Company Law - Proprietary Ltd Company - Assessment Answer

Company Law Assignment

Assignment Task

PART 1

REGISTER A PROPRIETARY Ltd COMPANY

THE INTERNAL MANAGEMENT OF THE COMPANY IS TO BE GOVERNED BY A COMBINATION OF REPLACEABLE RULES AND A CONSTITUTION - NB SECTIONS 134 AND 135

THE COMPANY IS TO HAVE A CLASS OF ORDINARY SHARES AND A CLASS OF REDEEMABLE PREFERENCE SHARES NB SECTIONS 254A (2 )AND(3)

PART 2

EXPLAIN WHY THE FOLLOWING SECTIONS ARE IN THE CORP. ACT YOU ARE REQUIRED TO EXPLAIN THE HISTORICAL BACK GROUND AND REASON FOR THEIR INCLUSION IN THE CORP. ACT

Part-1:

As per the section 45A of the Corporations Act 2001, a proprietary company which is registered can be converted to a proprietary company. A proprietary company should be limited by the shares or can also be an unlimited company having a share capital. As per the act there cannot be more than 50 non-employee shareholders in the company. There are two types of proprietary companies present as per the act. They are small proprietary company and large proprietary company. As per the section 134, the internal management of the company can be governed by the act which can apply to the companies as the replaceable rules. The companies, in which the replaceable rules can apply, should be registered after 1st July 1998. The replaceable rules for the proprietary companies can apply to any type of companies which have been registered after 1st July 1998 and they have been converted into the proprietary companies. As per the section 254A, the company can issue shares including the bonus shares and preference shares and partly paid shares. The act also helps the proprietary limited companies to issue shares for different matters such as repayment of the capital for the company, participation in the profits and assets, voting etc.

Part 2:

Section 198A:

The section 198A, states that the directors have the freedom to manage the business of any company and they also can implement their powers for the betterment of the company apart from the powers stated by in the constitution of the company which should be exercised only after conducting a general meeting by all of the shareholders of the company. The act has been included in the act in the year 2001 because as the company should have the legal capacity and power to form a body of corporate, the power should be given to the directors of the company because they can engage in the different types of activities on behalf of the company unless the activities are restricted by the constitution of the company. The act has also been developed and included in the corporations act because as the shareholders of the organization will not have obligation to act for the best interests of the company, the director is the best person of the organization who can take the responsibility for the welfare of the company and they can exercise their powers for the best interest of the company.

Section 191:

The section 191 states the duty of the directors of the corporations to inform the other directors of the company regarding the material interest of the director in case any conflict arises. The section of corporations act states that if the director of the corporation has any material interests regarding any particular matter then it is the duty of the director to inform in written form to other shareholders regarding it. The section was included in the corporations act 2001 by the Australian Institute of Company Directors when the honest and reasonable defence of the directors was proposed in the act. Some strict liability provisions were presented by AICD in the corporations act. The amendment by AICD also stated that sometimes it is difficult to consider the breach of providing notice to other directors of the company regarding the material interest. In order to bring the solutions to the problem the AICD included the strict liability provision in the corporations act 2001 under section 191 and the section 195 was also included in order to find solutions to the problems through voting in which the director has material interests.

Section 250R (2) and Section 250R(3):

The main purpose of the section of the Corporation Act 2001 is to conduct voting in annual general meeting of the companies for the consideration of the annual reports of the company, the election of the directors, appointment of the auditor of the company and determination of the remuneration of the auditor. The sections of the corporations act also states that the directors of the corporations should give notice to all shareholders of the company regarding the remuneration report to be put in the AGM before the AGM is to be conducted. All directors of the company should have idea about the things which will be put in the AGM. The act has been enforced in the corporations act in the Corporations Amendment Act which prohibits the KMP and other parties from voting in form of proxies regarding the resolutions to be enforced for the issues related to the remuneration. A list of resolutions have been provided by the amendment in the Section 250R (2) and Section 250R (3) of the Corporations Act 2001 which are related to the remuneration of the member of KMP.