Corporations law week 13

What is considered a public company?

• A public company has sold part or all of itself to the public via an initial public offering

• A public company has not sold any shares to the public at all

• Most public companies are privately traded-companies listed on the ASX, like Aldi

The term "promoter" includes a range of persons who may undertake activities involved in:

• only negotiating preliminary agreements

• forming a company, registration of a company raising capital and negotiating preliminary agreements

• only raising capital and negotiationing agreements

• none of the options provided

Bernard is an accountant skilled in preparing budgets and cash flow statements for businesses. He is hired by the company to prepare budgets and cash flows for their company. Bernard goes to the printer and orders stationery for the company and signs on behalf of the company. Bernard does the work and is paid. The company does not pay for the stationery which Bernard ordered.

Who is liable to pay the stationery account?

• Bernard

• The company

• The printer cannot hold anyone liable

• The printer holds Bernard and the company liable.

Who has the powers to manage the affairs of a corporation?

• Members and/or shareholders of the company

• Director or directors of the company

• ASIC

• Combination of directors with the approval of shareholders

Shareholders in Coldstream Ltd have requested that the directors call a meeting of the company in order to discuss the performance of the directors in relation to certain contracts. The directors refuse to do so.

What action should or could the members take?

• The members can take no action if the directors refuse

• The shareholders need to formulate the motions for resolution so as to evoke a response and put resolutions to a meeting

• Shareholders need to lodge a request to ASIC to take necessary action against company directors

• None of the options provided apply

Barry is a director of Pinot Pty Ltd. There are 4 other directors. At a board meeting a resolution is passed removing Barry from his office of director. The board appoints Minerva as a director. The next AGM for the company is in 8 months' time. Advise Barry whether he can challenge the resolution and appointment of Minerva?

• Replacement rules provide that a resolution may be passed to remove a director from office and appoint another person as a director instead

• Barry can challenge the resolution at the next AGM

• Barry can refuse to leave his office of director

Sellor Pty Ltd is a large media and technology company. 88% of its shares are owned by Resco Ltd and its associates. The remaining shares are owned by small investors in various sized parcels. Resco Ltd wishes to own 100% of Sellor Pty Ltd as it would gain considerable administrative and taxation savings from doing so. However, several small investors in the company are unwilling to sell out to Resco Ltd.

Advise the directors of Sellor Pty Ltd on the best way to achieve full ownership for Resco Ltd.

• Sellor Pty Ltd could conduct a share buy-back of the shares

• Sellor Pty Ltd could instigate a creeping takeover and complete a compulsory acquisition

• Resco Ltd could seek to have Sellor Pty Ltd's constitution changed to give them the power to compulsorily acquire the minority shares

• All 3 of the options provided

Jack and Jill decide to start up a retail nursery business. On advice from their accountan, they incorporate a proprietary company. The nursery is very successful and Jill commences serving refreshments in the nursery shop. Jack always resisted the idea of serving refreshments in the nursery shop because it was not part of the businessplan and it diverted resources away from the nursery. Jill argued that it enhanced the business by drawing more customers and that potentially the income from the refreshments would outstrip the nursery revenue. The differences in opinion have become more acute until the relationship is acrimonious. Decisions about the management of the business are difficult to achieve.

What would you suggest they do?

• Suggestion 1: to buy out the other member

• Suggestion 2: voluntary winding-up

• Suggestion 3: compulsory winding-up order

• Suggestion 4: any of the 1st 3 suggestions

NOTE

All the quiz questions were taken from Corporations Law 4th edition complied by Jason Harris.

• None

• None

• None

What is limited liability in business?

• The company has its own legal entity and the liability of members or shareholders is unlimited

• The company does not have its own legal entity and shareholders are liable for all debts of the company

• Members and shareholders are always liable for company debts

• The company has its own legal entity so the liability of members or shareholders is limited and generally they will not be personally liable for the debts of the company.