Corporation Law of Australia Corporations Act

Question: Discuss about the Corporation Law of Australiafor Corporations Act. Answer: Registration of a no Liability Company No liability companies are also known as proprietary company. In order to form such a company, there needs to be adherence to a particular procedure which is laid down by the Australian Securities and Investments Commission. Section 112(2) of the Corporations Act, 2001 speaks about companies who are having no liability. There are certain requirements to be fulfilled for a company to be registered as a no liability company. The company needs to have a share capital. While mentioning the objectives, the constitution of the company should stress on the fact that they intend to carry out mining activities only[1]. Another major requirement for a company to be registered as a no liability company is that they should have no rights of contract as per its constitution to redeem the calls which are made on their shares from the hands of a share holder who is unable to pay for them. Initially for registering the company as a no liability, the person intending to do so has to make an application to the Australian Securities and Investments Commission (ASIC). The application form will contain certain details. These details are mentioned in the section 117 of the Corporations Act 2001[2].The nature or type of the company should be mentioned which is to be registered under this Act. Then, decided name of the company is entered. It will be foregone if the Act requires the Australian Company Number (ACN) to be mentioned as its name. The form should contain the names and personal addresses of all the persons who intend to become a member of the company. There should be mention of the current name of the proprietor and any family name given to all individuals who intend to become the company secretary of the company. Additional details include date of birth and place of birth of the individual or individuals. The residential addresses of every person who intends to become the director or the company secretary should be mentioned. The form should also contain the address of the registered office of the no liability company. There is an option of mentioning the opening hours of the registered office though it is not mandatory in the case of a no liability company[3]. There should be further mention of certain details by a company limited by shares. These include the number of shares and the classes to which they belong of every member who through written agreement takes them up. There should be mention of the money which they intend to pay for these shares. According to section 150 of Corporations Act 2001, specifies that the term Limited need not be suffixed with the name of the company[4]. According to Section 134 of the Corporations Act 2001 speaks about the internal management of a company which can be controlled by the provisions of the principle Act which are used by the company in the name of replaceable rules[5]. They are contained within the constitution of the company or partly in the constitution and partly within the Act. Section 135 of the Corporations Act 2001, speaks about the changes in the constitution and the replaceable rules[6]. According to the rules of this section certain changes were made in the rules after 1st July, 1988 and were adopted for the functioning of a proprietor limited company. There are several restrictions on holding of shares along with rights conferred on a shareholder and they are mentioned in section 254A (2) of the Corporation Act 2001. The company is able to issue preference shares if certain rights with respect to them are given. These include right to vote, surplus profits and assets, repaying of capital etc. Doctrine ofMaintenance of Capital The present portion deals with the doctrine of capital maintenance. This requires the company to derive appropriate consideration in relation to the issuance of shares. When the required capital is gathered they should not be given back to the members of the company. This rule is however subject to exceptional situations and circumstances. This particular doctrine constitutes a key aspect in the Australian Company law. Under the doctrine the companies have the basic duty to ensure the capital generated is maintained as it is. This is necessary to safeguard the interests of the creditors of the company. The courts are under the mandate to see whether the capital is spent in a lawful manner or not[7]. While studying the doctrine of capital maintenance certain legal rules on significant aspects crop up. They are regarding paying of dividends and other emoluments to the shareholders. They also speak of the cutting down of the share capital and the reserves of the company. The companies a re prohibited from deriving financial help for buying their own shares. The rules also speak about the redeeming of the purchase of the companys own shares. When a company is limited by shares i.e. having limited liability, there is need to protect the interests of the creditors. Hence to facilitate this doctrine of capital maintenance was formulated. The company first gathers the capital it intends to raise. Then the maintenance of the capital is done taking into consideration the improbabilities of the business so that the creditors are benefitted and protected. The aim is to reduce the occurrence of fraud with respect to the creditors. This done by lowering the share capital to make sure the share holders have their liabilities. The purpose for the origin of the said doctrine is based on two aspects. The first is to safeguard the interests of the creditors. The other one is to make sure that the assets of the company are utilised in a lawful manner. The idea of keeping the capital intact has been disputed in the courts. This is because the creditors value the company on the basis how they maintain the capital and uses it only for the business purpose. This is the reason for maintaining the capital and not returning them to the shareholders. This particular doctrine has been subject to deliberations in the field of corporate law from the late 1850s. The ability and credibility of the doctrine in protecting the interests of the creditors is subjected to doubt. Hence the company related rules with respect to capital linked decisions have been reformed slowly. The experts in relation to the subject have decided to connect company capital decisions with questions regarding solvency, material disclosure to shareholders and fair approach. Under the Corporations Act 2001, they have decided to consider a more liberal approach with respect to solvency, fair approach and disclosure matters that has to be satisfied by the directors before taking decisions pertaining to share capital. When speaking about decisions they include aspects like reducing share capital, payment of dividends, buying back of companys own shares and the rule regarding providing financial assistance for buying back the shares[8]. All these decisions are now de pendent on the insolvent trading rules mentioned in section 588 G of the Corporations Act 2001. This makes the directors who are taking capital related decisions liable personally in case of breach of duty in respect of preventing the company from trading while being insolvent[9]. Bibliography Hannigan, Brenda,Company Law(Oxford University Press, 1st ed, 2009) Symon, Helen,Corporations Act 2001(Leo Cussen Institute, 1st ed, 2006) Corporation Act 2001 - SECT 117(2017) Austlii.edu.au https://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s117.html Corporation Act2001 - SECT 150(2017) Austlii.edu.au https://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s150.html Corporation Act 2001 - SECT 588G (2017) Austlii.edu.au https://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s588g.html McQueen, Rob,A Social History Of Company Law(Ashgate Pub., 1st ed, 2009) Corporation Act 2001 - SECT 135(2017) Austlii.edu.au https://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s135.html Corporation Act 2001 - SECT 134(2017) Austlii.edu.au https://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s134.html Corporations Act 2001 Reprinted On 16 June 2006 (Taking Into Account Amendments Up To And Including Those Made By Act No. 17, 2006)(Attorney-General's Dept., 1st ed, 2006)