ACC520 Legal Regulation of Business Assignment Sample
Here’s the best sample of ACC520 Legal Regulation of Business Assignment, written by the expert.
Question 1
A) Amaya, what the process for altering a company constitution is, and whether she can prevent the inclusion of the clause allowing the directors to expropriate her shares?
Answer:
The process for altering a company constitution follows the power to amend the constitution of a company. The Corporations Act 2001 describes how the amendment of the company could take place and how the shareholders of the company are bind to follow it.
- The constitution of the company is the contract between the company and the directors
- The company and each member
- Company and secretary and between each member (Downes and Steele, 2018)
- The repeal or modification of the constitution can be carried by the special resolution pass by the shareholders
- The constitution can be adopted by the company either before registration or after
- If it is before registration then each member needs to give approval in writing to the terms and conditions of the constitution, and if it is post registration then there must be a special resolution, that needs to pass by the shareholders.
A special resolution can be passed by the shareholders in order to make changes or alterations in the constitution.
- It is necessary to allow 28 days of notice period for publicly companies and 21 days for the other companies (Bird and Gilligan, 2016).
- There must be 75% of majority votes in favor of resolution pass.
- The minority votes will be mined by the majority votes even though the minority have votes are against the pass amendments until or unless if there is any additional changes requirements or statutory protections or common law in the constitution.
- The minority of the shareholders can negotiate the additional requirements that may provide some protection to them against the decisions of the majority votes, which could affect in the financial consequences.
- The statutory power of alteration to constitution cannot be restricted by the company
- It will bill consider as invalid if constitution states that amendment cannot take place.
- It needs to be taken care that the additional requirements to the constitution do not stop the power.
As per the guidelines of the Australian Laws, it is difficult for Amaya to restrict the inclusion of the clause allowing the directors to expropriate her shares. The majority of the votes need to be implemented for the resolution to pass and the role of Amaya is against the majority decisions (Bird and Gilligan, 2016). As per the law, expropriate can be held if there is any threat or harm for the goodwill of the company. Amaya needs to notify the amendments that is not bind by the shareholders. The law and Corporation Act that protect the shareholders of a company against are:
- The rights of cancellation or its variation
- Company’s constitution provisions specific amendments
- Certain amendments provisions of expropriating the minority shareholders or the rights of those shares
As per the decision of the Australian High Court in Gambotto v WCPLtd, the power of majority votes to make amendment in the constitution in order to expropriate the minority shares or the rights of those minority shareholders is limited. According to the Governments Act, the amendments can be effective if there is the valid reason for expropriating the shares of the minority shareholders. The amendments should not operate unfairly to the minority shareholders and the amendment to a constitution should be proper purpose. The Judgment court of Australia held majority that there should be information of the full disclosure of the materials, the payment of shares to the minority shareholders should be as per market value and an expert’s valuation intervened for expropriating the shares of a minority.
According to the decision of Gambotto, the expropriation of the minority share is permissible when the minority share is continued would be detrimental and the share of the minority is competitive with the company (Downes and Steele, 2018). Expropriate is not allowed if the majority is trying to secure the benefits of new structure corporate or for the sake of commercial advantage. The Gambotto decision also protects the minority shareholders by ensuring that the majority does not expropriate the shares less than the market value.
B. Gracey, what recourse, if any, she has for the non-payment of her monthly fee for the remainder of her one-year contract.
Answer:
Gracey the radio host needs to follow the Australia Law of breach of contract in order get paid of her remaining monthly fee of one-year contract. Breach of contract is considered to the terms and conditions of agreement that both the parties needs to abide. If any party fails to abide by the contractual obligation within the limited time then it would be the act of contractual breach or breach of contract. Since, Oh My Company refuse to pay the monthly fee of Gracey, it signifies the company has occurred the breach of contract between company and Gracey.
Breach of contract is considered of two types: Express term and implied term. Express contractual term is referred as the conveying provisions of explicitly and implied contractual term referred as the explicitly implied rather than it is conveyed. Example in an organization if any employee creates any misconduct of high nature then it will be considered as breach of contract from the employees end. Another way if any employee leaks out any important data and information of the company then it is said as breach of contract. Thus, it was contracted between Gracey and Oh My company that the company would pay $4000 monthly fee to Gracey but after the Amaya’s acceptance of accountant position with the competitor Gosh Company, Oh My Company decided not to pay the monthly fee, Thus, this way company has conducted breach of contract (Turner, 2015).
Gracey needs to approach the doors of Australian law so that the company abide by the terms and conditions and repay the monthly fee of her. According to the law of Australia if any party breach the contractual agreement then the number of remedies are available
- The party needs to compensate the damages to the innocent party for any loss incurred.
- The party needs to carry out the obligations as per the order from the High Court
- The order of the High court to stable the innocent party in the position where he started before the contract
In order to follow the contractual obligations, High court could order the party breached contract to perform specific penalty for the sake of being paid to the innocent party. When the compensate is less as equal to the damages incurred then the order from the court is being carried out to perform the specific role for fulfilling the innocent party’s demand. High court orders the breaching party to repair the damages and compensate to the suffered party for the failure, which occurred due to the breach of contract (Whincop, 2017). If there is no damages occurred then court will implied a penalty charge to the breaching party in favor of the injured party so as to prove that the legal action has been infringed.
The damages are of two types:
Liquidated damages – It is the amount of damage that is mentioned in the contractual agreement that if a party breaks the contract then he has to pay the amount of money due to the breach of contract. It must be penalty damage or liquidated. It is the estimate amount of money, which needs to pay due to the contractual breach and court, will award the amount to the suffered party as compensation.
Un-liquidated damages: It is the contractual terms where the amount is not mentioned in the event of breach of contract the court who decides the amount of compensation.
Question 2
A. Lily-Mae whether the directors of Drink It Up Pty Ltd have breached s181 of the Corporations Act 2001 (Cth) or their equivalent equitable duties and what penalties or remedies might be applicable
Lily-Mae should follow the Corporations Act 2001 (Cth) for the remedies of breaching the law against Drink It Up Pty Ltd. The Act specifies that the authority members of the company such as directors or other staff officers needs to carry out their duties appropriately (Russo and DiGabriele, 2018). They should exercise their role of powers and execute the duties properly with diligence and care. In order to follow the legal guidelines and to abide the obligations one has to possess the following qualities:
- The judgment should be made with the perception of proper purpose and with the good faith.
- The directors should not have personal interest in the material subject in the role of judgment in the subject matter.
- The overall calculation needs to be done and judgment is made so that the outcome is in the favor of the corporation
- The decision of the judgment should be informed to the reliable holders of the company for the better outcome of the company.
In the above-mentioned scenario of Drink It Up Pty Ltd, Kristofer the shareholder sells his 5% share to Dhruv in the process of company liquidation. Thus, in such a way Kristofer created the illegal act for the sake of distributing the ratio of payments of creditors. The directors and other officers of the company should exercise their duties with full of good faith and it should be in the outcome of the company’s interests (s 181). The directors and officers should not misuse the power of their position in the company for the sake of the individual benefits and it should be used properly for company’s interests. The shareholders are prohibited not the gain an advantage by using the power of their position for the sake of benefiting themselves which could result in the corporation detriment (s 182) (Langford, 2015). The officers and directors are also not allowed to use the internal information, which was obtained by them within the role consequence, in order to gain an advantage for the fruitful benefiting of himself or herself or someone that could give out the corporation detriment (s 183).
Thus, it makes easier for the liquidator Lily-Mae to find out the culprits of breaching the contract for the sake of self-benefits and with the deal that will deceive Dhruv by sharing the burden of creditor’s payments. The above-mentioned breach gives rise to the obligations of civil section. The activity carried out by Kristofer has raised a civil obligation of the contractual terms and this rise to the provisions of civil penalties. In a incident where court realize that the provision of civil penalty has been contravened then it should pass court order that the person needs to make a penalty of commonwealth a pecuniary of up to $200,000 and may order the culprits of the case to compensate the damages and loss that occurred due to the contravention (Part 9.4B). The court can also remove or disqualify the person from the role of managing the corporate for a appropriate period, which the court considers to be appropriate (s 206C) (Subramanien, 2016).
The Corporations Act 2001 (Cth) sets out the cases of criminal offences records as well where an officer or a director of the corporation acts irresponsibly or lies intentionally in the failure of the proper performance of the duties with good faith and in the favor of the company. The action is been taken against the person who is dishonest and is not loyal towards the corporation. The criminal cases are filed where a director or the officers of a company intentionally misuse the advantage of the position that they have gained from the company (s 184). The order comes from the court against the person in the form of penalty and from the discontinuing of the role from the corporation. The duty of the directors is to let know the full information about the company to all the shareholders for the better judgments on any subject matter. It is their duty to disclose the information frankly and honestly without any hidden subjects.
Bray v Ford (1896) AC 44 – In the case of misuse of the power of position, court has make a decision that a person involved in the role of fiduciary such as the charitable company’s director is unless or provided expressly is enable to gain profit. The directors are not allowed to engage him-self or her-self in the process of the self-interests and the conflictions of the duties. It is a breach to obtain the opportunity for the purpose of company’s benefits and then utilizing it for the sake of personal benefits. It should be noticed that the obligations are not used in an improper way and there should be the consent of all the members of the company. The directors should not be involved in the secret profit.
B. Dhruv whether he has an action against Kristofer for breach of directors’ duties for selling him the shares in Drink It Up Pty Ltd just before it was going into liquidation.
As per the Governments law and guidelines Dhruv has an option filing the fraud case against Kristofer who sold his shares to Dhruv just before it was going into liquidation. As per the section code (s 181) Kristofer should be penalized for not obeying the obligations of the company’s contract and he did not performed his duties with good faith. The intention of selling the share to Dhruv was not good, as he wanted Dhruv to be involved in the burden of sharing the payments to creditors. Dhruv can also file case against Kristofer with the section code (s 182) where Kristofer used his power of position for self-benefits and not for the interest of the corporations. This way it will lead to the external shareholder Dhruv in result of loss (Langford, 2015).
The code (s 183) states that the directors or the officers should not misuse of any information of the company with the power of his/her position, which was gained by the company (Subramanien, 2016). However, in the case of Dhruv, Kristofer tried to misuse the company’s information by selling the share to Dhruv while the company was under the process of liquidation. Dhruv needs to file the case to Australian law and needs to coordinate with the other shareholders of the company for the solution of the deception. The penalty order from the high court could satisfy Dhruv from being deceived. The order from court could result in Kristofer paying of amount up to $200,000 to Dhruv for the case of fraud and additionally he can be disqualified from the role of making the decisions of the corporation. There is a term of jail for 5 years also involved in the case of fraud and civil sections.
Therefore, Kristofer should have performed strict duties as per the Law guidelines in order to avoid the conflictions. The judgments of Kristofer were not out of the good faith thus it could result in landing in the bar. This will help Dhruv from being deceive was planned by Kristofer and will help Dhruv in gaining the compensation of the loss that will be decided appropriately by the government.
Reference List
Bird, H. and Gilligan, G., 2016. Deterring corporate wrongdoing: penalties, financial services misconduct and the Corporations Act 2001 (Cth). Company and Securities Law Journal, 34, p.332.
Langford, R.T., 2015. Directors’ Duties: Conflicts, Proactive Disclosure and S 181 of the Corporations Act.
Russo, C.J. and DiGabriele, J.A., 2018. Impact of the Tax Cuts and Jobs Act on the Valuation of S Corporations. Journal of Forensic & Investigative Accounting, 10(2).
Subramanien, D., 2016. Back to the future: the reinstatement of deregistered companies and close corporations, section 82 (4) of the Companies Act 71 of 2008 Missouri Trading CC v ABSA Bank Ltd 2014 (4) SA 55 (KZD): cases. Obiter, 37(1), pp.187-199.
Turner, R., 2015. Debt for Equity Swaps and Corporate Restructuring Under Section 444GA of the Corporations Act.
Whincop, M.J., 2017. Corporate governance in government corporations. Routledge.
________________________________________________________________________________
Know more about UniqueSubmission’s other writing services:
