STATUTE Flashcards
What do you need to show for obstensible authority?
- a representation was made that the agent had authority to enter into that type of contract
- the representer has actual authority to act on behalf of the company either generally or in specific matter
- Reliance on representation
- constitution does not deprive ability to delegate authority
Explain s 128
A person is entitled to make assumptions in s 129 in relation to DEALINGS with a company. The company is not entitled to assert in proceedings in relation to the dealings that any of the assumptions are incorrect.
List assumptions 1-3 in s 129
(1) Can assume the corporate constitution has been complied with. This is essentially the indoor management rule. [Similar to “that is in order which appears to be in order”
(2) Can assume that persons listed as directors or company secretaries on ASIC have been (a) duly appointed [Builds on s 205B] and (b) have usual authority. [Hely – reflects usual authority]
(3) Can assume that people held out by the company as an officer or agent has been (a) duly appointed and (b) has authority to exercise the powers and perform the duties customarily exercised. [Reminds us of ostensible authority (Freeman)].
List assumptions 4-6 in s 129
(4) Can assume officers and agents properly perform their duties to the company (i.e. that they are not acting in breach of their duties)
(5) Can assume document duly executed if it appears to have been executed in accordance with s 127(1) (i.e. signature of 2 directors or 1 director and company secretary)
(6) Can assume a corporate seal has been properly affixed and witnessed under s 127(2).
what is s 128(4)?
A person is not entitled to make an assumption in s 129 if at the time of the dealings they knew or suspected that the assumption was incorrect.
subjective (sunburst)
Explain s 187 (for the company as a whole)
A director of a corporation that is a wholly-owned subsidiary of a body corporate is taken to act in good
faith in the best interests of the subsidiary if:
(a) constitution of subsidiary expressly authorises director to act in best interests of holding company; and
(b) the director acts in good faith in the best interests of the holding company; and
(c) not insolvent at the time and does not become insolvent because of it.
What is s 181
Statutory duty to act in good faith and for a proper purpose.
Objective standard is used.
What is the test for a D making profit?
prohibition on “by reason of and in the course of their fiduciary relationship”
Outline related party transactions
s 208 - for a public company (or subsidiary) independent member approval is required for the company granting a financial benefit to a related party.
s 229 - financial benefit (very broad)
s 228 - related party
main escape route - s 210- financial benefits given on arm’s length terms
what is the duty of care of D’s under statute?
s 180(1) (1) A director or other officer of a corporation must exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person (objective standard) would exercise if they:
(a) were a director or officer of a corporation in the corporation’s circumstances; and
(b) occupied the office held by, and had the same responsibilities within the corporation as, the director or officer.
What does the D have to show in order to shift risk under s 198D
s 190 (2) A director is not responsible [i.e. can shift risk] under subsection (1) if: (a) the director believed on reasonable grounds at all times [this suggests an ongoing obligation to check the delegate’s competence] that the delegate would exercise the power in conformity with the duties imposed on directors of the company by this Act and the company's constitution (if any); and
(b) the director believed:
(i) on reasonable grounds; and
(ii) in good faith; and
(iii) after making proper inquiry if the circumstances indicated the need for inquiry; that the delegate was reliable and competent in relation to the power delegated.
What is the business judgement rule?
s 180(2) (2) A director or other officer of a corporation who makes a business judgment is taken to meet the requirements of subsection (1), and their equivalent duties at common law and in equity, in respect of the judgment if they:
(a) make the judgment in good faith for a proper purpose; and
(b) do not have a material personal interest in the subject matter of the judgment; and
(c) inform themselves about the subject matter of the judgment to the extent they reasonably believe to be appropriate; and
(d) rationally believe that the judgment is in the best interests of the corporation.
What is the test for fraud on the minority? (also overlaps with good faith/company as a whole)
whether in the honest opinion (i.e. subjectively) of the shareholders, the resolution was passed by shareholders bona fide for the company as a whole (which means the members as a whole, not the company as a distinct entity).
What is the test in Gambotto?
Garden variety alterations- Prima facie, the majority’s resolution will be valid unless its ultra vires (beyond any purpose contemplated by the company’s articles) or it’s oppressive.
Shares/share right alterations: Prima facie the resolution is invalid unless it can be shown by the majority (i.e. onus is on them) to be (1) for proper purposes and (2) not oppressive.
When will the court grant leave to bring a statutory derivative suit?
s 237(2) - must grant leave if (a) it is probable the company will not bring an action, and
(b) the applicant is acting in good faith, and
(c) it is in the best interests of the company that leave be granted, and
(d) the applicant has given 14 days notice of the leave application to the company.
