Topic 1: Chapter 27 Terminology

Question 1

ASIC

Answer 1

The Australian Securities and Investments Commission

Question 2

Chose in Action

Answer 2

Legal standing that allows the enforcement of a right (usually to non-physical property).

Question 3

Circulating Security Interest

Answer 3

Replaces the old floating charge on the circulating assets of a debtor; non-circulating security interest replace the old fixed charges system.

Question 4

Company (also known as a corporation)

Answer 4

A distinct legal entity separate from its shareholders.

Question 5

Company Constitution

Answer 5

The internal rules, created by the company itself, governing the management and members of the company.

Question 6

Crowd Funding

Answer 6

The ability of an investor to set up an internet platform to raise funds for a boutique enterprise from the public.

Question 7

Debenture

Answer 7

A documented promise by a company to repay borrowed money through a security.

Question 8

Director

Answer 8

A person either appointed or defined to be a director as per s9 of the Corporations Act 2001 (Cth).

Question 9

Disclosing Document

Answer 9

A document that must be prepared by companies offering securities publicly.

Question 10

Dividend

Answer 10

Represents the division of a company’s profits among its shareholders.

Question 11

Execution

Answer 11

the carrying out of a duty or proper signing and preparation of a document.

Question 12

Liquidator

Answer 12

The person appointed to carry out the winding up of a company.

Question 13

Manage Investment Scheme

Answer 13

The offer to participate in an investment which is not normally defined as a security.

Question 14

Member

Answer 14

A shareholder of the company, or member of a guarantee company which has no shares.

Question 15

Officer

Answer 15

A person who holds a significant managerial position in the company as defined by s9 of the Corporations Act 2001 (Cth).

Question 16

Oppression

Answer 16

An action by members of the company which is unfair, discriminatory or prejudicial against a member of the company.

Question 17

Personal Property Securities Register

Answer 17

A means by which all security interests are recorded on a national register.

Question 18

Phoenix Company

Answer 18

A phoenix was a mythical bird who died by setting itself on fire, only to rise out of the ashes to live again. Similarly, directors have been known to revive a company that was liquidated without its creditors being paid by simply starting a new (and thus debt-free) company to carry on the business.

Question 19

Pre-registration Contract

Answer 19

A contract made by a promoter or some other party on behalf of a company which is still to be registered.

Question 20

Promoter

Answer 20

Is the party who brings together interested parties in order to register a company.

Question 21

Proprietary Company (aka a private company)

Answer 21

A company limited by shares, or unlimited with share capital, and with no more than 50 non-employee shareholders.

Question 22

Prospectus

Answer 22

A disclosure document setting out the nature and objects of an issue of shares or debentures created by a company and inviting the public to subscribe to (buy) them.

Question 23

Public Company

Answer 23

A company which is able to invite the public to invest in its shares.

Question 24

Ratify

Answer 24

To agree to, to accept responsibility for.

Question 25

Receiver

Answer 25

A person appointed by a creditor can be a private receiver, or a public receiver if appointed by a court, who then enters into possession of the property of a company in accordance with the powers granted by the creditors or the court.

Question 26

Registration

Answer 26

Also referred to as incorporation, whereby a company comes into existence through registration with ASIC.

Question 27

Replaceable Rules

Answer 27

A set of basic rules enshrined in the Corporations Act 2001 (Cth), s141 which determine the internal management of a company.

Question 28

Safe Harbour Principle

Answer 28

A defence available to directors who attempted, with reasonable prospects, to manage a potentially insolvent company out of its potential insolvency.

Question 29

Security Interest

Answer 29

A lender registers a claim or interest in property held by the borrower.

Question 30

Shares

Answer 30

A security, a chose in action (intangible personal property) and the parts into which the capital of a company is divided.

Question 31

Statutory Derivative Action

Answer 31

A member or officer can take legal action on behalf of a company by force of statute.

Question 32

Ultra Vires

Answer 32

Acting beyond proper powers.

Question 33

Whistleblower Protection

Answer 33

Public and large proprietary companies must establish policies allowing persons in the company to make “public interest disclosures”, where the company is doing something wrong.