LAWS3100 Study Guide - Midterm Guide: Ibm System I, Byrsonima Crassifolia, Investor
LAWS3100 Corporate Law Lecture 1 (Chap 1 and 2)
CHAP 1: ABOUT COMPANIES
A company is an artificial person created by the law. !
Function: hold assets (property) and to carry on a business or other activity, as an entity separate
from the participants (investors, managers) in that business or activity. !
Company law developed alongside the company to regulate the relationship between:!
-participants in the company !
-The company and the state !
-The company and those with whom the company had dealings !
AUSTRALIAN SECURITY EXCHANGES (ASX):
: one of the 3 listing markets in Australia
: many large public companies’ shares are listed on the ASX in which investors can buy and sell
the company’s shares on the ASX market.
: largest entity listed on the Australian market is the Commonwealth Bank, which in October 2015
had a total market capitalisation of more than $130 billion.
THE ARCHITECTURE OF COMPANIES
Dominant form of business organisation
Over 2.11 million companies in Australia, 99% of these companies are limited by shares.
Created by: Application to ASIC, the Commonwealth government agency responsible for the
formation and regulation of companies —> requirements are met —> ASIC registers company
They are ‘separate legal persons’ with special attributes and features
Most companies are small businesses, about 2000 companies are listed
At least one member and at least one director, who is responsible for managing the company’s
business.
Some proprietary companies (optional) and all public companies also have a secretary for admin
responsibilities.
STRUCTURE OF COMPANY’S CAPITAL
The sources of that fund = Company’s capital come from:
1) contributions of capital made by the persons who form the company or persons who become
members after the company is formed
2) By creditors- including lenders and those who supply goods on credit
3) Profits (if any) not distributed to members
Equity capital (shares): in a case limited by shares, the members provide money or property to the
company and receive shares in return. The money or property becomes the property of the
company and not of the member anymore.
Debt Capital: companies borrowing money from banks to fund its operations. Suppliers may also
supply goods to companies on credit. These are not members of the company, instead just in a
contractual relationship with.
Share: a number of rights that may or may not include control rights (voting rights, rights to receive
information) and distribution rights (right to receive dividends or to share in the assets of the
company on a winding up of the company.
STRUCTURE OF COMPANY’S MANAGEMENT
(board of directors and other officers, members (shareholders)
What does it mean to be a member of a company?
A person who holds shares in a company.
Invested money in the company expecting to receive a return on their money if the company is
successful, either as dividends or in the form of growth in the value of their investment in the
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company overtime. In the case of a company limited to shares, the members are called the
shareholders- the people that have purchased shares in the company.
- Officers include the director/board of directors (plural).
- Board of directors manage the business.
- Selected between the members and from company’s governance rules.
- Make decisions without the approval of members, except changes to the company’s governance
rules that affect rights of members.
-Directors are not always members; Directors may be executive (employed by the company and
devote all their working time to managing the company’s affairs) or non-executive (not
employed, provide an outsider’s contribution and oversight to the company).
-Members have a right to vote on some issues but usually not on general management decisions
The historical development of companies
- The emergence of corporate aggregate (as separate legal persons) and the concept of joint stock
(as a means of financial participation)
-Legislation making incorporation available as a general right (from mid 19th century)
-Limited liability (from mid 19th century)
-Recognition of proprietary company as a distinct form of company
-Recognises the privileges of incorporation (from mid 19th century) extend to small, closely held
companies, in Salomon’s case
-The statuary facilitation of true ‘one-person’ companies
Extra questions:
•When did the right to incorporate companies become generally available? The 1844 Act
allowed business associations to become companies by a process of registration. Registration
was granted in 2 stages, provisional and final, with final registration being available only after
the company had secured investments from 1/4 of the proposed final number of investors.
•When was limited liability first introduced? 1855
•When were companies first used for small business? After the Salomon Case in 1897, the
benefits of incorporation were capable of extending to small, privately owned companies. New
disclosure requirements designed to protect public investors, introduced into Victorian law in
1896, were expressed NOT to apply to proprietary companies.
•When did it become possible to have a one-person company? 1 July 1998. Single direct/
shareholder company.
Proprietary companies vs Public companies
Proprietary companies: Most Australian companies are small businesses and most of these are
proprietary companies.
s113:
no more than 50 members
Not permitted to ask the public for investment. In return, they are exempted from many company
law rules.
- no fundraising activity requiring a disclosure document under Chapter 6D of Corporations Act
- may be a company limited by shares or an unlimited company with share capital (s112)
Public companies: everything other than proprietary companies
s112:
companies limited by guarantee and no liability companies are always public companies
companies limited by shares and unlimited companies with share capital may be public companies
CHAP 2: COMPANY LAW
General term used to describe the legal rules governing:
formation and termination of companies
Through the first set of rules, company law provides for this. Since companies are artificial legal
persons created and extinguished by the state, laws are necessary to confer or withdraw their
existence. !
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Document Summary
Laws3100 corporate law lecture 1 (chap 1 and 2) A company is an arti cial person created by the law. Function: hold assets (property) and to carry on a business or other activity, as an entity separate from the participants (investors, managers) in that business or activity. Company law developed alongside the company to regulate the relationship between: The company and those with whom the company had dealings. : one of the 3 listing markets in australia. : many large public companies" shares are listed on the asx in which investors can buy and sell the company"s shares on the asx market. : largest entity listed on the australian market is the commonwealth bank, which in october 2015 had a total market capitalisation of more than billion. Over 2. 11 million companies in australia, 99% of these companies are limited by shares.
