Corporate Law: Section 125 Analysis

Questions and Answers

Which statement about the impact of express restrictions in a company's constitution is true?

An act of the company becomes invalid if it breaches the objects stated in the constitution.

The exercise of a power is automatically invalid if it contradicts the express restrictions.

Established authority allows for all acts that breach express restrictions to be found invalid.

The company can still exercise its powers even if contrary to express restrictions. (correct)

Which of the following correctly describes the Doctrine of ‘Constructive Notice’?

It has been abolished and does not impose liability on individuals. (correct)

It mandates that all companies must inform members of available public information.

It is still applicable as an independent cause of action.

It requires individuals to know company information available on public record.

What is a significant distinction of a statutory contract compared to other contracts?

Its remedies are limited to declarations or injunctions only. (correct)

It requires consent from all parties for any modifications.

It offers the same remedies as standard contracts including damages.

It automatically supersedes all clauses in ordinary contracts.

Under which circumstance can an ultra vires act potentially influence other legal actions under the Corporations Act?

In matters such as breach of duty by a director. Signup and view all the answers

Which statement is true regarding the enforcement of a company's constitution and replaceable rules?

They function as a contract between the company and each member. Signup and view all the answers

What is required for members to enforce provisions in the constitution according to s 140(1)(c)?

Members can only enforce provisions that confer rights in their capacity as members. Signup and view all the answers

Which statement accurately reflects the remedy provisions under s 232?

Members need to demonstrate collective oppression or unfair discrimination. Signup and view all the answers

What is a critical requirement for passing a special resolution as per s 136(2)?

It must be passed by at least 75% of votes cast by participating members. Signup and view all the answers

In the context of procedural irregularities under s 1322, what must members demonstrate?

A procedural irregularity causing substantial injustice. Signup and view all the answers

Which is NOT a condition under which members can seek remedies for breaches of the constitution?

The breach causes harm only to individual shareholders. Signup and view all the answers

Study Notes

Limiting Company Powers

Exercise of a company's power is not invalid if it contradicts express restrictions or prohibitions in the constitution (s 125(1)).
A company’s action is valid even if it exceeds or contradicts stated objects in the constitution.

Constructive Notice

Doctrine of ‘Constructive Notice’ abolished (s 130(1)).
Individuals are not presumed to have information simply because it is publicly available from ASIC.

Ultra Vires Acts

An ultra vires act is not an independent cause of action but can influence other actions under the Corporations Act.
Examples include breaches of director duties, oppression in winding up applications, or just and equitable winding up under s 461(1)(k).

Enforcement of Constitution and Replaceable Rules

The company’s constitution and applicable replaceable rules act as a statutory contract between the company, its members, and its officers (s 140(1)).
Breaches can be enforced by the company against members and vice versa.

Characteristics of Statutory Contracts

Limited remedies available: declarations or injunctions.
Can be modified without the consent of all parties involved.
Members can enforce provisions that confer rights upon them in their capacity as members.

Remedies for Procedural Irregularities

Members can seek remedies for procedural irregularities causing substantial injustice under s 1322.
Examples include absence of quorum or insufficient notice during meetings.

Oppressive or Unfair Conduct

Under s 232, members can seek relief for conduct that is oppressive, unfairly prejudicial, or discriminatory irrespective of the nature of their membership.
Breaches must be contrary to the interests of all members.

Alteration of Company’s Constitution

Requires a special resolution passed by at least 75% of votes (s 136(2)).
Notice of the meeting must specify the intention to propose the special resolution (s 249L(c)).

Management and Stakeholder Theory

Corporations should be managed for the benefit of stakeholders including customers, employees, and local communities.
Management has a fiduciary duty to act in the stakeholders' interests while ensuring the corporation's long-term viability.

Board of Directors Powers

Business is managed under the direction of directors, who can exercise powers unless restricted by law or the constitution (s 198A).
Directors cannot override management decisions; they may delegate powers to committees or other designated persons (s 198D).

Calling of Meetings

A reasonable notice period must be provided for meetings.
Valid notice can be verbal but must effectively communicate meeting specifics.

Physical Presence Rule

Directors are typically required to be physically present to vote unless linked via technology (s 248A allows for circulating resolutions).
All directors must consent to use technology for meetings (s 248D).

Shareholder Powers in General Meetings

Proprietary companies can skip AGMs unless their constitution requires otherwise; public companies must hold AGMs annually (s 250N).
Generally includes consideration of financial reports, director elections, and auditor appointments at AGMs (s 250R).

Requesting General Meetings

Directors are required to call a meeting upon request from members holding at least 5% of voting rights (s 249D).
If directors fail to do so, members may organize the meeting themselves (s 249E).
Members holding 5% voting rights may call a meeting at their own expense, and courts can order a meeting if calling through regular channels is impracticable (s 249G).

Notice of General Meeting

A minimum of 21 days' notice must be provided for general meetings.

Description

This quiz explores Section 125 of corporate law, focusing on the limitations of powers exercised by companies, particularly regarding express restrictions in their constitution. Analyze case law, including Hillig v Darkinjung Pty Ltd, to understand the implications of this section on corporate acts.