Question

1. Explain the division of power between the Board of directors and General Meeting of Shareholders.

2. Discuss who is bound by the Constitution and replaceable rules. With respect to the different parties briefly outline the rights that may be enforced under the Constitution and replaceable rules.       

3. Detail the conditions that must be satisfied for a small scale offering to be exempt from the disclosure requirements.

4. List the benefits of voluntary administration as a process that gives business an opportunity to recover?

Answer 1

Answer:

a) Explain the division of power between the Board of directors and General Meeting of Shareholders.

QUICK ANSWER:

• The fiction theory, also named natural entity theory or organic theory, describes that the legal person has no actual reality, no mind, no willing, the legal person exists only in law.
• The division of power between the board of directors and the general meeting of members has been relatively settled in Anglo-Australian law since the decision of Lord Clauson in Scott v Scott in 1943. This case considered the interpretation of the then default constitutional provision2 regarding management of a company, which gave management power to the board of directors, subject to regulations passed by the general meeting. The Court read down the general meeting's power to interfere with board decisions by regulation and held that board power in this situation is paramount.
• Since then - the default constitutional provisions have been changed in Australia and the United Kingdom to further entrench the management role of the board. In Australia there is no longer any mention of the general meeting in the replaceable rule in s 198A of the Corporations Act 2001 (Cth), which simply provides that the company is to be managed by or under the direction of the board. In the UK, Table A3 does not go quite as far, in that it still refers to the possibility of the general meeting giving a direction to the board, but this must be done by special resolution.
• What then are the options for shareholders who are unhappy with the management of companies in which they have invested? The Court of Appeal said in John Shaw & Sons (Salford) Ltd v Shaw that shareholders unhappy with the board's exercise of management power should either alter the articles of the company (now constitution) or refuse to re-elect the directors of whose actions they disapprove.

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b) Discuss who is bound by the Constitution and replaceable rules. With respect to the different parties briefly outline the rights that may be enforced under the Constitution and replaceable rules.   

QUICK ANSWER:

In short, all companies and each's company's internal management are bound by the provisions of the Corporations Act 2001 that apply to the company - known as replaceable rules, by theconstitution, or by the combination of both. Specifically, the following companies must be governed by a constitution:

• 'No Liability' public companies
• 'Special purpose companies' that want a reduced annual review fee.
• A proprietary company (that is a special purpose company)

The following are the rights enforceable under replaceable laws:

• Voting and completion of transactions - directors of proprietary companies
• Right to power of directors
• Power to Negotiable instruments
• Rights to a Managing director
• Company may appoint a Director
• Directors may appoint other directors

c) Detail the conditions that must be satisfied for a small scale offering to be exempt from the disclosure requirements.

QUICK ANSWER:

• Section 107.Burden of proving death of person known to have been alive within thirty years.
• Section 108.Burden of proving that person is alive who has not been heard of for seven years.
• Section 102.On whom burden of proof lies.
• Section 115. Estoppel
• Section 116. Estoppel of tenant and of license of person in possession
• Section 117. Estoppel of acceptor of bill of exchange, bailee or licensee

d) List the benefits of voluntary administration as a process that gives business an opportunity to recover?

QUICK ANSWER:

1. It is an inexpensive method to initiate and the cost to implement will be significantly lower compared to all other methods.
2. It will help in improving the financial position of the company as the asministrator reviews the business's finances and makes reccommendations.
3. The voluntary administration process also gives creditors the a chance to find out what’s happening in the business and get an independent expert to review the finances of the company.