BLAW20001 Study Guide - Final Guide: Lexus Gs, Unfair Prejudice In United Kingdom Company Law, Financial Statement
29 May 2018
School
Department
Course
Professor
Corporate Law Notes
MEMBERS POWERS
Action
Section
Resolution
Remove directors
203D: Ltd
RR 203C: Pty
Ordinary
Appoint directors
RR 201G
Ordinary
Amendments to constitution
136(2)
Special
Variation of class rights
246B(2)
Special
Unless constitutional provision
Director remunerations
202A(1)
Ordinary
Dividend rights
Approving preference shares
254W
254A(2)
Special
Unless constitutional provision
Ch2E
Financial benefit to related party
208
Financial assistance to acquire shares
260B
Special or unanimous vote
Unless exemption: s260C
Reduction of share capital
256C
Equal: ordinary
Selective: special
Share buy-back
257B
Equal access scheme: ordinary
Selective: special or unanimous vote
Appointment and removal of directors
Proprietary company
Unlisted public company
Listed public company
How are
directors
appointed?
Check constitution or RR
If RR apply:
- Board may appoint but
members must confirm
appointment later: RR
s201H
- Members may appoint
by ordinary resolution:
RR s201G
Check constitution or RR
If RR apply:
- Board may appoint but
members must confirm
appointment later: RR
s201H
- Members may appoint
by ordinary resolution:
RR s201G
- Separate resolution
required for each
director unless all
members agree: s201E
Check constitution
- If board may appoint
members must confirm at
the next AGM: ASX Listing
Rules
Separate resolution required for
each director unless all members
agree: s201E
All directors (other than CEO)
must stand for re-election every
three years: ASX Listing Rules
How are
directors
removed?
Check constitution (may allow
board or members to remove)
If RRs apply, members may
remove by ordinary resolution:
RR s203C
Members may remove by
ordinary resolution: s203D
Board cannot remove a
director: s203E
Members may remove by
ordinary resolution: s203D
Board cannot remove a director:
s203E
Definition of “director” and “officer” under s9:
Director
Officer
(a) regardless of name
given to their position
(i) appointed
(ii) acting in capacity
(a) director or secretary
(b) not validly appointed
(i) act in position – de facto
(b) a person:
(i) makes decisions that
affect the whole or
substantial part of the
business
(ii) significantly affect
financial standing
(iii) directors accustomed
to follow their wishes or
instructions
(ii) directors accustomed to
follow their instructions or
wishes - shadow
(c) receiver or manager of
corporation property
(d) administrator
(e) administrator of a deed
(f) liquidator
(g) trustee
Introduction to company law
Separate legal entity doctrine:
Company is a separate legal person
• Salomon v Salomon
Companies are separate from their controllers:
• Lee v Lee's Air Farming Ltd
• Macaura v Northern Assurance
Limited liability:
In a company limited by shares, a member's liability to pay debts of the company is limited to the amount (if any)
unpaid on their shares: s516
s254M: liability on partly-paid shares
s254B: terms of issue of classes of shares
s198A: director’s power to issue shares
s254A(2): shareholders’ approval to preference share rights
Business planning and setting up companies
Piercing the corporate veil:
Making shareholders liable for corporate debts
-> Avoiding a legal duty:
• Gilford Motor Company v Horne
• Jones v Lipman
-> Statutory veil piercing: s558V
Proprietary companies (Pty Ltd): s113
• no more than 50 non-employee members
• no fundraising activity
-> may be a company limited by shares or an unlimited company with share capital: s112
Public companies (Ltd): s112
• sometimes have different rules - dividends: 254W; disclosure
Pty Ltd: s113
Ltd: s112
201A(1): 1+ director, ordinarily reside in Australia
201A(2): 3+ directors, 2+ directors ordinarily reside in
Australia
204A(1): not required to have a secretary
204A(2): 1+ secretary
RR 203C: members can vote out director
203E: Ltd directors cannot remove other directors
203D: members can vote out director
249H(3)(A): at least 21 days’ notice
191(2)(B): other directors are aware of nature and extent
of interest
191(5): does not apply to sole director of Pty
195(1): directors of Ltd who have a material personal
interest must not (a) be present or (b) vote
RR 254W: subject to terms of issue, directors may pay
dividends as they see fit
254W: each class of shares have the same dividend rights
unless (a) constitution or (b) special resolution
250N: must hold AGM yearly and within 5 months of FY
end
Corporate groups:
Companies can be shareholders in other companies
• Holding companies and subsidiaries: s46
• Related bodies corporate: s50
• Controlled entities: s50AA
Registering companies:
Companies created through registration by ASIC
-> Procedure: s117
-> Names - s148:
• No liability - NL
Internal management of companies (replaceable rules): s134
RR do not apply if displaced or modified by a constitution: s135(2)
Table of RR: s141
Not all RRs apply to all companies:
• S249X (proxies) - mandatory for public companies; replaceable for proprietary companies
• S203C (removal of directors by members) - RR for proprietary companies only
• S254D (pre-emption) - RR for proprietary companies only
Adopting a constitution:
-> When company is registered or later: s136(1)
-> Adopting, amending or repealing a constitution after registration requires a special resolution of members: s136(2)
• Special resolution: s9 - 75% vote of those present who are entitled to vote
-> Entrenching a rule: constitution can contain extra requirements for changing its rules: s136(3)
Legal effect of the internal governance rules:
S140(1) - a company's constitution (if any) and the RRs that apply to it have effect as a contract between:
• (a) The company and each member
• (b) The company and each director and secretary
• (c) A member and each other member
-> Eley v Positive Govt Security Life
Statutory contract only applies to those stated in s140(1)
Failure to comply with RR of company is not a contravention of Corporations Act: s135(3)
Single director/shareholder companies:
-> Only allowed for proprietary companies
-> RRs do not apply: s135(1)
-> Some special rules apply: s198E, s201F, s202C
Decision making in companies
Directors have general power of management: RR s198A
Board delegation of certain functions to committees of the board: s198D
Board delegation of day-to-day management to CEO/managing director: RR s198C
Members cannot interfere with powers of board:
Automatic Self-Cleansing Filter Syndicate v Cunninghame
John Shaw & Sons [also for proper purpose meaning that it is within that decision-making organ’s power] table?
Options available to members who disagree with board:
• Vote out board
• Sell shares
• Change s198A – power of directors – or other rules
Members vote directors onto the board:
-> Members elect the directors by ordinary resolution: RR s201G
-> Members must approve appointments made by directors under casual vacancy power: RR s201H
-> table 10.1 pg 215
Members remove directors from the board:
-> Vote in general meeting
• Public company: s203D (ordinary resolution)
