Company Law of Australia

Question: Discuss about theCompany Law of Australia. Answer: Introduction: For any company to start functioning certain procedures have to be abided by. There are many statutory requirements which have to be fulfilled which are essential to determine the structure of a company. Initially one should know about the types of companies which can be registered under the section 112 of Corporations Act, 2001. They can be broadly divided into proprietary companies and public company (Austlii.edu.au, 2016). Since this assignment concentrates on a proprietary company, more emphasis will be laid on it. Proprietary companies are further classified according to shares. They can be either limited by shares or have unlimited share capital. Registration of a proprietary limited company Section 113 of the Corporations Act 2001, elaborates about a proprietary company. It is essential for a proprietary company to have maximum of 50 shareholders who are not employees of the company in order to- Register oneself as a proprietary company Convert oneself into a proprietary company Continue to be incorporated as a proprietary company. Certain restrictions and norms must be adhered for a proprietary company to be constituted like- One of the directors has to reside in Australia. There should be a registered office and address in Australia for registration purposes. One of the company secretaries should be resident of Australia. The word limited implicates that the liability to pay debts by the shareholders is in proportion with the number of shares held by them (Austlii.edu.au, 2016). For registering a proprietary the following processes have to be followed. According to Section 117 of the Corporations Act, 2001 the registration method for a company incorporate is provided. They are as follows: The person who is applying for registration has to apply in Australian Securities and Investment Commission (ASIC). The following particulars should be mentioned in the registration form: Name of the company Name and address of the individual who is willing to become a part of the company. Business purpose of the company Company address The person who is going to be appointed as director of the company must give details of personal details of his family like names, birthdays etc. The company secretary of the company must provide same details as above. At what time the company office starts working. A sample of the application is portrayed below in an edited manner. NAME OF THE COMPANY MOORE PROPRIETARY LIMITED COMPANY ADDRESS 2/A, WELLINGTON AVENUE, NSW, AUSTRALIA- 2055 NAME OF PROPRIETOR GORDAN MOORE RESIDENTIAL ADDRESS OF THE PROPRIETOR 62/B, HUDSON ROAD, NSW, AUSTRALIA-2055 In order to register a company under ASIC, a number is allotted to the company which is known as Australian Company Number (ACN). The name of the company in a clear format followed by the words Australian Company Number or the abbreviation and the number itself should be seen on: Common seal and other seals of the company. Documents publicly issued, published or signed on behest of the company Negotiable instruments signed, issued or published on behest of the company Documents to be submitted to the ASIC according to Corporation Act, 2001. According to section 169 of the Act companies should who have share capital must keep record and register all its shares (Austlii.edu.au, 2016). Share register is the record kept by the company also named as register of members. The information contained in the share register include- Name of the member and his residential proof. The date mentioning when the member was included in the register. Members who are not there for benefit purpose are also mentioned. If modification or change in the members detail is needed then such rectification is recorded in the register. In case there are more than 50 members in the company, an index in the register should be maintained. When there is a format of index mentioned in the register, no separate index needs to be maintained. Following information must be there in the register- Class of share and the amount of it held by the member. Date of holding the share allotted. Number of shares at each allotment. Information as to whether the share is fully paid up or not. Indicating how many unpaid shares are there if shares are not fully paid up. Show the shares and the share certificates attached to them. Section 134 of the Corporations Act, 2001 speaks about how a company works within itself or more specifically internal management. There are replaceable rules which control the internal management of a company along with provisions of the relevant act (Austlii.edu.au, 2016). Section 135 of the Corporations Act, 2001 discusses about replaceable rules. These rules apply to those companies which were registered after July 1 , 1998 and companies registered prior to July 1, 1998 and they had cancelled their constitution post that day. A company can use the replaceable rules as it deems fit to administrate its domestic management (Asic.gov.au, 2016). No written constitution needs to be present. A company preferring to be guided by the replaceable rules will not bear costs of updating its constitution as per law even when the replaceable rules get modified. As per section 140 of the Corporations Act, 2001, the replaceable rules and the constitution of the company which apply to a company act as a contract between: The company and the employees. Company and directors and the company secretary The members themselves These people consent to follow and agree the rules and constitution as much as they relate to those people. Companies can incorporate a replaceable rule into its constitution which otherwise is not applicable to it. Similarly a company can scrap or bring modifications to the replaceable rules. There are no sanctions which entail to non compliance with the replaceable rules(Austlii.edu.au, 2016). Non compliance with the rules is no contravention to the Act. No criminal or civil duty or injunctions apply in such cases. Section 254A of the Corporations Act, 2001 discusses of the right of the company to issue: Bonus shares i.e. shares which do not carry payment to the company who are issuing such shares. Preference shares which include redeemable preference shares (Austlii.edu.au, 2016). Shares which are paid in parts whether or not they match with the calls for payment or time associated with the call payment. Sub section 2 of Section 254A of the Act discusses that company has the power to issue preference shares depending on the fact that rights regarding preference shares are there in the constitution of the company or ratified by special resolution regarding the following matters: Paying back of capital Dealing with assets and gains which are surplus in nature. Cumulative and non- cumulative dividends. Vote related matters. Deciding the order in which capital and dividends in context to other shares or classes of preference shares. Subsection 3 of Section 254A of the Act speaks of redeemable preference shares which are subscribed with a condition that they will be subject to encashment. This may be done When a certain time frame is mentioned or on the occurrence of a certain event. When the company wishes to do so. When the shareholder wishes to do so. Section 254J of the Corporations Act, 2001 says that redeeming of preference shares must conform to rules of the issue. When the shares are redeemed or encashment is done they are subject to cancellation. The rules do not apply when redeemable preference shares get cancelled due to capital reduction or buying back of share. Section 254K of the Act that preference shares can only be redeemed when the shares are paid for the entire price of it or if it is done out of the profits coming out of issue of new shares done for redemption purpose. Section 254L speaks about repercussions entailing contravening the previous sections. There is no effect on the validity of the redemption or any agreement or expenditure related with it. No offence can be alleged on the company. However a person who is involved in such contravention may face civil sanction. However the involvement must be dishonest in nature. Section 198A of the Corporations Act, 2001 This provision is part of the replaceable rules which are functional for the effectiveness of the internal governance system. It says that any business of the company should be under the managerial functions and surveillance of the directors. The director has the power to wield all powers of the company except those which the Act or the constitution of the company says that company should execute in a general meeting. Examples of a directors power may be issuing shares, borrowing money or subscription of debentures. When there is only one director in a proprietary company ( section 198E), and only one shareholder, he may execute and exercise all powers of the company except those mentioned in the Act which the company needs to exercise in the annual general meeting of the company. If there is only one director of the proprietary company and the only shareholder, he may draw, sign, endorse, accept and also execute a negotiable instrument (Austlii.edu.au, 2016). He may also devise a se parate manner of doing the same functions. There should also be provisions to indicate the presence of determining authority who may take decisions on behalf of a director who is relieved from functions. Moreover there must be provisions as to the appointment process of a new director replacing an old one. Section 191 of the Corporations Act, 2001 This provision speaks about the interest a director has in the company affairs. In case of any conflict, the director duty bound to mention to other directors his interest in the company affairs. In case there is any offense, the director will be held strictly liable for having material interest in the company affairs (Austlii.edu.au, 2016). However the directors are excluded to so when the interest- When the director is having common membership with other members of the company and has common interest in the subject matter. It is related to the directors earning as the director of a company Is connected to a contract requiring consensus of all members and will have no effect on the company unless ratified by the members of the company. If director is a surety to an indemnity paid by the director to the company for a loan. Related to a contract which insures the director for liabilities incurred as officer of the company. The director has the right to ask back the indemnity money for a loan given. Section 250R (2) and (3) of the Corporations Act, 2001 In any annual general meeting, agenda is well prepared and concise. However it may include anything which is not mentioned in the notice like- The annual budget in the yearly financial report, accountants report and directors report. Election procedure of the directors. Hiring an auditor. Deciding the payment to be given to the auditor According to subsection 2 of the section 250R of the Act, any decision pertaining to remuneration report must be debated (Austlii.edu.au, 2016). Finance of a company is an integral subject matter which should be given special impetus and should be given maximum attention while discussing it. Allocating payments is essential for any organisation to work hassle free. Correct allocation needs proper discussion and meeting of minds. The voting process must not bind any of the directors. It should be just advisory in nature and should not force participation on part of the directors. This is mention in sub section 3 of section 250R of the Act. Conclusion This assignment draws attention towards the procedures of formation and registration of a proprietary limited company. It should not be confused with sole proprietorship. It is formed on a much larger scale but controls are exercised usually in few hands. Proprietary corporations are in vogue in Australia and their importance is growing with every passing days. Various nuances and sections have been discussed comprehensively and solutions have been derived for various problems related to the Act. References Asic.gov.au. (2016).Constitution and replaceable rules. [online] Available at: https://asic.gov.au/for-business/starting-a-company/constitution-and-replaceable-rules/ [Accessed 14 Sep. 2016]. Austlii.edu.au. (2016).Corporations Act2001 - SECT 112. [online] Available at: https://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s112.html [Accessed 14 Sep. 2016]. Austlii.edu.au. (2016). Corporations Act2001 - SECT 113. [online] Available at: https://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s113.html [Accessed 14 Sep. 2016]. Austlii.edu.au. (2016). Corporations Act 2001 - SECT 134. [online] Available at: https://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s134.html [Accessed 14 Sep. 2016]. Austlii.edu.au. (2016). Corporations Act2001 - SECT 135. [online] Available at: https://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s135.html [Accessed 14 Sep. 2016]. Austlii.edu.au. (2016).Corporations Act 2001 - SECT 169. [online] Available at: https://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s169.html [Accessed 14 Sep. 2016]. Austlii.edu.au. (2016). Corporations Act2001 - SECT 191. [online] Available at: https://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s191.html [Accessed 14 Sep. 2016]. Austlii.edu.au. (2016).Corporations Act2001 - SECT 198A. [online] Available at: https://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s198a.html [Accessed 14 Sep. 2016]. Austlii.edu.au. (2016). Corporations Act2001 - SECT 250R. [online] Available at: https://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s250r.html [Accessed 14 Sep. 2016]. Austlii.edu.au. (2016). Corporations Act2001 - SECT 254A. [online] Available at: https://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s254a.html [Accessed 14 Sep. 2016].