LAW2485_Group1_finalversion

RMIT International University

Assignment Cover page

Subject code LAW2485

Subject name LAW OF INVESTMENT AND

FINANCIAL MARKET

Location and campus Sai Gon South Campus

Title of assignment Group Assignment

Student name

Vuong Minh Chau Le Duc Manh Le Thao Ngoc

Nguyen Hoang Phuc

Student number

S3461886 S3461882 S3480700 S3461818

Lecture Esmira Hackenberg

Group number G1 Wednesday (from 10:30am to 12:00pm)

Assignment due day 4th May 2015

Date of submission 4th May 2015

Number of pages 28 pages

Word count 2490

Table of Contents

Question A .................................................................................................................................. 1

.................................................................................................................................................... 2

Question B .................................................................................................................................. 2

Assumption:............................................................................................................................ 2

Case B (i) ............................................................................................................................... 2

Case B (ii) .............................................................................................................................. 3

Question C .................................................................................................................................. 4

Assumption:............................................................................................................................ 4

Case C (i) ............................................................................................................................... 4

Case C (ii) .............................................................................................................................. 5

Question D .................................................................................................................................. 6

Case D (i) ............................................................................................................................... 6

Case D (ii) .............................................................................................................................. 8

1. Voluntary administration............................................................................................... 8

2. Possible outcomes of voluntary administration ............................................................. 9

Appendix: ...................................................................................................................................10

Question A .................................................................................................................................10

CORPORATIONS ACT 2001 - SECT 136 ..........................................................................10

Question B .................................................................................................................................11


CORPORATIONS ACT 2001 - SECT 251B .......................................................................11

CORPORATIONS ACT 2001 - SECT 254D .......................................................................11



Question C .................................................................................................................................13







Question D .................................................................................................................................17




CORPORATIONS ACT 2001 - SECT 436E .......................................................................19

CORPORATIONS ACT 2001 - SECT 439A .......................................................................19


CORPORATIONS ACT 2001 - SECT 435C .......................................................................21



[Type the document title]

1

Question A

In order to successfully change constitution, the company must go through following

steps.

Firstly, according to S. 136(2), company has to pass the special constitution by

having at least 75% members agree to the alteration if it is provided in the

constitution. Therefore, this step can be satisfied because Kiki, Jet, Sky and Rada,

they all wanted to add a new provision and it was more than 75% (four over five)

members agreed to the alteration.

On contrary, if changing constitution by special resolution is not provided in the

constitution, then company has to go to the second step that requires further

requirements (according to S.136(3)). The first requirement is that the alteration must

have greater majority than 75% to be implemented. Here, Kiki, Jet, Sky and Rada

intended and agreed to insert a new provision into the constitution. Hence, the first

requirement (which is the same as the first step) is satisfied. The second

requirement is that the alteration has to obtain the consent of particular person.

Here, Kiki, Jet, Sky and Rada are directors of HHH Pty Ltd. Therefore, director’s

intension was the same as intension of major members as well as company’s need

to add a new provision to gives directors the right to compulsorily acquire Guy’s

shares for their issue price. Thus, the second requirement is met. Consequently, the

alteration will be passed after it satisfied two requirements above.

Finally, according to S. 136(5), after the change in the constitution is passed, the

company has to lodge ASIC with a copy of a special resolution modifying its

constitution and a copy of constitution modification within 14 days.

In conclusion, in order to successfully alter the constitution, Kiki, Jet, Sky and Rada

have to make the alteration through special resolution if it is provided in constitution;

otherwise the change has to get through the second step before lodging ASIC with

necessary documents to be valid in the constitution.


2

Question B

Assumption:

This case is based on the assumption that HHH company did provide a pre-emptive

clause.

Case B (i)

The legal issue is whether Guy can successfully enforce the company’s constitution

under s140(1)(a) dealing with (a) right to have the vote at general meeting, and (b)

corresponding to s254D when they offer share to an outsider.

Here, when the general meeting was held, there was no proper notice given to Guy.

Indeed, he was neither informed that there was going to be a meeting nor invited to

it. Due to this unawareness, he was not able to give his vote, which obviously

contradicted to the rule. Beside, as a shareholder, he must still have the right to

attend any meeting of the company, according to s251B(1).

Applied to this case, Guy is still the shareholder of HHH, he must therefore have the

right to receive the offer of the new shares issued before anyone that are not the

company members. Indeed, the fact that the other 4 directors first give the offer to

Oscar - currently an outsider, which contradicts to the company’s pre-emptive

clause. Therefore, s254D will consider this as breach of contract and Guy can

successfully enforce the company constitution.


3

In conclusion, Guy can successfully enforce the company’s constitution under

s140(1)(a), corresponding to s254D.

Case B (ii)

The legal issue is whether Guy can successfully sue the other 4 directors for their

oppressive conduct under s232.

1. One circumstance which will be considered oppressive is improper issue of

shares (ReDalkeith Investment Pty Ltd [1984]). In this case, the 4 directors, by

themselves, decided to issue new shares for their mutual friend - Oscar, in the

hope to dilute Guy’s shareholding. Obviously, it is not a proper purpose for them

to issue new shares, since there was no evidence to prove that the company is in

need of money.

2. Another circumstance is amending the company’s constitution to deduct other

shareholders’ voting power (Mamouney v Soliman [1992]). In this case, the 4

directors wanted to take over the amount of shares Guy is currently

holding through a change in the company’s constitution. Probably, Guy was not

willing to sell his shares yet. Regardless of his unwillingness, the directors

changed the constitution to force Guy to sell his holding at their desired price,

instead of the market ones. By this action, they can dilute the current

shareholding and therefore, his voting power.

3. The last circumstance is when a policy was implemented without the approval of

the board or sufficient notice of other shareholders. Here, the 4 directors both

issued shares and changed the company’s constitution without informing or

inviting Guy to the general meeting.

The suitable remedies for Guy in this case should be either re-altering the company’s

constitution under s233(1)(b) or ordering buying out (order that the majority

shareholders will buy Guy’s shares) under s233(1)(d).

In conclusion, due to the oppressive conduct by the 4 directors, Guy can get range of

remedies for compensation under s232.


4

Question C

Assumption:

There is a notice that Rada gave to the company (14 days).

Case C (i)

The legal issue is whether Rada, as an outsider of the contract, can sue Jet, Sky and

Kiki for breach of contract in manufacturing spare part for washing machine that was

not within the scope of one of company’s objectives in Constitution under s124(1)

and s125.

HHH Pty Ltd once registered became “legal person” who was recognized by s119.

Thus, it has legal capacity and power of an individual and the body corporate under

s124. Applying in to this case, HHH signed a contract in which provided washing

machine’s component for KJS Pty Ltd in order to open its business scale. In fact,

spare part for washing machine was not set out in the object clause. Since the “Ultra

vires” was abolished, the contract would be valid. However, Sky, Jet and Kiki went

against the objects clause in the Constitution of company. The objects clause only

affected the internal members as breach of the Constitution.

In conclusion, the contract between HHH Pty Ltd and KJS Pty Ltd was still

enforceable and Rada can sue Kiki, Jet and Sky for the breach of Objects clause of

Constitution.

Jet, Sky and Kiki as directors acted contrary to company’s Constitution and this will

be an element in a legal action against them for breach of director’s duties.

Breach of Constitution allows Rada to obtain an order for winding up the company on

a just and equitable grounds s461(1)(k).

Contravention with the Constitution may also be contrary to the interest of members

as a whole or oppressive and allow Rada to seek a remedy under s233.


5

Case C (ii)

The legal issue is whether Rada, as a member of HHH Pty Ltd company can sue

Sky, Jet and Kiki in a contract with KJS Pty Ltd successfully on behalf of company

under s236(1) if permission is given by the court s237(2).

a. Probable the company will not sue:

In this case, Jet, Sky and Kiki were directors of the company and the contract was

signed by them, hence, perhaps they would not sue themselves. As a result, the

company will not sue.

b. Person is acting in the good faith

HHH did a business related to resort and restaurants but the directors signed a

contract to manufacture spare part for washing machine. In fact, this contract

seemed to be bad because producing spare part for washing machine was not

HHH’s strength. Consequence, Rena knew this and tried to void this transaction.

Therefore, Rada’s intention to sue the three directors for their actions is acting in

good faith.

c. In the best interest of the company

Jet, Sky and Kiki were also the directors of HHH and KJS, which meant that the

contract would be beneficial for KJS that they could produce washing machines at a

lower price because of their relationship between KJS and HHH. Rada as a member,

she saw there was a conflict of interests of Jes, Sky and Kiki and this would not be

good for the company as they did do the best for HHH. Therefore, Rada's action tried

to void the transaction was considered to do the best interest for the company.

d. Serious question to be tried

When company decided to enter into the contract, which meant this contract could

bring some profit or at least the company would not make loss. However, this

contract was hard to determine because the transaction was not the company’s

strengths. In fact, HHH did not produce spare part before or any experiences.

Furthermore, the company was small and had limited cash, so the contract was very


6

important and determined the survival of the company. Hence, the corporation might

bankrupt if the contract failed.

e. Notice give to company (14 days)

As we assumed above that Rada did give the company a notice within 14 days,

therefore HHH aware of this information. However, in the response to Rada, the

corporation did nothing like meetings or some actions to evaluate the contract again.

Therefore, the company knew the notice and had no reaction to the notice.

As all the elements are satisfied, the court must grant leave for Rena to take an

action on behalf of the company to sue Jet, Sky and Kiki for breach director’s duties

under derivative action.

Question D

Case D (i)

The legal issue here is whether any of directors of HHH Pty Ltd have breached their

duties in fiduciary law or common law corresponding to statutory law duties sections

s181 (1), s182 (1) and s180 (1).

In this case, Kiki, Jet, Sky and Rada were directors of HHH Ltd Pty. However, they

did not act for the best interest of the company but for themselves. When Guy who

was one of directors in HHH Ltd Pty resigned, Kiki, Jet, Sky and Rada wanted to

reduce Guy’s shareholding and issue additional shares for Oscar, their friends in

order to ensure that Guy did not have voting control. Thus the power to issue shares

of directors was not used correctly. The reasonable directors would issue shares for

raising capital to the company not for affecting voting power of someone else to gain


7

advantage in general meeting. As a result, Kiki, Jet, Sky and Rada breached duty to

act in good faith in best interest of the company for proper purpose.

Kiki, Jet and Sky on behalf of HHH Ltd Pty signed a contract with KJS Pty Ltd where

they were also directors and shareholders. The purpose of this contract somehow

brought benefits for directors themselves. The reason is that KJS Pty Ltd would have

profit from the contract and Kiki, Jet, Sky could gain advantages from that profit. It

also caused HHH Pty Ltd to face financial difficulties. Hence, they did misuse their

position.

Kiki, Jet and Sky signed the contract because they thought the contract would help

HHH Pty Ltd to expand its business operation. However, they did not have

appropriate knowledge and expertise in investment. As executive directors, they

should have taken reasonable steps to place themselves in a position to guide and

monitor the management of the company (Daniels v Anderson (1995)). In fact, they

just entered the contract without any researches and seeking for advice from experts

in investment. Furthermore, at that time, HHH Pty Ltd was not under financial

difficulties. Thus, the directors were not urgent to do so. They breached duty of care

expected from them, which led to an inability for the company to pay its creditors due

to financial problems.

Remedies:

● Common law: sue for damages


8

● Fiduciary law: equitable compensation, account and profits, injunction,

constructive trust and rescission of contract.

● Statutory law: ASIC can intervene:

- Can get pecuniary civil penalty

- Money damages

- Injunctions

- Criminal sanctions if action dishonest or reckless

- Director can be disqualified and banned

In conclusion, Kiki, Jet, Sky and Rada who were directors of HHH Pty Ltd did breach

duty to act in good faith in best interest of the company for proper purpose.

Moreover, Kiki, Jet and Sky also breached duty to not misuse position and duty to

exercise due care, and diligence. The court will decide suitable remedies to them.

Case D (ii)

1. Voluntary administration

The voluntary administration is divided into two distinct phases: first meeting is an

appointment of voluntary administrator and the second meeting is when creditors

make decision about the company’s future.

The duration of voluntary administration will be 4 to 5 weeks. It gives administrator a

control of company and gives creditors to have breathing space to consider

appropriate course of action. The purpose is to maximize the opportunity to remain

HHH Pty Ltd.’s existence. If it is impossible, voluntary administration gives creditors

chances to achieved higher return than immediate winding up.

Under s436E, within 8 business days of appointment of administrator, creditors

convene the first meeting. In the meeting, creditors can pass resolution to remove

the administrator and appoint another if needed. Furthermore, a committee of

creditors can also be appointed to assist administrator in voluntary administration.

Under s439A (5), within 20-25 business days, creditors hold the second meeting to

decide the HHH Pty Ltd.’s future. The administrator gives creditors operational and

financial reports which are investigated during convening period s438A (a). Then,

creditors will have voting rights to decide the company to enter into deed of company

arrangement, end of administration (giving company back to director) or voluntary


9

winding up. If necessary, administrator has an ability to expand duration of voluntary

administration by applying to court s439A (6).

2. Possible outcomes of voluntary administration

a. Deed of company arrangement

This is one of the possible outcomes for HHH Pty Ltd that is put into voluntary

administration s435C (2) (a). The voluntary administrator becomes the administrator

of the deed of the company arrangement if creditors do not appoint another s444A

(2).In this period, the company has additional time to pay its debts and permission to

continue operating its business. Creditors accept lesser payment in order to keep the

company as a customer alive so they have chance to at least receive some instead

of nothing if the company goes to liquidation. Directors may agree to contribute funds

to creditors from their own personal resources to avoid potential voidable

transactions against them.

In this case, HHH Pty Ltd is likely to enter into deed of company arrangement since

Kiki, Sky and Rada paid some of the company debts personally to save the

company.

b. Liquidation

Another outcome from the end of voluntary administration period is creditor’s

voluntary winding up. The aim of winding up is to pay off as many creditors as

possible by fairly distributing the company’s insufficient assets, widen interest of

business community (government, employees etc.) and investigate reasons for the

insolvency. A liquidator who is appointed by the court must be registered with ASIC

as an official liquidator s532 (8). The liquidator has power to control the company,

continue the company’s business for beneficial disposal or winding up the business,

sell the company’s property, bring or defend legal proceedings on behalf of the

company.


10

Appendix:

Question A

CORPORATIONS ACT 2001 - SECT 136

Constitution of a company

(1) A company adopts a constitution:

(a) on registration--if each person specified in the application for the

company's registration as a person who consents to become a member agrees in

writing to the terms of a constitution before the application is lodged; or

(b) after registration--if the company passes a special

resolution adopting a constitution or a court order is made under section 233 that

requires the company to adopt the constitution.

Note: The Life Insurance Act 1995 has rules about how benefit fund rules

become part of a company's constitution and about amending those rules. They

override this Act (see section 1348 of this Act). Consequential amendments to the

rest of the company's constitution can be made under that Act or this Act (see

Subdivision 2 of Division 4 of Part 2A of that Act).

(2) The company may modify or repeal its constitution, or a provision of its

constitution, by special resolution.

Note: The company may need leave of the Court to modify or repeal its

constitution if it was adopted as the result of a Court order (see subsection 233(3)).

(3) The company's constitution may provide that the special resolution does

not have any effect unless a further requirement specified in the constitution relating

to that modification or repeal has been complied with.

(4) Unless the constitution provides otherwise, the company may modify or

repeal a further requirement described in subsection (3) only if the further

requirement is itself complied with.

http://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s1.html#special_resolution?stem=0&synonyms=0&query=s136


http://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s233.html

http://www.austlii.edu.au/au/legis/cth/consol_act/lia1995144/


http://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s58aa.html#the_court?stem=0&synonyms=0&query=s136




11

(5) A public company must lodge with ASIC a copy of a special

resolution adopting, modifying or repealing its constitution within 14 days after it is

passed. The company must also lodge with ASIC within that period:

(a) if the company adopts a constitution--a copy of that constitution; or

(b) if the company modifies its constitution--a copy of that modification.

This also applies to a proprietary company that has applied under Part 2B.7 to

change to a public company, while its application has not yet been determined.

(6) An offence based on subsection (5) is an offence of strict liability.

Question B


Effect of constitution and replaceable rules

(1) A company's constitution (if any) and any replaceable rules that apply to

the company have effect as a contract:

(a) between the company and each member; and

(b) between the company and each director and company secretary;

and

(c) between a member and each other member;

under which each person agrees to observe and perform the constitution and rules

so far as they apply to that person.

CORPORATIONS ACT 2001 - SECT 251B

Members' access to minutes

(1) A company must ensure that the minute books for the meetings of its members

and for resolutions of members passed without meetings are open for inspection by

members free of charge. (2) A member of a company may ask the company in

writing for a copy of:

(a) any minutes of a meeting of the company's members or an extract of

the minutes; or

(b) any minutes of a resolution passed by members without a meeting.

CORPORATIONS ACT 2001 - SECT 254D



http://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s156.html#proprietary?stem=0&synonyms=0&query=s136

http://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s9.html#director?stem=0&synonyms=0&query=s140

http://www.austlii.edu.au/au/legis/cth/num_act/ca2001172/s9.html#company?stem=0&synonyms=0&query=s251B

http://www.austlii.edu.au/au/legis/cth/num_act/ca2001172/s9.html#books?stem=0&synonyms=0&query=s251B

http://www.austlii.edu.au/au/legis/cth/num_act/ca2001172/s9.html#member?stem=0&synonyms=0&query=s251B

http://www.austlii.edu.au/au/legis/cth/num_act/ca2001172/s9.html#resolution?stem=0&synonyms=0&query=s251B




http://www.austlii.edu.au/au/legis/cth/num_act/ca2001172/s9.html#charge?stem=0&synonyms=0&query=s251B






http://www.austlii.edu.au/au/legis/cth/num_act/ca2001172/s9.html#resolution?stem=0&synonyms=0&query=s251B



12

Pre-emption for existing shareholders on issue of shares in proprietary

company (replaceable rule—see section 135) (1) Before issuing shares of a

particular class, the directors of a proprietary company must offer them to the

existing holders of shares of that class. As far as practicable, the number of shares

offered to each shareholder must be in proportion to the number of shares of that

class that they already hold


Grounds for Court order

The Court may make an order under section 233 if:

(a) the conduct of a company's affairs; or

(b) an actual or proposed act or omission by or on behalf of a company;

or

(c) a resolution, or a proposed resolution, of members or a class of

members of a company;

is either:

(d) contrary to the interests of the members as a whole; or

(e) oppressive to, unfairly prejudicial to, or unfairly discriminatory

against, a member or members whether in that capacity or in any other capacity.


Orders the Court can make

(1) The Court can make any order under this section that it considers appropriate in

relation to the company, including an order:

(a) that the company be wound up;

(b) that the company's existing constitution be modified or repealed;

(c) regulating the conduct of the company's affairs in the future;

(d) for the purchase of any shares by any member or person to whom a

share in the company has been transmitted by will or by operation of law;

(e) for the purchase of shares with an appropriate reduction of the

company's share capital;

(f) for the company to institute, prosecute, defend or discontinue specified

proceedings;

(g) authorising a member, or a person to whom a share in the company

has been transmitted by will or by operation of law, to institute, prosecute, defend or

discontinue specified proceedings in the name and on behalf of the company;

http://www.austlii.edu.au/au/legis/cth/num_act/ca2001172/s9.html#proprietary_company?stem=0&synonyms=0&query=s254D


http://www.austlii.edu.au/au/legis/cth/num_act/ca2001172/s761.html#shares?stem=0&synonyms=0&query=s254D

http://www.austlii.edu.au/au/legis/cth/num_act/ca2001172/s9.html#director?stem=0&synonyms=0&query=s254D


http://www.austlii.edu.au/au/legis/cth/num_act/ca2001172/s9.html#hold?stem=0&synonyms=0&query=s254D




http://www.austlii.edu.au/au/legis/cth/num_act/ca2001172/s9.html#hold?stem=0&synonyms=0&query=s254D

http://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s58aa.html#the_court


http://www.austlii.edu.au/au/legis/cth/num_act/ca2001172/s58aa.html#the_court?stem=0&synonyms=0&query=CORPORATIONS%20ACT%202001%20-%20SECT%20233

http://www.austlii.edu.au/au/legis/cth/num_act/ca2001172/s1371.html#order?stem=0&synonyms=0&query=CORPORATIONS%20ACT%202001%20-%20SECT%20233

http://www.austlii.edu.au/au/legis/cth/num_act/ca2001172/s9.html#company?stem=0&synonyms=0&query=CORPORATIONS%20ACT%202001%20-%20SECT%20233

http://www.austlii.edu.au/au/legis/cth/num_act/ca2001172/s1371.html#order?stem=0&synonyms=0&query=CORPORATIONS%20ACT%202001%20-%20SECT%20233



http://www.austlii.edu.au/au/legis/cth/num_act/ca2001172/s9.html#constitution?stem=0&synonyms=0&query=CORPORATIONS%20ACT%202001%20-%20SECT%20233

http://www.austlii.edu.au/au/legis/cth/num_act/ca2001172/s9.html#conduct?stem=0&synonyms=0&query=CORPORATIONS%20ACT%202001%20-%20SECT%20233


http://www.austlii.edu.au/au/legis/cth/num_act/ca2001172/s9.html#affairs?stem=0&synonyms=0&query=CORPORATIONS%20ACT%202001%20-%20SECT%20233

http://www.austlii.edu.au/au/legis/cth/num_act/ca2001172/s761.html#shares?stem=0&synonyms=0&query=CORPORATIONS%20ACT%202001%20-%20SECT%20233

http://www.austlii.edu.au/au/legis/cth/num_act/ca2001172/s9.html#member?stem=0&synonyms=0&query=CORPORATIONS%20ACT%202001%20-%20SECT%20233

http://www.austlii.edu.au/au/legis/cth/num_act/ca2001172/s9.html#person?stem=0&synonyms=0&query=CORPORATIONS%20ACT%202001%20-%20SECT%20233


http://www.austlii.edu.au/au/legis/cth/num_act/ca2001172/s761.html#shares?stem=0&synonyms=0&query=CORPORATIONS%20ACT%202001%20-%20SECT%20233




http://www.austlii.edu.au/au/legis/cth/num_act/ca2001172/s9.html#member?stem=0&synonyms=0&query=CORPORATIONS%20ACT%202001%20-%20SECT%20233



http://www.austlii.edu.au/au/legis/cth/num_act/ca2001172/s9.html#on_behalf_of?stem=0&synonyms=0&query=CORPORATIONS%20ACT%202001%20-%20SECT%20233



13

(h) appointing a receiver or a receiver and manager of any or all of the

company's property;

(i) restraining a person from engaging in specified conduct or from doing a

specified act;

(j) requiring a person to do a specified act.

Question C


Legal capacity and powers of a company

(1) A company has the legal capacity and powers of an individual both in and

outside this jurisdiction. A company also has all the powers of a body corporate,

including the power to:

(a) issue and cancel shares in the company;

(b) issue debentures (despite any rule of law or equity to the contrary,

this power includes a power to issue debentures that are irredeemable, redeemable

only if a contingency, however remote, occurs, or redeemable only at the end of a

period, however long);

(c) grant options over unissued shares in the company;

(d) distribute any of the company's property among the members, in

kind or otherwise;

(e) grant a security interest in uncalled capital;

(f) grant a circulating security interest over the company's property;

(g) arrange for the company to be registered or recognised as a body

corporate in any place outside this jurisdiction;

(h) do anything that it is authorised to do by any other law (including a

law of a foreign country).

A company limited by guarantee does not have the power to issue shares.

Note: For a company's power to issue bonus, partly--paid, preference and

redeemable preference shares, see section 254A.

(2) A company's legal capacity to do something is not affected by the fact that

the company's interests are not, or would not be, served by doing it.

(3) For the avoidance of doubt, this section does not:

(a) authorise a company to do an act that is prohibited by a law of a

State or Territory; or

http://www.austlii.edu.au/au/legis/cth/num_act/ca2001172/s435b.html#receiver?stem=0&synonyms=0&query=CORPORATIONS%20ACT%202001%20-%20SECT%20233

http://www.austlii.edu.au/au/legis/cth/num_act/ca2001172/s9.html#receiver_and_manager?stem=0&synonyms=0&query=CORPORATIONS%20ACT%202001%20-%20SECT%20233



http://www.austlii.edu.au/au/legis/cth/num_act/ca2001172/s261.html#property?stem=0&synonyms=0&query=CORPORATIONS%20ACT%202001%20-%20SECT%20233


http://www.austlii.edu.au/au/legis/cth/num_act/ca2001172/s9.html#conduct?stem=0&synonyms=0&query=CORPORATIONS%20ACT%202001%20-%20SECT%20233


http://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s601cw.html#limited?stem=0&synonyms=0&query=s124

http://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s254a.html

http://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s9.html#law_of_a_state_or_territory?stem=0&synonyms=0&query=s124



14

(b) give a company a right that a law of a State or Territory denies to

the company.


Constitution may limit powers and set out objects

(1) If a company has a constitution, it may contain an express restriction on,

or a prohibition of, the company's exercise of any of its powers. The exercise of a

power by the company is not invalid merely because it is contrary to an express

restriction or prohibition in the company's constitution.

(2) If a company has a constitution, it may set out the company's objects. An

act of the company is not invalid merely because it is contrary to or beyond any

objects in the company's constitution.


Company comes into existence on registration

A company comes into existence as a body corporate at the beginning of

the day on which it is registered. The company's name is the name specified in the

certificate of registration.

Note: The company remains in existence until it is deregistered (see

Chapter 5A).


General grounds on which company may be wound up by Court

(1) The Court may order the winding up of a company if:

(a) the company has by special resolution resolved that it be wound up

by the Court; or

(c) the company does not commence business within one year from its

incorporation or suspends its business for a whole year; or

(d) the company has no members; or

(e) directors have acted in affairs of the company in their own interests

rather than in the interests of the members as a whole, or in any other manner

whatsoever that appears to be unfair or unjust to other members; or

(f) affairs of the company are being conducted in a manner that is

oppressive or unfairly prejudicial to, or unfairly discriminatory against, a member or






15

members or in a manner that is contrary to the interests of the members as a whole;

or

(g) an act or omission, or a proposed act or omission, by or on behalf

of the company, or a resolution, or a proposed resolution, of a class of members of

the company, was or would be oppressive or unfairly prejudicial to, or unfairly

discriminatory against, a member or members or was or would be contrary to the

interests of the members as a whole; or

(h) ASIC has stated in a report prepared under Division 1 of Part 3 of

the ASIC Act that, in its opinion:

(i) the company cannot pay its debts and should be wound up;

or

(ii) it is in the interests of the public, of the members, or of the

creditors, that the company should be wound up; or

(k) the Court is of opinion that it is just and equitable that the company

be wound up.

(2) A company must lodge a copy of a special resolution referred to in

paragraph (1)(a) with ASIC within 14 days after the resolution is passed.


Bringing, or intervening in, proceedings on behalf of a company

(1) A person may bring proceedings on behalf of a company, or intervene in

any proceedings to which the company is a party for the purpose of taking

responsibility on behalf of the company for those proceedings, or for a particular step

in those proceedings (for example, compromising or settling them), if:

(a) the person is:

(i) a member, former member, or person entitled to be

registered as a member, of the company or of a related body corporate; or

(ii) an officer or former officer of the company; and

(b) the person is acting with leave granted under section 237.

(2) Proceedings brought on behalf of a company must be brought in the

company's name.

(3) The right of a person at general law to bring, or intervene in, proceedings

on behalf of a company is abolished.

Note 1: For the right to inspect company books, see subsections 247A(3) to

(6).

Note 2: For the requirements to disclose proceedings and leave applications in

the annual directors' report, see subsections 300(14) and (15).







16

Note 3: This section does not prevent a person bringing, or intervening in,

proceedings on their own behalf in respect of a personal right.


Applying for and granting leave

(1) A person referred to in paragraph 236(1)(a) may apply to the Court for

leave to bring, or to intervene in, proceedings.

(2) The Court must grant the application if it is satisfied that:

(a) it is probable that the company will not itself bring the proceedings,

or properly take responsibility for them, or for the steps in them; and

(b) the applicant is acting in good faith; and

(c) it is in the best interests of the company that the applicant be

granted leave; and

(d) if the applicant is applying for leave to bring proceedings--there is a

serious question to be tried; and

(e) either:

(i) at least 14 days before making the application, the applicant

gave written notice to the company of the intention to apply for leave and of the

reasons for applying; or

(ii) it is appropriate to grant leave even though subparagraph (i)

is not satisfied.

(3) A rebuttable presumption that granting leave is not in the best interests of

the company arises if it is established that:

(a) the proceedings are:

(i) by the company against a third party; or

(ii) by a third party against the company; and

(b) the company has decided:

(i) not to bring the proceedings; or

(ii) not to defend the proceedings; or

(iii) to discontinue, settle or compromise the proceedings; and

(c) all of the directors who participated in that decision:

(i) acted in good faith for a proper purpose; and

(ii) did not have a material personal interest in the decision; and

(iii) informed themselves about the subject matter of the

decision to the extent they reasonably believed to be appropriate; and

(iv) rationally believed that the decision was in the best interests

of the company.





17

The director's belief that the decision was in the best interests of the company is a

rational one unless the belief is one that no reasonable person in their position would

hold.

(4) For the purposes of subsection (3):

(a) a person is a third party if:

(i) the company is a public company and the person is not a

related party of the company; or

(ii) the company is not a public company and the person would

not be a related party of the company if the company were a public company; and

(b) proceedings by or against the company include any appeal from a

decision made in proceedings by or against the company.

Note: Related party is defined in section 228.

Question D


Good faith--civil obligations

Good faith--directors and other officers

(1) A director or other officer of a corporation must exercise their powers

and discharge their duties:

(a) in good faith in the best interests of the corporation; and

(b) for a proper purpose.

Note 1 : This subsection is a civil penalty provision (see section 1317E).

Note 2: Section 187 deals with the situation of directors of wholly-owned

subsidiaries.

(2) A person who is involved in a contravention of subsection (1)

contravenes this subsection.

Note 1: Section 79 defines involved.

Note 2: This subsection is a civil penalty provision (see section 1317E).


Use of position--civil obligations

Use of position--directors, other officers and employees

(1) A director, secretary, other officer or employee of a corporation must not

improperly use their position to:



http://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s9.html#director?stem=0&synonyms=0&query=s181%20and%201

http://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s1317e.html









18

(a) gain an advantage for themselves or someone else; or

(b) cause detriment to the corporation.

Note: This subsection is a civil penalty provision (see section 1317E).

(2) A person who is involved in a contravention of subsection (1)

contravenes this subsection.

Note 1: Section 79 defines involved .

Note 2: This subsection is a civil penalty provision (see section 1317E).


Care and diligence--civil obligation only

Care and diligence--directors and other officers

(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 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.

Note: This subsection is a civil penalty provision (see section 1317E).

Business judgment rule

(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.

The director's or officer's belief that the judgment is in the best interests of the

corporation is a rational one unless the belief is one that no reasonable person in

their position would hold.

Note: This subsection only operates in relation to duties under this section and

their equivalent duties at common law or in equity (including the duty of care that

arises under the common law principles governing liability for negligence)--it does














19

not operate in relation to duties under any other provision of this Act or under any

other laws.

(3) In this section:

"business judgment " means any decision to take or not take action in respect of a

matter relevant to the business operations of the corporation.

CORPORATIONS ACT 2001 - SECT 436E

Purpose and timing of first meeting of creditors

(1) The administrator of a company under administration must convene a

meeting of the company's creditors in order to determine:

(a) whether to appoint a committee of creditors; and

(b) if so, who are to be the committee's members.

(2) The meeting must be held within 8 business days after the

administration begins.

(3) The administrator must convene the meeting by:

(a) giving written notice of the meeting to as many of the company's

creditors as reasonably practicable; and

(b) causing a notice setting out the prescribed information about the

meeting to be published in the prescribed manner;

at least 5 business days before the meeting.

Note: For electronic notification under paragraph (a), see section 600G.

(3A) A notice under paragraph (3)(b) that relates to a company may be

combined with a notice under paragraph 450A(1)(b) that relates to the company.

(4) At the meeting, the company's creditors may also pass a resolution:

(a) removing the administrator from office; and

(b) appointing someone else as administrator of the company.

CORPORATIONS ACT 2001 - SECT 439A

Administrator to convene meeting and inform creditors

(1) The administrator of a company under administration must convene a

meeting of the company's creditors within the convening period as fixed by

subsection (5) or extended under subsection (6).

Note: For body corporate representatives' powers at a meeting of the

company's creditors, see section 250D.

(2) The meeting must be held within 5 business days before, or within 5

business days after, the end of the convening period.

(3) The administrator must convene the meeting by:

http://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s600g.html


http://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s250d.html

http://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s250d.html


20

(a) giving written notice of the meeting to as many of the company's

creditors as reasonably practicable; and

(b) causing a notice setting out the prescribed information about the

meeting to be published in the prescribed manner;

at least 5 business days before the meeting.

Note: For electronic notification under paragraph (a), see section 600G.

(4) The notice given to a creditor under paragraph (3)(a) must be

accompanied by a copy of:

(a) a report by the administrator about the company's business,

property, affairs and financial circumstances; and

(b) a statement setting out the administrator's opinion about each of

the following matters:

(i) whether it would be in the creditors' interests for the company

to execute a deed of company arrangement;

(ii) whether it would be in the creditors' interests for the

administration to end;

(iii) whether it would be in the creditors' interests for the company

to be wound up;

and also setting out:

(iv) his or her reasons for those opinions; and

(v) such other information known to the administrator as will

enable the creditors to make an informed decision about each matter covered by

subparagraph (i), (ii) or (iii); and

(c) if a deed of company arrangement is proposed--a statement setting

out details of the proposed deed.

Note: For electronic notification, see section 600G.

(5) The convening period is:

(a) if the day after the administration begins is in December, or is less

than 25 business days before Good Friday--the period of 25 business days

beginning on:

(i) that day; or

(ii) if that day is not a business day--the next business day; or

(b) otherwise--the period of 20 business days beginning on:

(i) the day after the administration begins; or

(ii) if that day is not a business day--the next business day.

(6) The Court may extend the convening period on an application made

during or after the period referred to in paragraph (5)(a) or (b), as the case requires.







21

(7) If an application is made under subsection (6) after the period referred to

in paragraph (5)(a) or (b), as the case may be, the Court may only extend the

convening period if the Court is satisfied that it would be in the best interests of the

creditors if the convening period were extended in accordance with the application.

(8) If an application is made under subsection (6) after the period referred to

in paragraph (5)(a) or (b), as the case may be, then, in making an order about the

costs of the application, the Court must have regard to:

(a) the fact that the application was made after that period; and

(b) any other conduct engaged in by the administrator; and

(c) any other relevant matters.


Administrator to investigate affairs and consider possible courses of action

As soon as practicable after the administration of a company begins, the

administrator must:

(a) investigate the company's business, property, affairs and financial

circumstances; and

(b) form an opinion about each of the following matters:

(i) whether it would be in the interests of the company's creditors

for the company to execute a deed of company arrangement;

(ii) whether it would be in the creditors' interests for the

administration to end;

(iii) whether it would be in the creditors' interests for the company

to be wound up.

CORPORATIONS ACT 2001 - SECT 435C

When administration begins and ends

(1) The administration of a company:

(a) begins when an administrator of the company is appointed

under section 436A, 436B or 436C; and

(b) ends on the happening of whichever event of a kind referred to in

subsection (2) or (3) happens first after the administration begins.

(2) The normal outcome of the administration of a company is that:

(a) a deed of company arrangement is executed by both the company

and the deed's administrator; or

(b) the company's creditors resolve under paragraph 439C(b) that the

administration should end; or





http://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s436b.html

http://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s436c.html


22

(c) the company's creditors resolve under paragraph 439C(c) that the

company be wound up.

(3) However, the administration of a company may also end because:

(a) the Court orders, under section 447A or otherwise, that the

administration is to end, for example, because the Court is satisfied that the

company is solvent; or

(b) the convening period, as fixed by subsection 439A(5), for a meeting

of the company's creditors ends:

(i) without the meeting being convened in accordance

with section 439A; and

(ii) without an application being made for the Court to extend

under subsection 439A(6) the convening period for the meeting; or

(c) an application for the Court to extend under subsection 439A(6) the

convening period for such a meeting is finally determined or otherwise disposed of

otherwise than by the Court extending the convening period; or

(d) the convening period, as extended under subsection 439A(6), for

such a meeting ends without the meeting being convened in accordance

withsection 439A; or

(e) such a meeting convened under section 439A ends (whether or not

it was earlier adjourned) without a resolution under section 439Cbeing passed at the

meeting; or

(f) the company contravenes subsection 444B(2) by failing to

execute a proposed deed of company arrangement; or

(g) the Court appoints a provisional liquidator of the company, or

orders that the company be wound up; or

(h) management of the general insurer vests in a judicial manager of

the company appointed by the Federal Court under Part VB of the Insurance Act

1973 or Part 8 of the Life Insurance Act 1995 .

(4) During the administration of a company, the company is taken to be

under administration.


Effect of creditors' resolution

(1) This section applies where, at a meeting convened under section 439A,

a company's creditors resolve that the company execute a deed of company

arrangement.

http://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s58aa.html#the_court?stem=0&synonyms=0&query=s435c%20and%202%20and%20a













http://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s439c.html

http://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s444b.html


http://www.austlii.edu.au/au/legis/cth/consol_act/ia1973116/

http://www.austlii.edu.au/au/legis/cth/consol_act/ia1973116/




23

(2) The administrator of the company is to be the administrator of the deed,

unless the creditors, by resolution passed at the meeting, appoint someone else to

be administrator of the deed.

(3) The administrator of the company must prepare an instrument setting

out the terms of the deed.

(4) The instrument must also specify the following:

(a) the administrator of the deed;

(b) the property of the company (whether or not already owned by the

company when it executes the deed) that is to be available to pay creditors' claims;

(c) the nature and duration of any moratorium period for which the

deed provides;

(d) to what extent the company is to be released from its debts;

(e) the conditions (if any) for the deed to come into operation;

(f) the conditions (if any) for the deed to continue in operation;

(g) the circumstances in which the deed terminates;

(h) the order in which proceeds of realising the property referred to in

paragraph (b) are to be distributed among creditors bound by the deed;

(i) the day (not later than the day when the administration began) on

or before which claims must have arisen if they are to be admissible under the deed.

(5) The instrument is taken to include the prescribed provisions, except so

far as it provides otherwise.


Disqualification of liquidator

(1A) In this section:

"liquidator " includes a provisional liquidator.

(1) Subject to this section, a person must not consent to be appointed, and

must not act, as liquidator of a company unless he or she is:

(a) a registered liquidator; or

(b) registered as a liquidator of that company

under subsection 1282(3).

(2) Subject to this section, a person must not, except with the leave of the

Court, seek to be appointed, or act, as liquidator of a company:

(a) if the person, or a body corporate in which the person has a

substantial holding, is indebted in an amount exceeding $5,000 to the company or a

body corporate related to the company; or



http://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s58aa.html#the_court?stem=0&synonyms=0&query=s532%20and%208



24

(b) if the person is, otherwise than in his or her capacity as liquidator, a

creditor of the company or of a related body corporate in an amount exceeding

$5,000; or

(c) if:

(i) the person is an officer or employee of the company

(otherwise than by reason of being a liquidator of the company or of a related body

corporate); or

(ii) the person is an officer or employee of any body corporate that

is a secured party in relation to property of the company; or

(iii) the person is an auditor of the company; or

(iv) the person is a partner or employee of an auditor of the

company; or

(v) the person is a partner, employer or employee of an officer of

the company; or

(vi) the person is a partner or employee of an employee of an

officer of the company.

(3) For the purposes of paragraph (2)(a), disregard a debt owed by a natural

person to a body corporate if:

(a) the body corporate is:

(i) an Australian ADI; or

(ii) a body corporate registered under section 21 of the Life

Insurance Act 1995 ; and

(b) the debt arose because of a loan that the body corporate or entity

made to the person in the ordinary course of its ordinary business; and

(c) the person used the amount of the loan to pay the whole or part of

the purchase price of premises that the person uses as their principal place of

residence.

(4) Subsection (1) and paragraph (2)(c) do not apply to a members'

voluntary winding up of a proprietary company.

(5) Paragraph (2)(c) does not apply to a creditors' voluntary winding up if, by

a resolution of the creditors passed at a meeting of the creditors of which 7 days

notice has been given to every creditor stating the purpose of the meeting, it is

determined that that paragraph does not so apply.

(6) For the purposes of subsection (2), a person is taken to be an officer,

employee or auditor of a company if:

(a) the person is an officer, employee or auditor of a related body

corporate; or





25

(b) except where ASIC, if it thinks fit in the circumstances of the case,

directs that this paragraph does not apply in relation to the person--the person has,

at any time within the immediately preceding period of 2 years, been an officer,

employee, auditor or promoter of the company or of a related body corporate.

(7) A person must not consent to be appointed, and must not act, as

liquidator of a company if he or she is an insolvent under administration.

(8) A person must not consent to be appointed, and must not act, as

liquidator of a company that is being wound up by order of the Court unless he or

she is an official liquidator.

(9) A person must not be appointed as liquidator of a company unless the

person has, before his or her appointment, consented in writing to act as liquidator of

the company.

(10) An offence based on subsection (1), (2), (7), (8) or (9) is an offence of

strict liability.

Note: For strict liability , see section 6.1 of the Criminal Code .


Date post:	18-Jan-2017
Category:	Documents
Upload:	chau-vuong-minh
View:	100 times
Download:	2 times

LAW2485_Group1_finalversion

Documents