Company’s constitution Essay

QUESTION 1Issue the issue about orders system and whether the lend contr meet between ABC bank and Sambal Pty Ltd is pack.State the lawSection 140 of the corporations act states thatA clubs constitution (if any) and any exchangeable rules that apple to the troupe have effect as a contract (a) Between the company and each segment and(b) Between the company and each coach and company secretary and (c) Between a member and each other memberApply the law fit to section 140, a companys constitution is only an internal governance rule, it cannot be enforced by outsider and also cannot be used and act between a company member and an outsider (Corporation Act, 2001).In this case, Sambal Pty Ltd has a constitution, which restricts the amount of money the company can borrow at any one time to $10m. So, as a director of Sambal Pty Ltd, both Jim and Peter require compliance with this internal governance rules (maximum borrow $10m at one time), however, the directors who had been authori sed by the board had borrowed an extra $2m contribute from ABC Bank this time. Well, at the same time, section 140 is important in determine that the consequences of a failure, by around person who is bound by them, to comply with the internal governance rules. This means the liability should be undertook by the directors.State the lawSection 125(1) if a company has a constitution, it may blockade an express restriction on, or a prohibition of, the companys exercise of any of its superpowers. The exercise of any of its powers, the exercise of a power by the company is not invalid. 125 (2) if a company has a constitution, it may set out the companys object. An act of the company is not invalid merely because it is contrary to or beyond any objects in the companys constitution. Section 126(1) a companys power to make, vary, ratify or discharge a contract may be exercised by an individual acting with thecompanys express or implied authority and on behalf of the company. The power may be exercised without employ a common seal.Apply the lawCompanies that act outside their capacity are said to have acted ultra vires. According to section 125, companys exercise goes beyond to a companys constitution leave behind not invalid. That means, although the companys action goes beyond the constitution, the action will still valid. So, the $2m loan contract between ABC bank and Jim and Peter will still valid. The company should pay the interest that colligate to $2m loan (Corporation Act, 2001). Moreover, the person who breaches the companys constitution may be liable for damages (if any) to other shareholders. In this case, the two directors Jim and Peter should be indebtedness to their act and bear the damages to other shareholders (Corporation Act, 2001).ConclusionIn this case, ABC bank do not have any liability. Sambal should give interest for the $2m loan to ABC bank, and asks the two directors to bear all the damages of companys other shareholders.Question 2(1) IssueIn this case, the shareholders of Rich Pty Ltd havent been gainful a dividend related to their shares for 3 years. Susan who owns 25% shares of the company is one of them. She is convinced that she deserves better and yet, given no reasons, the board of directors respond to pay a distribution of the companys profit attached to her shares. Hence, the issue is whether or not the boards refusal is in breach of province. If so, what would be Susans salvage?(2) LawThe laws applied in this case area. The oppression remedy Pt 2F.1b. An injunction to prevent a contravention of the Corporations Act s1324S 232 of the Pt 2F.1 allows the court to provide a remedy to a member where the court finds that the conduct of the companys affairs, oran actual or proposed act or omission by or on behalf of the company, or a resolution, or a proposed resolution, of members or a class of members of the company Is eithercontrary to the interests of the members as a whole, oroppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member or members whether in that capacity or in any other capacity.S1324(2) states that where a person has refused or failed, is refusing or failing, or is proposing to refuse or fail, to do an act or thing that the person is require by this Act to do, the Court may, on the application of ASIC orany person whose interests have been, are or would be affected by the refusal or failure to do that act or thing grant an injunction, on such terms as the Court thinks appropriate, requiring the first summonsed person to do that act or thing.(3) ApplicationThe board of Rich Pty Ltd has committed oppressive conduct, specifically, unfairly restricting dividends. In this case, the directors refuse to give reasons or explanations of failing to pay dividends. By paying no dividends to the shareholders, the directors can possibly benefit their own interests such as paying them excessive remuneration out of the profits that should be paid as dividends that constitutes oppression. Under s232 of the Corporations Act, remedies where there is oppression allows Susan to seek her rights by an order held by the court to regulate the conduct of the affairs of the company in the future. For example, remove several directors and appoint new directors. Furthermore, according to s1324, the court can grant an injunction to any person who has breached the Corporations Act.One of the directors duties is to act in the interest of the company. To some extent, the members interest is the companys interest. Thus, refusing to pay dividends to members is a breach of duty that neutralises the Corporations Act. Therefore, Susan can appeal to the court to have it grantan injunction against the directors of Rich Pty Ltd. In other words, mandatorily require the board to pay dividends to the shareholders and provide sufficient information to the members. Additionally, the statutory right allows members of a company to seek to inspect the books o f the company if they believe that insufficient information are given by directors. However, there are some certain circumstances that failing to pay dividends does not contravene the Corporations Act. For instance, chasing higher profits for the company or suffering a financial crisis.(4) ConclusionAll in all, the fact that the board of Rich Pty Ltd contravenes the Corporations Act will result in certain consequences, these may include fine, disqualification order, injunction etc. Speaking of Susan, she may receive the amount of dividends attached to her shares as compensation. Nevertheless, if the directors acted in a good faith or say for the sake of the company, then the board only needs to provide relevant information and explain why they refuse to pay dividends.Question 3Section 249H states that, as unlisted companies, the minimum period of discover are 21 days. The notice period can be reduced by agreement of members holding at least 95% of the votes that maybe cast at the.1 In this case, John, Sam only hold 72% of the shares, they do not have the authority to reduce the period. For listed companies, S249HA of the Corporations Act prescribes a minimum notice period of 28 days. The minimum 28 days notice period required for a listed company cannot be shortened by member/shareholder approval.2 At this moment, Mark should check when they gave him the notice. If it was given less than 21 /28 days before the general meeting, the meeting can be treated as procedural irregularities.Under this situation, section 1322(2) says if the court is opinion of the irregularities has caused, or may cause substantial injustice that cannot be remedied by any order of the court and the court makes an order declaring the proceeding to be invalid. 249S allows that a company to hold a meeting of its members in two or more venues using any technology that gives the members as a whole a apt opportunity to participate3. In this case, Mark was unable to reserve a flight from Dar win to Brisbane but he canattend the meeting by using telephone or video conferencing facilities.In order to get the full answer of question 3, we trace for the origin knowledge back to the textbook, which shows restrictions on members closing making power. It includes1. Equitable limitation2. Special procedural requirements (e.g. reduction of capital)3. Corporations Act and Listing rules prevented interested members from voting4. Statutory provisions protecting the minority5. phalluss personal rights6. Limit on powers of legal age to ratify breaches of dirs duties. We pay the attention to special procedural requirements in restrictions on members decision-making power. In this part, we know that majority member can remove directors. However, special procedures exists, include special notice must be given to company 2 months before. In this case, it does not mention the special notice, so Mark could argue it. Another key ingredient is limit on powers of majority to ratify breache s of directors duties. Majority cannot ratify dirs breach of duty if it is oppressive the result is to prejudice creditors because coy is insolvent when ratification took place breach of equitable limitation results in a personal right of member being eliminatedMajority cannot ratify directors breach of duty if it is oppressive. In this case, we know that the relationship between Mark and his cousins broke down. Mark could rent that there is oppression then try to invalid this meeting. Finally, board of directors can delegate certain tasks to committees, a single director, an employee or another person unless constitution prevents it. Although Mark cannot book a flight at the week before Easter, he could do it in this way.ReferenceCorporations Act. (2001). s. 125. Retrieved fromhttp//www.austlii.edu.au/au/legis/cth/consol act/ca2001172/ Hanrahan, P., IRamsay, G Stapledon, (2014). Commercial Applications of Company Law, 15th Edition, CCH Australia.