Section 259 A of the Corporations Act 2001 prohibits self-acquisition. A company directly acquiring its own shares is prohibited. Nevertheless, this prohibition is subject to exceptions where a company is allowed under Section 257A of the Corporations Act 2001 to buy back shares if:...
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...Assignment Word Count (including footnotes):1997 Due Date: 16/4/2012 Name of Tutor: Michael Duffy Name of Unit: Corporation law Question 1 (a). Issue: can shareholders force the company comply with the replaceable rule and clause2.1? Under s134, a company’s internal management may be governed by provisions of the Corporations Act that apply to the company as replaceable rules, by constitution, or by a combination of both. Orchard Downs Pty ltd’s internal management is governed almost exclusively by its own constitution. The only replaceable rules it uses are the replaceable rule in s201G and the replaceable rule in s203C. In this case, Norm, Sean and Anne are the only shareholders of Orchard Downs Pty Ltd. They received a letter informing them that the board had appointment Betty as a director without holding a general meeting. The shareholders were all unsatisfied with appointment of Betty. However, the board of directors told them that as s201G was a replaceable rule, they were not obliged to comply with it. Under s135(3), a failure to comply with applicable replaceable rules is not of itself a contravention of the Corporations Act. However, the constitution and replaceable rules have effect as a contract. Hence, the shareholders can sue the company breach the contract. Section 140(1)(a) provides that a company’s constitution (if any) and replaceable have effect as a contract between the company...
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...Assignment - Corporations Law Question 1 worth 25 marks James is a graphic designer and shareholder in Snowzone Pty Ltd (“Snowzone”) a profitable graphic design company. He holds 200 of the 1,000 issued shares. The other 800 shares are divided equally between the other 16 graphic designers in Snowzone. Two of these other 16 graphic designers are the directors of the company. James did not support the election of these directors but a majority of the other shareholders voted for them. The company has paid dividends to the shareholders from time to time but not for the last 3 years. Snowzone uses computer hardware supplied by Nicola Pty Limited. The 2 directors of Snowzone are in fact shareholders in another computer hardware supplier, Zabriski Pty Limited, and they, together with some of the shareholders of Snowzone favour a change in the hardware supplier to Zabriski Pty Limited. The directors accordingly call an extraordinary general meeting so that the shareholders can vote on a change of the hardware supplier. James has consistently voiced his opposition to a change to Zabriski Pty Limited. James has also recently begun contacting other shareholders seeking their support in requesting that the directors pay a small dividend in the current year. He has little success with the shareholders but still puts his proposal to the directors. Snowzone’s directors and the majority of shareholders, several of whom are relatives (family)...
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...convened and a resolution was made that stated that Betty acted improperly and failed to discuss the contracts with board members. As a result, the three contracts have been labeled as void and ultra vires and Bechdo Pty does not recognize them. The paper seeks to advise, Bechdo Pty Ltd, BB Ltd, Jillo Pty Ltd, and Con Development Ltd in regard to their liabilities and legal rights to the contract. Moreover, advice is given on legal grounds that may be taken by Bechdo Pty Ltd against Betty, Charlie, and Doris. Rules First, a corporation or a limited company is an artificial entity which is independent of its member founders, and is capable of engaging in a contract, suing, or get sued as an entity. Therefore, as an independent entity a limited company can sue its shareholders if they engage in malicious acts which do not abide to the set laws (Chen-Wishart n.d). A contract is an agreement entered by two or more people. The agreement should be enforceable by the law and it can...
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...Corporations • Corporate attributes o Legal entities o Creature of the state ▪ State statute ▪ Uniform model corporations act o Limited liability ▪ Owners = shareholders ▪ Sign agreements to buy stock in this corp • Certain $ investment • Whatever they invest of promise to invest they are held liable for ▪ Free transfer of stock • Don’t need consent to transfer stock/liability/rights ▪ Perpetual existence – unique to corporations • When a shareholder dies the corporation doesn’t die/dissolve ▪ Centralized management • Corp structure(see written notes) ▪ Is a person ▪ Is a citizen (of the state where it is created(can make political contributions ect.) • Classification of Corporations o Public or Private ▪ Public – governmental bodies o Profit or non profit ▪ Profit – Shareholders ▪ Non-profit – Don’t have shareholders simply have board of directors o Domestic or foreign ▪ Foreign could get franchise tax if they aren’t a state corporation but are making money in that state o Close held/publicly held ▪ Close – only a few shareholders o Professional corporations ...
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...PRINCIPLES 2 A.) Efficiency and Other Concepts 2 B.) Agency and Partnership Law 2 II.) INTRODUCTION TO THE CORPORATE FORM 16 A.) Formation and Structure 16 B.) Debt, Equity, and Valuation 22 III.) CONTROL OF CORPORATE DECISIONS 32 A.) The Role of the Shareholder 32 B.) Management Obligations 50 1.) Duty of Care 51 2.) Duty of Loyalty 56 3.) Duty of Fairness: Parent-Subsidiary Relationships 63 4.) Duty of Good Faith 64 5.) Management Obligations Under Federal Securities Laws 67 C.) Shareholder Litigation 76 IV.) Structural Changes 85 A.) Transactions in Control 85 B.) Mergers and Acquisitions 86 1.) Mergers 87 2.) Sale of Assets 93 3.) Asset Purchase or Tender Offer 94 C.) Public Control Contests 96 1.) The Poison Pill 100 2.) Enhanced Review When Business is Up for Sale 103 3.) Proxy Contests for Corporate Control 106 4.) Protecting the Deal: Shareholder Lockup Agreements 109 I.) INTRODUCTORY PRINCIPLES • Definitions o Corporate Law: The allocation of rights and power within a corporation; the internal body of law ▪ Addresses the creation of economic wealth through the facilitation of voluntary, ongoing collective action ▪ Flexible- expectation that market discipline will weed out what is not working ▪ Principle aim- reduce agency costs of all sorts o Securities Law: Regulates capital markets that corporations use to obtain funding o Firm: A form of business relation that...
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...United States v. WRW Corporation 986 F.2d 138 (1983) United States Court of Appeals, Sixth Circuit PECK, Circuit Judge In 1985, civil penalties totaling $90,350 were assessed against WRW Corporation (WRW), a Kentucky corporation, for serious violations of safety standards under the Federal Mine Safety and Health Act (the Act) which resulted in the deaths of two miners. Following the imposition of civil penalties, WRW liquidated its assets and went out of business. Three individual defendants, who were the sole shareholders, officers, and directors of WRW, were later indicted and convicted for willful violations of mandatory health and safety standards under the Act. Roger Richardson, Noah Woolum, and William Woolum each served prison sentences and paid criminal fines. After his release from prison, Roger Richardson filed for bankruptcy under Chapter 7 of the Bankruptcy Code. The United States (the Government) brought this action in May of 1988 against WRW and Roger Richardson, Noah Woolum, and William Woolum to recover the civil penalties previously imposed against WRW. The district court denied the individual defendants' motion to dismiss and granted summary judgment to the Government piercing the corporate veil under state law and holding the individual defendants liable for the civil penalties assessed against WRW. For the reasons discussed herein, we affirm. The district court held that it was appropriate to pierce WRW's...
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...Section 2 - Installation D-Link DSL-2740B User Manual 9 Installation Notes In order to establish a connection to the Internet it will be necessary to provide information to the Router that will be stored in its memory. For some users, only their account information (Username and Password) is required. For others, various parameters that control and define the Internet connection will be required. You can print out the two pages below and use the tables to list this information. This way you have a hard copy of all the information needed to setup the Router. If it is necessary to reconfigure the device, all the necessary information can be easily accessed. Be sure to keep this information safe and private. Low Pass Filters Since ADSL and telephone services share the same copper wiring to carry their respective signals, a filtering mechanism may be necessary to avoid mutual interference. A low pass filter device can be installed for each telephone that shares the line with the ADSL line. These filters are easy to install passive devices that connect to the ADSL device and/or telephone using standard telephone cable. Ask your service provider for more information about the use of low pass filters with your installation. Operating Systems The DSL-2740B uses an HTML-based web interface for setup and management. The web configuration manager may be accessed using any operating system capable of running web browser software, including Windows 98 SE, Windows ME, Windows...
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...DIRECTORS' DUTIES – THE INSOLVENT TRADING ISSUES FROM A LAWYER’S PERSPECTIVE 1. OVERVIEW The aim of this paper is to: provide an overview of the insolvent trading provisions under Australian law; look at the liabilities which might be imposed on a director for breach of those provisions; examine the defences and in particular: when directors can rely on someone else to tell them about the solvency of their company after Manpac v Ceccatini and Scott v Williams; and the loss of the Southern Cross Interiors defences; look at the decisions in the Solomon; Murawai and the Clark v Perkins cases and the potential for de facto or shadow directors to be exposed to an insolvent trading action; and finally to look at the potential for directors to set-off any exposure they have to a company for insolvent trading from any liability owed by the company to them such as unpaid salary or outstanding loan repayments. 1.1 So what is insolvent trading? Section 588G of the Corporations Act (the Act) imposes liability on a director of a company who allows the company to incur a debt at a time when the company is insolvent when at the time that the debt was incurred there existed reasonable grounds for suspecting that the company was, or may become as a result of incurring the debt, insolvent. A director will be liable if at the time the debt was incurred he or she was actually aware of the existence of reasonable grounds to suspect insolvency or a reasonable person in...
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...Foss v. Harbottle 1 Principles and Applications and Exceptions to the Principles INTRODUCTION Basically, both under the general law and under the Companies Acts there are some protections of minority. Example of minority protection is the doctrine under the general law that the majority of the members must not commit a fraud on minority but must act bona fide for the benefit of the company as a whole. Here, the topic that I am about to touch is the rule of Foss v. Harbottle in which there are some exceptions to this particular rule protect the minority. As for the beginning, Foss v. Harbottle was originally a case reported in 1843. The Victoria Park Company was established for the purpose of ‘laying out and maintaining an Ornamental Park within the Township of Rusholme, Charlton-upon Medlock and Moss Side, in the country of Lancaster’. The capital of the company was to be $500,000, divided into 5,000 shares of $100 each. It was to be controlled by five shareholders. The first directors were Thomas Harbottle, Joseph Adshead, Henry Byrom, John Westhead and Richard Bealey. It was provided that three directors should constitute a board and that the acts of three or more should be as effectual as if done by the five. To sum up the feature of the case, two shareholders in the company, Richard Foss and Edward Turton, brought an action against the company’s directors, on behalf of themselves and the other shareholders except the defendants. The defendants were the five directors, a shareholder...
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...Section 254M (1), one need to understand the justification on requesting the shareholders to pay for their shares. In doing so we will be examining three important theory that governing this justifications which is the fraud theory, trust fund theory and the contract theory. The ‘holding out theory’ which also referred as the fraud theory. The fraud theory was first derived from the case of Hospes V.North-Western Manufacturing and Car, in which it was held that misrepresentation provides the ground upon which the liability of shareholders to pay-up for the allotted shares is based (Mwenda, 1999). Hanks and Manning observed: "The basic rationale of the Hospes court was that the creditor had somehow received a representation from the corporation to the effect that the shares had been fully paid for; if in fact the shares had not been paid for, and if the company later became insolvent the creditor could claim that he had been misled and could compel shareholders who had not paid in the par value of their shares to do so...” (Hanks and Manning, p.50, 1990). This representation makes a clear message that unless the company become insolvent there is no action against the shareholder by the creditor since there is no damages taken by the creditors. While the trust fund theory states that the shareholder’s equity which the capital stock is in the nature of a ‘trust fund’ for the creditors hence the shareholders are not allowed to withdraw their asset from the company in order to remain...
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...Issue one Can the funds be raised from existing members or anyone else without a prospectus? Relevant law The ability of raising funds from investors is one of the most important functions of companies, furthermore, a significant objective of the Corporations Act (CA) is to encourage and regular those kind of investments. Usually, when a company want to offer securities, a disclosure documents (DD) must be issued simultaneously. The types of DD were given by s 705, and prospectus was including in. From s 706 “ ISSUE OFFERS THAT NEED DISCLOSURE”, we can find that, “ An offer of securities for issue needs disclosure to investors under this Part unless section 708 or 708AA says otherwise.” Obviously, to solve this issue we need to discuss if the Growth Ltd can fulfill the circumstances under s708 or 708AA. As there are too many subsections under s 708 and s 708AA, i will pick out sever subsections instead of copy all of them here. 从投资者筹集资金的能力是企业最重要的功能之一，此外，公司法（CA）一显著的目标是鼓励和定期的一种投资。通常，当一个公司希望提供证券，一个披露文件（DD）必须同时发出。 DD的类型由s705分别给予和招股说明书，包括研究。从s706“需要泄露问题提供了”，我们可以发现，“对于发行证券的要约需要向投资者披露在本部中，除部分708或708AA否则说，“很显然，要解决这个问题，我们需要讨论，如果公司成长可在S708或708AA履行情况。因为有书下708太多小节和S708AA，我将挑选出断绝小节，而不是拷贝他们都在这里。 Application In case one, the amount of fundraising is $m20, which can be considered as a large offer. Thus, the subsection (1) - (7) of s 708, Small scale offering, will not be applied here. For example, s 708 (1) b showed that the offer of ”$ 2 million ceiling”. For some special investors...
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...By Laws Unlike Articles of Incorporation, Bylaws do not need to filed with the state. However, Bylaws are an important document that lays out how the cooperative is to be governed. The governing body (whether it consists of an elected Board of Directors or all members of a collective[1]) must abide the Bylaws. Typically, a cooperative’s Bylaws can only be changed by a democratic vote (or in some cases, consensus [2]) of the membership. For this reason, cooperatives usually limit their Bylaws to fundamental governance-level issues. More specific operational procedures may be documented in policy manuals or handbooks, which can be changed as needed by Directors, (co-)managers, committee members, staff, or other bodies using approved decision-making processes. Bylaws are organized into sections, and most sections are broken up into subsections. In this document, only the lengthier sections are broken up into subsections for ease of reading. However, shorter sections can benefit from being broken down as well. Bylaws can be easily referenced when numbers or letters are assigned to sections and subsections. ------------------------------------------------- Cooperative Bylaws should include: I. Mission, purpose, and legal structure This section often includes the cooperative’s mission statement, vision statement, or stated purpose.[3] This is also a good place to restate the information outlined in the Articles of Incorporation. The Bylaws should agree...
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...Multiple choice (20 marks - 2 marks each) a. 1) There should be no tax consequences. The loan was repaid by the end of the next taxation year (December 31, 2014) as required by subsection 15(2.6). The fact that the loan bears interest at the market rate means there should be no imputed interest benefits to Marc. b. 1) If the shares issued to Sophie-Anne are not in a separate class, the PUC of the shares held by her will be less than the $25 per share that she paid to the corporation. The other shareholders contributed $10 per share, and under the definition of paid-up capital in subsection 89(1), the PUC of a share of a class is equal to the total PUC of the class, divided by the number of issued shares of that class. Incorrect answers: 2) The ACB of the shares of a given shareholder is not affected by the ACB of the shares for the other shareholders. 3) In order for a taxable benefit to be conferred, the price of $25 per share would have had to be less than the FMV of the shares of the corporation. Having a separate class does not affect the determination of a taxable benefit. 4) The fact that the PUC of Sophie-Anne’s shares is less than the amount that she contributes does not constitute a reduction of paid-up capital to which subsection 84(4) applies. c. 4) See...
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