General Corporations Law

Question 1

The Corporations Act 1989, as far as providing for incorporation of trading and financial corporations, is invalid.

Answer 1

New South Wales v Commonwealth (“Incorporation Case”) [1990] HCA

s 51(xx) - foreign, trading, financial - must be already formed.

Question 2

Which body has the statutory responsibility to administer the Corporations Act 2001 (Cth)?

Answer 2

ASIC.

National company register - education - enforcement.

Question 3

The replaceable rules apply to all companies (except single director companies) unless the constitution modifies.

Answer 3

s 135 Corporations Act 2001.

“…a replaceable rule can be displaced or modified by the company’s constitution.”

Question 4

The doctrine of ultra vires voided company acts which fell beyond the scope of its objects.

Answer 4

Ashbury Railway Co v Riche [1875] UKHL

Railway compay - construct and engineer object - contract to operate void.

Question 5

Which sections of the Corporations Act 2001 abolish the ultra vires rule?

Answer 5

They are:

• s 124 - company has legal powers of an individual; and
• s 125 - action no invalid merely because it is beyond objects.

Question 6

A company’s constitution has the effect of a statutory contract between company, directors and each member.

Answer 6

s 140 Corporations Act 2001.

“A company’s constitution (if any) and any replaceable rules that apply to the company have effect as a contract…”

Question 7

WIll a court stay a claim by a member against a company bought in breach of an arbitration clause?

Answer 7

Yes. Constitution is statutory contract.

Question 8

A member may apply to the court for relief (including winding up) if the company acts:

1. contrary to interests of members as a whole; or
2. oppressive towards a minority.

Answer 8

s 232 Corporations Act 2001.

one measure - regulates directors - interests of all shareholders.

Question 9

The company general has plenary power to modify or repeal its constitution, or a provision of its constitution, by special resolution.

Answer 9

s 136(2) Corporations Act 2001.

wide power to alter - binds all members - including dissenters.

Question 10

The court may grant an injunction to restrain a breach of the Corporations Act 2001.

Answer 10

s 1324 Corporations Act 2001.

ASIC - persons whose interests affected - damages also.

Question 11

Tighter controls exist around changing a company’s constitution to vary or cancel rights attached to a class of shares.

Answer 11

Part 2F.2 Corporations Act 2001.

Exception to plenary power - follow variations procedures - 75% of affected class if none.

Question 12

A constitution cannot be amended to expropriate shares unless for a proper purpose and fair in all the circumstances.

Answer 12

Gambotto v WCP Ltd [1995] HCA

Company takeover - 99.7% - hold out shareholder.

Question 13

Constiutional amendments which increase shares, liability, or restricts transfer of shares are not binding on existing members.

Answer 13

s 140(2) Corporations Act 2001

“Unless a member of a company agrees in writing to be bound, they are not bound by a modification of the constitution…”

Question 14

A company is a seperate legal entity from its directors and members.

Answer 14

Salomon v Salomon & Co Ltd [1896] UKHL

Bootmaker - business failied - recover company debt from shareholders.

Question 15

Corporate groups, while perhaps being grouped administratively, maintain seperate legal entity status.

Answer 15

Industrial Equity Limited v Blackburn [1977] HCA

Distribution from ‘profits’ - sought to rely on group profits - invalid.

Question 16

A member has no legal or equitable interest in the property of the company.

Answer 16

Macaura v Northern Assurance Co [1925] UKHL

Majoity shareholder - held insurance policy - but company owned wood.

Question 17

A corporation may commit an offence.

Answer 17

Hamilton v Whitehead [1988] HCA

company - offer interest in syndicate trust - director liable as accessory.

Question 18

Courts will pierce the corporate veil when a corporation has been established to commit a fraud.

Answer 18

Re Darby, ex parte Brougham [1911] KB

Purpose to fraudulently raise equity - liquidators recovered from directors

Question 20

The distinguishing feature between a partnership and a joint venture is former shares profit, while the later shares a product.

Answer 20

United Dominion Corporation Ltd v Brian [1985] HCA per Dawson J

Real estate development - described as joint venture - found in truth to be partnership and fiduciary duties owed.

Question 21

A member, acting in good faith and for a proper purpose, may apply to the court to inspect the “books” of a company.

Answer 21

s 247A Corporations Act 2001

“On application by a member of a company or registered managed investment scheme, the Court may make..”

Question 22

A member may, in good faith, apply to the court to bring a “derivative proceeding” if the company is unlikely to act and there is a serious question to be tried.

Answer 22

ss 236 and 237 Corporations Act 2001.

Question 23

When a company is wronged by its directors it is only the company that has standing to sue.

Answer 23

Foss v Harbottle [1843]

Company purchased land - development - directs allegedly wasted funds.

Question 24

Must a liquidator be a natural person?

Answer 24

Yes.

“it’s a personal appointment (ie nothing to do with the person’s firm)…”

Question 25

What is the limit on the number of non-employee shareholders of a Pty Ltd company?

Answer 25

50.

Question 27

Under the Owners Corporation Act 2006, what property does the owners’ corporation own?

Answer 27

Common property.