- Business Associations Law Summary Notes!

What's in the Business Associations Law Summary Notes?

Table of Contents for Business Associations Law Summary Notes

1.  Introduction. 4

A.   How to use Cram Notes. 4

2.  Background. 5

A.   Types of companies and corporations. 5

i.        Proprietary companies (Pty Ltd) 5

ii.       Public companies (Ltd) 5

iii.      Registration procedures. 6

B.   Decision to incorporate. 6

3.  Is there Separate Legal Personality? 6

A.   Saloman¡¦s Case. 6

B.   Piercing the Corporate Veil 7

i.        Corporations Act 7

ii.       Avoidance of obligations (Fraud, Device or Sham) 7

iii.      Agency and Under capitalisation. 8

1)     Agency. 8

2)     Undercapitalisation. 9

4.  Is the Corporate Constitution valid? 9

A.   Nature and effect of the constitution.. 9

i.        Replaceable Rules. 10

B.   Amendments to the constitution.. 10

C.   Implications for shareholder¡¦s rights. 10

5.  Have Meetings and Board Powers procedures been implemented correctly? 11

A.   General meeting.. 11

i.        Requirements and Notice. 11

ii.       Disclosure obligations (Common Law) 12

iii.      Resolution. 13

iv.      Special Resolution. 13

v.       Residual control in general meetings (Doctrine of Unanimous consent) 14

1)     Where the board is unable to act 14

2)     Ratification of directors¡¦ acts. 14

3)     Informal corporate acts. 14

vi.      Irregularities. 15

B.   Board of directors. 16

i.        Powers of directors. 16

ii.       Appointing directors. 16

iii.      Removal of directors. 16

1)     Disqualification. 16

iv.      Managing director 16

v.       Director¡¦s meetings. 17

vi.      Single shareholder/director companies. 17

6.  Are Contracts with Outsiders enforceable? 17

A.   What authority did the person supposedly acting on behalf of the company have?  17

i.        Actual authority. 17

ii.       Ostensible authority. 18

iii.      Protected under Indoor management rule or other statutory assumption as to authority  19

1)     Statutory assumptions as to authority. 19

2)     Section 128(4) exclusion. 20

7.  Did Director¡¦s breach their duty to the company? 20

A.   Duty of Care and Diligence. 20

i.        What was the standard of care required?. 20

ii.       Business Judgment Rule. 22

B.   Duty to act in Good Faith in Best Interests of the Company. 23

C.   Duty to act for a Proper Purpose. 24

i.        What is the legal purpose for which the power may be used?. 24

1)     Proper purposes. 24

2)     Improper purposes. 25

ii.       Has the power been used for proper purpose as a matter of fact?. 25

D.   Duty to avoid conflicts. 26

i.        Was there a personal interest?. 26

1)     Fettering the exercise of discretion. 26

ii.       Was there adequate disclosure of a material personal interest?. 26

iii.      Were statutory disclosure obligations satisfied?. 27

E.   Duty not to make secret profits. 27

i.        Was there ¡§secret profits¡¨?. 27

ii.       Was there a ratification of the breach?. 28

iii.      Businesses started by former directors. 29

iv.      Directors¡¦ personally benefiting from opportunity turned down by the company. 30

v.       Statutory duty. 30

F.    Related party transactions. 30

i.        Was a financial benefit given?. 30

ii.       Was there an exception?. 31

iii.      Were procedural requirements for approval followed?. 31

G.   Statutory duty to prevent insolvent trading.. 31

i.        Was the person a director at the time the debt was incurred?. 31

ii.       Is there a debt?. 31

iii.      Did the debt that was incurred cause insolvency?. 31

iv.      Are defences available?. 32

8.  Can the Director rely on an Indemnity? 33

9.  Is there Standing to sue the Director or the Company? 33

A.   Suing the directors. 33

i.        Shareholders suing directors for breach of director¡¦s fiduciary duty. 33

1)     Directors buying shares from shareholders. 33

ii.       Statutory derivative suit 34

1)     Probability that the company itself will bring proceedings. 34

2)     Good faith. 34

3)     In the best interests of the company. 35

B.   Suing the company. 35

i.        How to impute knowledge to the company. 35

ii.       Shareholders suing company as a personal action. 36

iii.      Shareholders suing company for other wrongs committed by company to shareholder in a collateral capacity  36

iv.      Shareholders suing company for fraud on the minority. 37

1)     Ratification. 37

2)     Constraints on exercise of power by special majority in changing constitution. 37

3)     Infringement of personal rights by breach of directors¡¦ duty. 38

v.       Statutory oppression remedy. 38

1)     Unfairly prejudicial or discriminatory. 39

10.      Remedies. 40

A.   Common Law remedies. 40

i.        Rescission of contract 40

ii.       Account of profits. 40

B.   ASIC Declaration of contravention.. 40

C.   Statutory oppression.. 41

D.   Statutory winding up.. 41

i.        Just and equitable. 42

ii.       Directors have acted in affairs of company in own or others interests (s 461(1)(e)) 42

E.   Statutory insolvent trading.. 43