These provisions apply whether or not the single shareholder company has adopted a constitution which include: The director may appoint another director by recording the appointment and signing the record: s OFF. The director may exercise all of the powers of the company except any powers that the
Corporations Act or the company’s constitution requires the company to exercise in general meeting: s 1 EYE(1) The business of the company is to be managed by or under the direction of the director: SSL EYE(1) The director may execute a negotiable instrument such as a cheese, and may determine that a negotiable instrument may be executed in a different way: s IEEE(2) The director is to be paid any remuneration for being a director that the company determines by resolution. The company may also pay the director’s traveling and other expenses properly incurred by the director in connection with the company’s cuisines: s ICC.
Where something must be done by the member of a single director company in their capacity as a member, it can be done by the member recording a resolution in writing and signing it. This is provided for under s BIBB of the Corporations Act, The resolution must be recorded in the company’s minute book: s AAA. Section OFF deals with the situation where the sole participant in a single director company dies or is otherwise incapacitated, by providing for their personal representative to take over the company. B) James is considering bringing his brother into the company as a shareholder.
Explain what difference will make to the company. When James brings his brother into the company as a shareholder, the company issues shares to James’ brother. One his brother becomes the shareholder, James as the single director can call shareholder meetings, or shareholder meetings of only those who hold a specific class of shares. Shareholders holding at least 5% of the votes, that may be cast at a company’s general meeting can call and hold a meeting themselves, or require the directors to call and hold a meeting.
The Corporations Act sets out rules that deal with shareholder meetings The company can hold tenting regularly, or when it becomes necessary to deal with, and resolve specific questions about the company’s management or business. A shareholder can ask for a copy of the record of a meeting, or of a decision of shareholders taken without a meeting. Shareholders can fund the company’s operations by lending it money, or by taking up other shares in the company. Unless it is raising funds from its employees or shareholders, a company cannot engage in any fundraising activity that requires disclosure to investors.
Dividends are payments to shareholders out of the company’s after tax profits. It is a replaceable rule that the directors decide whether the company should pay a dividend. The accounting requirements imposed on the company under the Corporations Act. C) James wants to raise more capital to increase the size of the company and expand its business. What options does James have in seeking to raise more funds? As a single director company, the principal sources of finance for companies limited by shares include: Debt finance.
Debt finance is money lent to the company, in the expectation that the company will pay interest throughout he term of the loan, and repay the principal by the end of the term. The lender may be an outsider such as bank. Term loans and overdraft facilities are examples of debt finance. Trade finance. Trade credit is a term used to describe the situation where a company has received goods or services in advance of paying for them, or has received payment in advance of delivering goods or services. Retained earnings. Retained earnings are earnings from previous periods that have not been distributed to the company’s members. ) Explain the implications of Jumbos becoming a pubic company. Corporations Act imposes the obligations on public companies and their participants than on proprietary companies and their participants. For this reason, it is generally appropriate to incorporate as a proprietary company unless the special restrictions that apply to public fundraising by proprietary companies are inappropriate for that enterprise. Public companies are required to hold an annual general meeting: s NON. Public companies are required to lodge financial reports, regardless of the size of the company’s operation: s 292.
Special restrictions on transactions with related parties apply to public companies under Chi E of the Corporations Act. Public companies must have three directors while proprietary companies need only one director: s AAA Public companies must have a secretary: s AAA. The resignation of an auditor of a public company requires the consent of ASIA: s 329. Directors’ report of a public company must certain statements about the qualifications of directors, their attendance at meetings of directors, their shareholdings or contracts with the company: s 300(10).
Therefore, if Jumbos becoming a pubic company, the company needs to hire more directors, establish secretary, follow the special restrictions applied to public companies. Question 2 Identify and explain how some parts of the Corporations Act allow certain business conducted at company meetings to stand notwithstanding that the meeting has not strictly complied with all the legal requirements of the Act. Please refer to any relevant case law that supports your answer. Sometimes a company or the people involved with it fail to observe all of the procedural and technical requirements relating to meetings.
In these circumstances s 1322 of the Corporations Act may assist. Section 1322 provides that meetings and other proceedings are not invalid because of certain irregularities. Unless a court is of the opinion that the irregularity has caused a substantial injustice that cannot be remedied, and orders that proceeding is invalid. This is a form of “automatic validation”, subject to the power of the court to override it. Section 1 322(2) of the Corporations Act deals with “procedural irregularities”.
It says that a proceeding under the Act is not invalidated because of any procedural irregularity unless the court is the opinion that the irregularity has caused, or may cause, substantial injustice that cannot be remedied by any other of the court, and the court make an order declaring the proceeding to be invalid. It is one of the “automatic validation” provisions. If a person wants to have the proceeding declared invalid, the onus is on that person to demonstrate that substantial injustice has resulted or will result form the irregularity.
Section 1 322(1) says that reference to a proceeding under the Act is a reference to “any proceeding whether a legal proceeding or not”. A meeting can be a proceeding, as can the passing of a special resolution. This means that s 1322(2) can apply to directors’ meetings and members’ meetings. “Procedural irregularity” is defined in s 1322(1) b of the Corporations Act to include: the absence of a quorum at a meeting of a corporation, at meeting of directors or creditors of a corporation, at a joint meetings of creditors and members of a corporation or at a meeting of members of a registered managed investment scheme. Defect, irregularity or deficiency of notice or time The statutory definition is inclusive, not exhaustive. Other things can amount procedural irregularity for this purpose. In the case of Gregg v Australian Building Industries Pity Ltd, courts have taken the view that the section should be afford a liberal interpretation to allow the court ample scope to unholy the results of proceedings, legal or corporate, which had not complied with the requisite rules but which have nonetheless not given rise to incurable injustice.
Coordinator Communications (Australia) Pity Ltd v The Communications Group Holdings Pity Ltd indicates where an irregularity goes to the thing to be done, as opposed to the manner in which the thing is to be done, it will constitute a abstractive, not procedural irregularity. In MET Holdings Pity Ltd v RCA Tomlinson Ltd, a share holder sought to have a resolution declared invalid on the basis that the meeting at which it was passed had been closed by the chairman before the shareholder had a proper opportunity to object to the validity of some of the proxy votes being cast in favor of the resolution.
The judge observed that in the case of voting at a meeting, the “thing to done” is the admission amount to a substantive, not procedural, irregularity. However, in this case the shareholder did not attempt to establish hat the proxies in question were actually invalid, but merely that the chairman had denied the shareholder a proper opportunity to object. Accordingly, the irregularity was procedural and not substantive, and was capable of being within s 1322(2). The procedural irregularity need not to be the result of an accident or oversight.
In Whitehorse v Capital Radio Network Pity Ltd a directors’ meetings was held at which there was not a quorum. The court held that the lack of a quorum was a procedural irregularity even if the meeting was called in the knowledge that is was extremely unlike that there would be a quorum, if the purpose of he meeting was to attempt to circumvent the effect of certain orders made by the Family Court, and if the meeting proceeded in the full knowledge of those present that there was no quorum.
Other irregularities automatically validated Non-receipt of notices of meeting Section 1 322(3) of the Corporations Act deals situations where there has been an accidental omission to give notice of the meeting, or where a person entitled to notice has not received it. The meeting is not invalidated only because of these failures unless the court, on the application of a person concerned, a person entitled to attend the meeting, or SIC, declares proceedings at the meeting to be void.
Member participation Sometimes members’ meeting are held in more than one place, for instance, using telephone or video conferencing facilities. Section 1322(AAA) of the Corporations Act deals with situations where the technology fails or where, for some other reason, a member dose not have a reasonable opportunity to participant in the meeting. The section provides that the meeting will only be invalid if a substantial injustice has occurred that cannot be remedied by any there order in the court, and the court makes an order declaring the meeting or proceeding to be invalid.