BLAW20001 Midterm: Corporate Law Mid-Term Exam Framework

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Part 1: Incorporation
A. Incorporation process
(i) Basic
s 114- a opa eeds at least oe ee, dot eed a ostitutio.
s 201A Proprietary companies must have at least 1 director who ordinarily resides in Australia; public must have 3, 2 of which
must ordinary reside in Australia.
(ii) How a company is registered Pt 2A.2
Registration with ASIC using ASIC Form 201and payment of fee (see Part 2 A.2 and Small Business Guide in Part 1.5)
Can have just one member (s114) and dont need a constitution
Lodge an application with ASIC s 171(1) in the prescribed form (3), this must contain (2) type of company, proposed
name, names and addresses of proposed members (those consenting) and those who have been nominated to be
director(s) and secretary etc.
o If a company ltd by shares, - the number and classes, the amount they are worthy, whether that will be
paid on registration, whether they will be beneficially owned.
o Providing and maintaining consents and agreements is a strict liability offence (7).
o Public companies must also lodge a constitution (3).
s 118 ASIC will then register and issue a certificate (giving the ACN, name, type)
s 119 Companies come into existence on registration. It will be registered as from the jurisdiction of its registration
(now cth) s 119A.
s 120 a person will then become a member/director/secretary as they are specified in the application. (1) Shares
will be issued on registration (2).
s 121 the address specified in the application will become the registered office.
s 122- the expenses incurred before registration in promoting/setting up a company may be paid out of the
opas assets
s 123 companies can then have a common seal.
See also
Small business guide pt 1.5 (item 3).
B. Consequences of incorporation
Although there is no specific section (like old s 123(2)), it is acknowledged that, the common law attributes listed below, are
implicitly conferred by s 119 when the company comes into existence as a body corporate, and by s 124(1) which gives it
separate legal personality/power.
What it provides a company, when registered:
o ability to perform all functions of a body corporate
o sue/be sued
o enjoy perpetual succession
o (possession of a common seal optional)
o ability to acquire hold and dispose of property
C. Classes of company
In this class we focus on those limited by shares (and mainly public) (ltd, not pty).
There can be: (s 112 (1))
1. PROPRIETARY COMPANIES
i. Langford (Ltd) Public
b. limited by shares, or (pty ltd)
c. unlimited with share capital
d. do not wish to raise funds from the public
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e. A proprietary company must have at least 1 director. That director must ordinarily reside in Australia.
201A(1)
f. Langford (Pty Ltd) Proprietary IF IT HA“ PTY it is P‘OP
g. ** Must have the word Proprietary or Pty in its name - s148
h. Needs to have a minim of 1 director (s201A)
i. A proprietary company is a private company designed for a relatively small group of persons who do not
wish the company to be able to invite the public to subscribe for its share capital or to lend money to it.
Section 113 identifies the requirements for proprietary companies.
j. A proprietary company must not have more than 50 non-employee shareholders and it must not engage in
any activity that would require disclosure to investors under Ch 6 D3 except in the limited circumstances
outlined below.
k. Choose a public company if you want control over who can become a shareholder in the company
l. PCs ill tpiall plae estitios o its tasfe of shaes if ou at the shaes to e held  a sall
ue of idiiduals ie.losel held opaies
m. They require less regulation and are allowed more privacy in relation to their finances
n. Section 113 (1): A company must have no more than 50 non-employee shareholders if it is to
1. (a) Be registered as a proprietary company; or
2. (b) Change to a proprietary company; or
3. (c) Remain registered as a proprietary company.
ii. Section 113 (3):
iii. Prohibited from engaging in any activity that would require disclosure under the fundraising provisions of
the act
iv. A proprietary company must not engage in any activity that would require disclosure under Chapter 6D,
except for an offer of its shares to:
1. (a) Existing shareholders of the company; or
2. (b) Employees of the company or a subsidiary of the company.
v. ASIC can order the company to convert to a public company s165
2. PUBLIC COMPANIES
a. Defines as Not a proprietary co (s 9) Generally MUST NOT HAVE the word Proprietary or Pty in its
name - s 148(5)* (hint how to tell)
b. limited by shares (ltd)
c. limited by guarantee
d. unlimited with share capital or
e. No liability (limited to mining companies (s 112(2)). No liability companies cannot engage in activity outside
the mining purpose object.
f. A public company must have at least 3 directors (not counting alternate directors). At least 2 directors must
ordinarily reside in Australia 201A(2)
g. Needs to have a minim of 3 directors (s201A)
h. Public companies Companies that wish to praise funds from the public
i. Require greater regulation in order to protect the investing publicmust disclose financial information
relevant to investment directions
j. Greater restrictions on public companies buying back their shares
k. Public companies must hold annual general meetings of shareholders (Prop companies do not)
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l.
(i) Companies limited by shares-
Members contribute capital and gain a share of the profits
In insolvency, they will not have priority over creditors. Therefore, the company must be solvent when share capital is
returned.
Such companies must be formed with share capital, which is the total amount
o Contributed by members, as proprietors, in money (or worth), to be adventured into that opas usiess, o
terms that the claim of the contributors to recover their contribution
is postponed to creditors, and
can be discharged only if the company is solvently trading
Shareholders can be of different classes, with differing rights. They have limited liability. On winding up, they only owe that
which they have yet to pay for their shares.
Liited was an addition for the companies, so that creditors would be aware of the limitation of liability
Puli opaies aise fuds  apital otiutios fo ees, it ill do so o a lage sale ad e listed o the ASX
(ii) Shareholders (see topic 9)
Hae a udle of ights agaist the opa, iludig –
o the right to attend/vote at GMs
o to payment of dividends
o to a return of capital in winding up, after all debts have been repaid
D. Proprietary companies, the distinction between large and small
Proprietary companies are private and formed to benefit relatively small numbers of persons. For example: a family business.
If a company is not a proprietary company (i.e. more than 50 members) it will be a public company.
(i) s 45A Types of proprietary company (big/small) (PTY LTD)
Proprietary (as opposed to public) (1) a company that is registered as, or converts to, a prop company under the Act (via s
118/61BD)
o It must: be limited by shares/unlimited with share capital
o have no more than 50 non-employee shareholders
o Not do that which would require disclosure
Small proprietary (2) if it satisfies 2/3 of the following:
o (a) its consolidated revenue for the financial year (including companies it controls) is less than $25 million
o  The alue of the opas osolidated assets is less than $12.5 million.
o (c) The company (and the entities it controls) have fewer than 50 employees
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Document Summary

If a company ltd by shares, - the number and classes, the amount they are worthy, whether that will be paid on registration, whether they will be beneficially owned. Providing and maintaining consents and agreements is a strict liability offence (7). Public companies must also lodge a constitution (3). s 118 asic will then register and issue a certificate (giving the acn, name, type) s 119 companies come into existence on registration. Small business guide pt 1. 5 (item 3): consequences of incorporation. In this class we focus on those limited by shares (and mainly public) (ltd, not pty). There can be: (s 112 (1): proprietary companies, langford (ltd) public limited by shares, or (pty ltd, unlimited with share capital, do not wish to raise funds from the public. A proprietary company must have at least 1 director. Langford (pty ltd) proprietary if it ha (cid:862)pty(cid:863) it is p op.

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