Corporation Law Sample Assignment

Answer to Question 1

In this case, Richard has extensive olive grove and his business is flourishing. Therefore they have decided to expand the business. In order to expand the business it was decided to change the business structure in to company form of business. Therefore an advice is drafted for Richard about the steps that is needed to be taken in order to incorporate and register a business in Australia.

Legislations

In order to conduct the business effectively the company structure is considered to be the best vehicle. It is because the company structure offers various benefits to the business. The setting up of a company and conducting the business means that the business will have to comply with all the regulatory requirement of Australian Securities and Investment Commissions[1]. It also means that the business will have to abide by the various provisions of the Corporation Act 2001. The companies are incorporate and registered in accordance with the Corporation Act 2001.

The reference have been made to the following section of the Corporation Act 2001 in order to provide this advice, they are:

• Section 147;
• Section 148;
• Section 152;
• Chapter 2A;

The other reference that have been made for providing the advice are:

• ASIC website for registering the company;
• New South Wales Department of Fair Trading;
• IP Australia;

Selecting the name of the company

The first stage of incorporating a company is selecting a name for the company. The Part 2B.6 of the Corporation Act 2001 deals with the various rules for naming the company. If a name is available as per section 147 of the Corporation Act 2001 then it should be mentioned in the application form of incorporation ASIC Form 410 in order to reserve the name of the company[2]. The section 152 of the Corporation Act 2001 provides that if the name is available then ASIC is required to reserve the name of the company. It should be noted that if the name of the company is not mentioned in the form then the Australian company number assigned will be regarded as the name of the company as provided in section 148 of the Corporation Act 2001.

The applicant should remember that a company should not be registered as identical to certain names as provided in the corporate regulation. It is provided in the regulation that the name of the company should not be identical to another registered company, registered foreign body and registered name of the business and a reserved company name. Therefore it can be said that an applicant can select any name of the company provided it is not misleading or prohibited by any other law[3].

In this case Richard should select a name and check for availability before registering the business. The name of the company is required to include identifiers in the name of the company. The section 152 of the Corporation Act 2001 states that a limited public company shall include at the name the word “limited” and in case of proprietary company the name should include “Proprietary limited”. In the case of company of unlimited proprietary company the word “proprietary” is used in the name of the company. In no liability company the word “no liability” is used in the name of the company[4]. In this case there are two names that they are considering for selection they can choose either of the name however it is advisable that the business should not select the name with the word guarantee. It is because this may be considered misleading.

Reserving the name of the company

The section 152 of the corporation Act 2001 provides that applicant should reserve the name of the company and this reservation lasts for two months. The Form number 410 should be completed and lodged with the ASIC. There is a fees that is required to be paid while lodging the form. The details that are required in Form 410 are:

• Name that is to be reserved;
• The class and type of the company;
• The name of the applicant;
• The address of the applicant;
• The reason for reserving the name of the company;

Registering the name of the company

It should be noted that registering the name of the company is administered by the state and territory government. In case of New South Wales the registration of business name is governed by the Business Name Act 2002. The registration process of business name is administered by the Department of Fair Trading[5].

Registering a company

The term Registration is used in the Chapter 2A of the Corporation Act 2001. The term is used to describe the process of registering a company with the ASIC. The registration with the ASCIC in effect creates a company. As per section 124(1) of the Corporation Act 2001 it is provided that a company has the power of an individual and the legal capacity. It order to register the company it is important to determine the type of the company that is to be registered. There are two types of company provided in section 112 of the Corporation Act 2001 they are public companies and proprietary company[6]. The public companies can be limited by shares, limited by guarantee, no Liability Company and company that have liability unlimited with share capital. The next step of registering the company includes the following:

• Proposing and registering the name of the company;
• Determine the shareholders of the company;
• Determining the secretary and directors of the company;
• Determining the main place of business; and
• Determining the registered office of the business;

Application for Registration

The section 117 of the Corporation Act 2001 states that for registering the name of the company the applicant is require to lodge an application with the ASIC. The Form 201 ASIC is required to be filled for registering the company[7]. The application is required to include the following:

• The nominated territory or state for registration;
• The name of the company that is proposed;
• If the type of the company selected is a public company. Then it requires to adopt a constitution. In this case the constitution should be accompanied with the form.
• The address of the principle place of business;
• The address of the proposed registered office of the company;
• In case of public company the opening hours of the registered office;
• The identity of the holding company;
• The address, name, birth place, date of birth of each of the proposed directors and secretaries.
• The details of the shareholders that includes name and address of each shareholders;
• The details of securities that is to be issued to the shareholders. The details should include the type of securities, the number of securities to be issued and if the consideration of the securities have been paid;

It should be noted that in case of proprietary company there must at least one director and one shareholder. The proprietary company is not required to have a secretary however if it has a secretary then it should have at least one secretary that is ordinary resident in Australia. The ASIC Form 201 should be signed by all the persons that are seeking registration like directors, secretary or shareholders[8]. The ASIC on successful registration provides an Australian Company Number (ACN). It is a nine digit number that is used for identifying the company for the purpose of Corporation Act 2001.

In this case Richard should register the company as a proprietary company. The steps that should be followed for incorporation ad registration has been provided above.

Answer to Question 2

In this case, Terry is an employee of the Cosmo Mining Service Limited and it is a subsidiary of the Cosmo mine limited. The company is engaged in mining in the Western Queens land. The mining activity of the CMS has resulted in contamination of a river and as a result many employees and local who drank the water of the river have contracted cancer. The shareholders of the CNS then decided to sell the company to a Lazarus Pty Ltd. The issue here is to discuss the liability of the company. The section below provides advice to Terry what actions he can take and against which company.

Providing safe workplace

The states and territories each have their own works health and safety legislation. The employer has an obligation to ensure that a safety and healthy workplace is provided to the employees. The health as defined in the Work health and Safety Act 2011 includes both the psychological and physical health[9]. The manager is responsible for providing reasonable health and safety by:

• Maintaining a place of work the environment of which is free from any risk to health and safety;
• Maintain and providing a system of work that is safe;
• Monitoring the conditions and health at the workplace;
• Taking suggestion of the employee regarding health and safety matters in the workplace;
• Providing training and supervision so that the employee can perform their function safely at the workplace[10];

Workplace Health and Safety Queens Land (WHSQ)

The responsibility of the WHSQ is to improve the safety and health of the workplace. They are also responsible to ensure that no workers are injured or killed in the workplace. The role cam be stated as follows:

• enforce the law relating to health and work safety;
• investigation of cases of serious injury and safety related to workplace;
• if there is any breach of legislation then they are persecuted;
• the education given to employer and employee;

In Queensland the department of Natural resources and Mines provides all the miners and other associated people the health and safety. Therefore it can be said that in this case the company is liable to Terry for paying the compensation[11]. However as the shareholders have decided to sell the company the issue here then is to determine whether the liability is of the CMS or the holding company CM or the new company.

Liability of the CMS

The Corporation Act 2001in Part 5.6 provides information relating to the winding up of the company. It is stated in this part that there are two types of winding up one is voluntary winding up and another is compulsory winding up. The section 513B of the Corporation Act 2001 states that if a company is resolved by a resolution by the shareholders then it is a voluntary winding up of the company. In this case the shareholders decided to sale the company so it is not a winding up o\but sale of the company[12]. In winding up the liquidators are appointed by the company to sell all the assets and settle all the liabilities. If the company took the option of winding up rather than selling then under section 561 of the Corporation Act 2001 then the company would be liable to provide priority to employees claim over the securities of the company[13]. Therefore it can be said as the company is sold to another company then it cease to exist so no case of obligation can be brought against the company.

Liability of the Lazarus Pty Ltd

The Lazarus Pty Ltd has purchased the CMS. The liability of the Lazarus Pty Ltd will be dependent on the nature of its acquisition. If the agreement of purchase provides that the new company is liable to take all the assets and liabilities including. Then in this case the new company is liable if the company does takes selected assets and liabilities. Then in such case it is not liable if the company does not select the liability. However as there is no existing liability at the date of acquisition so the new company cannot be held liable[14].

Liability of CM (holding company)

A company is considered to be holding company and another subsidiary if that company hold majority of the shares in the subsidiary company. The parent company and the subsidiary both are separate legal entity[15]. They both function independently of each other and like all other shareholders Parents Company selects the boards of directors, management etc. The parent company as a shareholder are not generally liable towards the liability of the company. However if there is any impropriety then the company can pierce through the corporate veil and then the parent company as shareholder will be liable[16]. Therefore in this case CM is not directly liable however if the corporate veil is lifted then the parent company will have to pay the liability. 

Based on the above discussion it is advised that as there are no alternative options Terry should take action against the parent company and try to lift the corporate veil. 

Reference

ASIC Home | ASIC - Australian Securities And Investments Commission (2017) Asic.gov.au http://asic.gov.au/

Baxt, R. et al, Corporations Legislation 2016 (Thomson Reuters (Professional) Australia, Fifteenth ed, 2016)

Baxt, Robert et al, Corporations Legislation 2015 (Thomson Reuters Australia, Limited, 13th ed, 2015)

Campbell, J. C., 'Corporate Law, the Courts and Corporate Personality' (2015) 33 Company and Securities Law Journal 227.

Dhir, Aaron, Challenging Boardroom Homogeneity: Corporate Law, Governance, and Diversity (Cambridge University Press, 2015)

Godwin, Andrew, 'Teaching Corporations Law from a Transactional Perspective and through the use of Experiential Techniques' (2015) 25 Legal Education Review 221.

Hall, Kath, Dan Than Nwe and Khin Khin Oo, 'Embracing Myanmar's Future: Reforming the 100-Year-Old Companies Act' (2016) 34 Company and Securities Law Journal 276.

Harris, Jason, Corporations Law (LexisNexis Butterworths, 4th ed, 2013)

Latimer, Paul, Australian Business Law: 35th Edition 2016 (Oxford University Press (aust), 35th ed, 2016)

Li, Xiaoshan, 'Introduction to the Reform of the Corporate Capital System of Chinese Corporation Law and some Reflections' (2016) 33 Arizona Journal of International and Comparative Law 105.

Lipton, P., A. Herzberg and Michelle Welsh, Understanding Company Law (Thomson Reuters, Eighteenth ed, 2016)

Moore, Marc T., 'Bridging the Gap between Labour Law and Company Law' (2015) 44 Industrial Law Journal 425.

Norwitz, Trevor S., 'Accountability does Not Require Constant Vulnerability: A Simple but Necessary Update to the Delaware General Corporation Law' (2016) 41 Delaware Journal of Corporate Law 105.

NSW Fair Trading - Home (2017) Fairtrading.nsw.gov.au https://www.fairtrading.nsw.gov.au/

Proulx, Melissa, 'Businesses Weigh Conversion Under B Corporation Law' (2014) 36 New Hampshire Business Review 1.

Woan, Lee Pey and Christopher Chen, 'Modernising Company Law: The Singapore Experience' (2016) 34 Company and Securities Law Journal 157.

[1] Harris, Jason, Corporations Law (LexisNexis Butterworths, 4th ed, 2013)

[2]ASIC Home | ASIC - Australian Securities And Investments Commission (2017) Asic.gov.au http://asic.gov.au/

[3] Baxt, R. et al, Corporations Legislation 2016 (Thomson Reuters (Professional) Australia, Fifteenth ed, 2016)

[4] Baxt, Robert et al, Corporations Legislation 2015 (Thomson Reuters Australia, Limited, 13th ed, 2015)

[5]NSW Fair Trading - Home (2017) Fairtrading.nsw.gov.au https://www.fairtrading.nsw.gov.au/

[6] Lipton, P., A. Herzberg and Michelle Welsh, Understanding Company Law (Thomson Reuters, Eighteenth ed, 2016)

[7] Latimer, Paul, Australian Business Law: 35th Edition 2016 (Oxford University Press (aust), 35th ed, 2016)

[8] Proulx, Melissa, 'Businesses Weigh Conversion Under B Corporation Law' (2014) 36 New Hampshire Business Review 1.

[9] Li, Xiaoshan, 'Introduction to the Reform of the Corporate Capital System of Chinese Corporation Law and some Reflections' (2016) 33 Arizona Journal of International and Comparative Law 105.

[10] Hall, Kath, Dan Than Nwe and Khin Khin Oo, 'Embracing Myanmar's Future: Reforming the 100-Year-Old Companies Act' (2016) 34 Company and Securities Law Journal 276.

[11] Norwitz, Trevor S., 'Accountability does Not Require Constant Vulnerability: A Simple but Necessary Update to the Delaware General Corporation Law' (2016) 41 Delaware Journal of Corporate Law 105.

[12] Dhir, Aaron, Challenging Boardroom Homogeneity: Corporate Law, Governance, and Diversity (Cambridge University Press, 2015)

[13] Moore, Marc T., 'Bridging the Gap between Labour Law and Company Law' (2015) 44 Industrial Law Journal 425.

[14] Woan, Lee Pey and Christopher Chen, 'Modernising Company Law: The Singapore Experience' (2016) 34 Company and Securities Law Journal 157.

[15] Campbell, J. C., 'Corporate Law, the Courts and Corporate Personality' (2015) 33 Company and Securities Law Journal 227.

[16] Godwin, Andrew, 'Teaching Corporations Law from a Transactional Perspective and through the use of Experiential Techniques' (2015) 25 Legal Education Review 221.