LAW 2505 Lecture Notes - Lecture 1: Sole Proprietorship, Public Company, Holding Company
23 May 2018
School
Department
Course
Professor
COMPANY PLANNING
Issue: persons wanting to start a company
Is there a choice between what TYPE of ENTITY is to be created?
STEP 1: incorporated or unincorporated?
STEP 2: Pty or PUBLIC?
Management structure; removing directors; members meetings; directors meetings
STEP 3: what type of company?
Proprietary
• S 112 Pty companies can be company limited by shars or unlimited company with
share capital
Company
Partnership
Sole trader
Separate entity?
Yes
S 124 legal capacity and
powers of an individual
No
no
Liability?
Limited (can be
unlimited)
Unlimited
Unlimited
finance
Very good
Poor
Poor
tax
30%
Personal 47%
Personal 47%
disclosure
High
None
None
structure
More than 50
shareholders is a PLC
Under 20
people (some
exceptions-
law and
accounting
firms)
Just one owner +
employees
management
Directors (and members)
Partners
Absolute
management
formalities
Registration + fee
None
none
Pty
Minimum 1 director s 201A(1)
No secretary needed s 204A(1)
--
A pty company may, (a) by
resolution remove a director from
office, and (b) may by resolution
appoint another person as a director
instead s 203C(RR)
--
RR can be removed s 249C
--
A member of a company who is
entitled to attend and cast a cote at
a meeting may appoint a proxy to
attend and vote for the member at
the meeting s 249(x) RR
--
If a director has a material personal
interest in a matter, they simply
have to disclose it under s 191 then
things act as if no interest s 194 RR
Public
Minimum 3 directors s 201A(2)
Minimum 1 secretary s 204A(2)
--
A public company may by resolution remove a director from office
despite anything in (a) the company’s c* (in any); or (b) an
agreement between the company and directors, or (c) an agreement
between any or all members of the company and the director s
203D(1)
Directors cannot be removed by other directors EVER s 203E
--
All public companies must hold an annual GM s 250N(2)
--
Listed: single director can always call a members meeting s 249
Listed: 28 days-notice must be given for a meeting of members s
259HA(1)
Listed: AGM, chairperson must allow questions/ comments about
remuneration report s 250SA
--
If a D has a material personal interest in a matter, they must
disclose it under s 191 then in order to vote/ be present at meeting
it must be either (a) approved by other directors at resolution, or (b)
by ASIC s195
find more resources at oneclass.com
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• S 113: no more than 50 non-employee shareholders (1); no fundraising activity
requiring (3) a disclosure doco under ch 6D
• S 201A(1) must have one or more directors
• S 148(2) must always include the words Pty Ltd in its name
• S 254W920 RR subject to the terms on which shares are issued, the director may pay
dividends as they see fit
S 45A can be a small or large Pty company. Small if it satisfied two or the following
• Gross revenue < 25 million
• Gross assets < 25 million
• Employees < 50
Company limited
by shares
S 9 a company formed on the principle of having the liability of its member limied to the
amount (if any) unpaid on the shares respectively held by them
Unlimited
company with
share capital
Members have no limit placed on their liability
Public company
S 112 can be any type of company
Any company that is not incorporated, or converted to a pty company
• S 201A(2) 3 or more directors
• S 201E special rules apply to appointment of director
• S 203D and 203E restrictions on removal od D
• S 204A must have a secretary
• S 250N must hold AGM
• S 254W each share in a class of shars must have same dividend rights
• S 292 must lodge financial eports regardless of size
• S 300(1) Ds reports must contain statements about the qualifications of the Ds, their
attendance at meeting, their shareholding and their contacts with the company
• S 254W(1) each share in a class of shares has same didivdnd rights unless (a) c*
provides for the shares tohave different dividend tightd; or (b) different dividend rights
are provided for by special rsolution
• S 392 resignation or an auditor requires consent of ASIC
• Ch 2E restrictions on transactions with related parries
Company limited
by guraantee
The liability of ompanys members limited to the respective amounts that the members
guarantee to contribute if the company is wound up
No liability
company
S 112(2) may be registered as a no liability company only if the company has a share capital,
its sole purposes are mining purposes andit has no contractual right to recover failed pay calls
Company limited
by shares
S 9 a company formed on the principle of having the liability of its member limied to the
amount (if any) unpaid on the shares respectively held by them
Unlimited
company with
share capital
Members have no limit placed on their liability
Can the corporate veil be lifted?
Issue: creditors seeking to pierce the corporate veil to recover debt incurred by company from members/ directors
Step 1: At common law, courts are reluctant to disregard the principle in Solomons case to pierce it.
• Lifted when a company is used as a "mere facade" concealing the "true facts"- a creature of the defendant, a
mask to avoid a pre-existing obligation (Jones v lipman). Look to timing, relationship between individuals
involved etc
• Lifted if a company is used as a vehicle for fraud (Re Darby)
• Lifted if a company has been used for fraud/ improper purpose- company created as a sham/ cloak to avoid a
legal obligation (Gilford Motor Co)
• Lifted if a company knowingly participates in a breach of a director's fiduciary duties (Green v Bestobell)
Step 2: May be pierced by statue
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
S 124 legal capacity and powers of an individual. Under 20 people (some exceptions- law and accounting firms) management. Management structure; removing directors; members meetings; directors meetings. A pty company may, (a) by resolution remove a director from office, and (b) may by resolution appoint another person as a director instead s 203c(rr) A member of a company who is entitled to attend and cast a cote at a meeting may appoint a proxy to attend and vote for the member at the meeting s 249(x) rr. If a director has a material personal interest in a matter, they simply have to disclose it under s 191 then things act as if no interest s 194 rr. Directors cannot be removed by other directors ever s 203e. All public companies must hold an annual gm s 250n(2) Listed: single director can always call a members meeting s 249. Listed: 28 days-notice must be given for a meeting of members s.
