Company’s constitution Essay

QUESTION 1 slew the issue about comp whatevers musical composition and whether the loan shove between ABC assert and surface-to-air missilebal Pty Ltd is hinder. disk operating system the lawSection one hundred forty of the corporations dissemble states thatA caller-outs constitution (if whatsoever) and any expendable rules that apple to the ships community have effect as a slue (a) Between the company and distributively member and (b) Between the company and each director and company secretary and (c) Between a member and each other memberApply the lawAccording to section 140, a companys constitution is only an internal governance rule, it put upnot be enforced by outsider and also shadownot be used and spell between a company member and an outsider (Corporation Act, 2001).In this case, Sambal Pty Ltd has a constitution, which restricts the amount of money the company can borrow at any one time to $10m. So, as a director of Sambal Pty Ltd, both Jim and spear req uire compliance with this internal governance rules (maximum borrow $10m at one time), however, the directors who had been authorised by the dining table had borrowed an extra $2m loan from ABC affirm this time. Well, at the same time, section 140 is important in catch out that the consequences of a failure, by some person who is bound by them, to obey with the internal governance rules. This means the liability should be undertook by the directors.State the lawSection 125(1) if a company has a constitution, it whitethorn check into an say restriction on, or a prohibition of, the companys exercise of any of its points. The exercise of any of its powers, the exercise of a power by the company is not invalid. 125 (2) if a company has a constitution, it may set out the companys object. An act of the company is not invalid merely because it is reverse gear to or beyond any objects in the companys constitution. Section 126(1) a companys power to make, vary, ratify or discharge a contract may be exercised by an individual acting with the companys express or implied imprimatur and on behalf of the company. The power may be exercised without apply a common seal.Apply the lawCompanies that act outside their capability are said to have acted ultra vires. According to section 125, companys exercise goes beyond to a companys constitution will not invalid. That means, although the companys sue goes beyond the constitution, the action will still valid. So, the $2m loan contract between ABC bank and Jim and Peter will still valid. The company should pay the interest that relate to $2m loan (Corporation Act, 2001). Moreover, the person who rupturees the companys constitution may be liable for indemnification (if any) to other shareholders. In this case, the two directors Jim and Peter should be responsibility to their act and bear the damages to other shareholders (Corporation Act, 2001).ConclusionIn this case, ABC bank do not have any liability. Sambal sh ould make water interest for the $2m loan to ABC bank, and asks the two directors to bear all the damages of companys other shareholders.Question 2(1) IssueIn this case, the shareholders of Rich Pty Ltd havent been remunerative a dividend related to their shares for 3 years. Susan who owns 25% shares of the company is one of them. She is convinced that she deserves better and yet, given no reasons, the tabular array of directors refuse to pay a distribution of the companys profit attached to her shares. Hence, the issue is whether or not the boards refusal is in breach of affair. If so, what would be Susans remedy?(2) LawThe laws apply in this case area. The oppression remedy Pt 2F.1b. An injunction to prevent a contravention of the Corporations Act s1324S 232 of the Pt 2F.1 allows the judgeship to provide a remedy to a member where the court finds that the learn of the companys affairs, or an actual or proposed act or omission by or on behalf of the company, or a resolu tion, or a proposed resolution, of members or a class of members of the company Is eithercontrary to the interests of the members as a whole, or oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member or members whether in that capableness or in any other capacity.S1324(2) states that where a person has refused or failed, is refusing or failing, or is proposing to refuse or fail, to do an act or thing that the person is required by this Act to do, the Court may, on the application of ASIC or any person whose interests have been, are or would be affected by the refusal or failure to do that act or thing ease up an injunction, on such terms as the Court thinks appropriate, requiring the first mentioned person to do that act or thing.(3) operationThe board of Rich Pty Ltd has committed oppressive conduct, specifically, unfairly restricting dividends. In this case, the directors refuse to give reasons or explanations of failing to pay dividends. B y nonrecreational no dividends to the shareholders, the directors can possibly benefit their own interests such as paying them excessive remuneration out of the boodle that should be paid as dividends that constitutes oppression. Under s232 of the Corporations Act, remedies where there is oppression allows Susan to seek her adepts by an set up held by the court to regulate the conduct of the affairs of the company in the future. For example, remove several directors and appoint new directors. Further more(prenominal), according to s1324, the court can grant an injunction to any person who has breached the Corporations Act.One of the directors duties is to act in the interest of the company. To some extent, the members interest is the companys interest. Thus, refusing to pay dividends to members is a breach of duty that contravenes the Corporations Act. Therefore, Susan can appeal to the court to have it grant an injunction against the directors of Rich Pty Ltd. In other word s, mandatorily require the board to pay dividends to the shareholders and provide sufficient information to the members. Additionally, the statutory right allows members of a company to seek to inspect the books of the company if they believe that insufficient information are given by directors. However, there are some current circumstances that failing to pay dividends does not contravene the Corporations Act. For instance, chasing higher profits for the company or suffering a financial crisis.(4) Conclusionall(a) in all, the fact that the board of Rich Pty Ltd contravenes the Corporations Act will resolve in certain consequences, these may include fine, disqualification site, injunction etc. sermon of Susan, she may receive the amount of dividends attached to her shares as compensation. Nevertheless, if the directors acted in a good faith or say for the sake of the company, then the board only needs to provide relevant information and explain why they refuse to pay dividends.Q uestion 3Section 249H states that, as unlisted companies, the minimum design of notice are 21 days. The notice period can be reduced by agreement of members holding at least 95% of the votes that maybe cast at the.1 In this case, John, Sam only hold 72% of the shares, they do not have the authority to reduce the period. For listed companies, S249HA of the Corporations Act prescribes a minimum notice period of 28 days. The minimum 28 days notice period required for a listed company cannot be shortened by member/shareholder approval.2 At this moment, Mark should check when they gave him the notice. If it was given less than 21 /28 days before the general collision, the meeting can be treated as procedural irregularities.Under this situation, section 1322(2) says if the court is opinion of the irregularities has caused, or may cause substantial injustice that cannot be remedied by any locate of the court and the court makes an order declaring the proceeding to be invalid. 249S all ows that a company to hold a meeting of its members in two or more venues using any technology that gives the members as a whole a reasonable opportunity to participate3. In this case, Mark was unable to reservation a feather from Darwin to Brisbane but he can attend the meeting by using telephone or video conferencing facilities.In order to get the full answer of question 3, we trace for the origin noesis back to the textbook, which shows restrictions on members decision making power. It includes1. Equitable chokeation2. superfluous procedural requirements (e.g. reduction of capital)3. Corporations Act and Listing rules prevented interested members from voting4. statutory provisions protecting the minority5. Members personal rights6. terminus ad quem on powers of majority to ratify breaches of dirs duties. We pay the attention to special procedural requirements in restrictions on members decision-making power. In this part, we know that majority member can remove director s. However, special procedures exists, include special notice must be given to company 2 months before. In this case, it does not mention the special notice, so Mark could argue it. Another key ingredient is limit on powers of majority to ratify breaches of directors duties. Majority cannot ratify dirs breach of duty if it is oppressive the result is to prejudice creditors because coy is insolvent when ratification took place breach of equitable limitation results in a personal right of member being eliminatedMajority cannot ratify directors breach of duty if it is oppressive. In this case, we know that the relationship between Mark and his cousins broke down. Mark could claim that there is oppression then try to invalid this meeting. Finally, board of directors can delegate certain tasks to committees, a single director, an employee or another person unless constitution prevents it. Although Mark cannot book a flight at the week before Easter, he could do it in this way. addressCo rporations Act. (2001). s. 125. Retrieved fromhttp//www.austlii.edu.au/au/legis/cth/consol act/ca2001172/ Hanrahan, P., IRamsay, G Stapledon, (2014). Commercial Applications of Company Law, fifteenth Edition, CCH Australia.