LAW201 Corporate Law Week 1

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Questions and Answers

What does the separate legal entity doctrine imply?

Corporate profits are considered personal income of owners.

Owners have unlimited liability for corporate debts.

A corporation is treated the same as its shareholders.

A corporation can act independently of its owners. (correct)

Which Act introduced limited liability for companies in the UK?

Companies Act 1862

Bubble Act 1720

Limited Liability Act 1855 (correct)

1844 Act

What is a corporation according to the Corporations Act?

A large business involved in a specific sector.

Any government department or entity.

An organization created by charter, prescription, or legislation.

A company as defined under Section 57A. (correct)

Which historical event led to the introduction of the Bubble Act in 1720?

The South Sea Bubble. Signup and view all the answers

What type of incorporation does the 1844 Act in the UK allow?

For private purposes for a fee. Signup and view all the answers

What is meant by 'corporate personality'?

The rights and responsibilities of an organization as a separate entity. Signup and view all the answers

What was a significant effect of the separate legal entity doctrine?

Corporations can enter into contracts in their own name. Signup and view all the answers

What is one primary advantage of incorporating a business?

Limited liability protection for shareholders. Signup and view all the answers

What was the core argument of the case Salomon v Salomon & Co Ltd?

The legal constitution of the company was valid. Signup and view all the answers

Which principle emerged from the Salomon v Salomon case?

There is a corporate veil protecting shareholders. Signup and view all the answers

How did Lord Haldane respond to the request to impose limitations on the Companies Act 1862?

He declined to impose any limitations not found in the act. Signup and view all the answers

What legal status was affirmed for Mr Salomon in relation to the debts of his company?

He had limited liability for the company's obligations. Signup and view all the answers

What is a notable consequence of the Salomon case in Australia?

The establishment of the $2 company structure. Signup and view all the answers

Which corporate structure became possible after the implications of the Salomon case?

Proprietary companies with only one member subscribing $1. Signup and view all the answers

What was determined about the relationship between a company and its shareholders in the Salomon case?

There is a legal separation between them. Signup and view all the answers

According to the decision in Salomon v Salomon, what is the significance of a company's constitution in law?

It is not subject to judicial limitations. Signup and view all the answers

What is one of the functions ASIC can perform under the Corporations Act 2001 (Cth) when an application is lodged?

Give the company an Australian Company Number (ACN) Signup and view all the answers

Which of the following does NOT describe a typical component of the certificate issued by ASIC upon registration of a company?

The financial forecast for the next year Signup and view all the answers

Which of the following regulators is concerned specifically with companies and financial services?

ASIC Signup and view all the answers

What is one of the stated purposes of the Corporations Act 2001 (Cth) regarding company registration?

To provide a legal framework for company formation Signup and view all the answers

Which body is primarily responsible for overseeing corporate regulations in Australia?

ASIC Signup and view all the answers

What does perpetual succession signify in relation to a company?

The company can exist indefinitely regardless of membership changes. Signup and view all the answers

Which of the following powers does a company possess under the Corporations Act 2001 (Cth)?

The power to issue and cancel shares. Signup and view all the answers

Under which circumstance may a court require a company to provide security for costs in legal proceedings?

If the company is believed to be unable to pay costs if it loses. Signup and view all the answers

What is the legal capacity of a company regarding ownership of property?

A company can acquire, hold, and dispose of property like an individual. Signup and view all the answers

What does the corporate veil refer to?

The shield against personal liability for company debts. Signup and view all the answers

In which scenario can a company be wound up based on its membership?

If a company has no members. Signup and view all the answers

What power does a company lack if it is limited by guarantee?

The power to issue shares. Signup and view all the answers

Which statement about the privilege against self-incrimination is correct?

Companies do not enjoy the privilege against self-incrimination. Signup and view all the answers

What happens to a company's identity if all its members die?

The company remains in existence despite losing all its members. Signup and view all the answers

In the case of Salomon v Salomon & Co Ltd, what was the court's ruling regarding the company and its members?

The company was held to have separate legal identity from its members. Signup and view all the answers

What is the role of a common seal according to the old Corporations Law?

It is a symbol of corporate authenticity. Signup and view all the answers

Which power is NOT granted to a corporation under the current Corporations Act?

To refuse the inspection of its financial documents. Signup and view all the answers

What action can be taken if a company cannot be represented due to the death of its last director?

Legal representatives may attend meetings on behalf of the deceased directors. Signup and view all the answers

How does the Corporations Act 2001 (Cth) define the powers of a body corporate?

It grants all rights of an individual and additional corporate powers. Signup and view all the answers

Study Notes

Corporate Law in Australia

A company is an incorporated entity that can be created via registration with ASIC.
"Corporation" is used interchangeably with "company" and refers to any corporate body or incorporated association.
Corporations Act defines a corporation as including a "company."

Historical Development

Early corporate law involved 'corporation aggregate' and joint stock concepts.
The South Sea Bubble led to the Bubble Act of 1720.
The UK 1844 Act allowed incorporation for private purposes for a fee.
Limited liability introduced by the Limited Liability Act of 1855 (UK).
The Companies Act of 1862 consolidated corporate laws in the UK.

Corporations in Australia

Corporate law legislation power is derived from Section 51(xx) of the Australian Constitution.
Landmark case: Huddart Parker & Co Pty Ltd v Moorehead (1909).
Introduction of the Uniform Companies Acts in 1961 and the National Co-operative Scheme.

Incorporation Process

Upon application under the Corporations Act 2001 (Cth) s117, ASIC may:
- Assign an Australian Company Number (ACN).
- Register the company and issue a registration certificate detailing company info.

Corporate Regulation

Key regulators include ASIC, ASX, ATO, AUSTRAC, APRA, ACCC, RBA, and FIRB.

Statutory Powers of Companies

Corporations Act 2001 (Cth) provides companies with individual powers:
- Sue and be sued, perpetual succession, acquire and hold property.
A common seal is no longer mandatory but it may be used.

Perpetual Succession

Defined in Corporations Act 2001 (Cth) s119, allowing a company to exist independently of its members.
Members changing or passing away does not affect a company's continuity.

Ownership and Property

Corporations have full legal powers to own property under Corporations Act 2001 (Cth) s119 and s124(1).
Companies can hold property in full beneficial ownership or as lesser interests.

Corporate Personality

Corporations are treated as legal entities distinct from natural persons but lack some rights (e.g., privilege against self-incrimination).
Interpretative statutes define person to include corporations in legal contexts, though some rights are limited to individuals.

Separate Legal Entity Doctrine

Companies are legally distinct from their members, encapsulated by the corporate veil, preventing personal liability for company debts.
The historic case of Salomon v Salomon & Co Ltd established the corporate veil and defined shareholder liability limits.

Salomon v Salomon & Co Ltd

Established that a properly constituted company is a distinct legal entity.
The Court ruled that personal debts of shareholders do not extend to company obligations; Lord Haldane emphasized adherence to statutory definition.

Corporate Developments Post-Salomon

Resulted in the evolution of the "$2 company" concept, allowing for minimal membership for company formation.
Current law permits a $1 company with a single incorporator acting as member and director.

Future Topics

Upcoming lectures will delve further into corporate roles and responsibilities, focusing on corporate social responsibility and evolving legal principles.

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Description

Explore the essentials of corporate law in Australia in this quiz covering the history of corporate law, incorporation, and the separate legal entity doctrine. Understand key concepts such as types of companies, the registration process, and the implications of these legal principles. Enhance your knowledge of the Australian legal framework in corporate governance.