LAWS200 Business Organisations

Questions and Answers

Under what circumstance can directors be held personally liable for debts incurred after insolvency?

If the company incurs debts that push it into insolvency (correct)

If they continue operations in a profitable manner

If they fail to disclose financial information

If they declare dividends while the company is insolvent

According to the law, when is a company considered insolvent?

When it cannot pay debts as they become due (correct)

When it cannot generate revenue

When it can pay some debts but not all

When it has more liabilities than assets

What duty do directors have under section 588G?

To maintain a balanced budget

To ensure the company is profitable

To stop the company from incurring debts once it becomes insolvent (correct)

To maximize shareholder returns

How can directors be personally liable under section 588G when returning share capital?

By returning capital which leaves the company insolvent Signup and view all the answers

Which of the following defines a holding company?

A company that controls multiple subsidiaries Signup and view all the answers

What conditions must be met for a company to be classified as a subsidiary under section 46?

The parent company must control the board composition and the voting rights Signup and view all the answers

Which scenario would likely lead to personal liability for directors under s 588G?

Returning profits to shareholders while ignoring incurring debts Signup and view all the answers

Which of the following statements about insolvency is correct?

Insolvency is when a company fails to pay debts as they fall due Signup and view all the answers

What criteria must a large proprietary company meet within a financial year?

Consolidated revenue of $50m or more and two other criteria Signup and view all the answers

What type of liability is a firm subject to when one partner misapplies money or property received from a third party?

Joint and several liability Signup and view all the answers

Which company type would be classified as a small proprietary company?

Consolidated gross assets of $24m with 90 employees Signup and view all the answers

What type of company does not have a limit on liability according to the classification criteria?

Unlimited company Signup and view all the answers

In the case of joint liability, what happens if one party fulfills the obligation?

The obligation is automatically discharged for all parties. Signup and view all the answers

If a partner receives property on behalf of the firm but misapplies that property, who is liable for the loss?

Both the partner and the firm Signup and view all the answers

What is the primary source of funding for a company limited by shares?

Member contributions for shares Signup and view all the answers

When can a member expect to be repaid their contribution in a company limited by shares?

After all the company’s debts have been paid upon winding up Signup and view all the answers

Which of the following accurately describes several liability?

Each party can be sued separately for the entire obligation. Signup and view all the answers

What is the purpose of forming a no liability company?

To operate solely as a mining company Signup and view all the answers

What occurs under joint and several liability if one partner is unable to fulfill the obligation?

The other partners must cover the entire obligation. Signup and view all the answers

What distinguishes collective liability from joint liability?

Joint liability involves a single obligation for all involved. Signup and view all the answers

Which of the following statements is true regarding a small proprietary company?

It may exceed one of the three financial criteria. Signup and view all the answers

What characterizes a public company?

It is not a proprietary company. Signup and view all the answers

Which statement best describes the responsibility of partners under misapplication of property?

The firm is liable as long as the property is in its custody. Signup and view all the answers

How is joint liability different from joint and several liability?

All parties can be sued together in joint liability but separately in several liability. Signup and view all the answers

What is the primary focus of company law?

To govern the creation, operation, and regulation of companies Signup and view all the answers

Which of the following is NOT a topic covered in the LAWS200 Business Organisations course?

Real estate law Signup and view all the answers

What is meant by the 'separate legal entity doctrine' in company law?

It establishes that a company is distinct from its shareholders Signup and view all the answers

Which corporate governance body is primarily responsible for overseeing company compliance?

The Australian Securities and Investments Commission (ASIC) Signup and view all the answers

Which type of company structure is primarily focused on fundraising through shares?

Public company Signup and view all the answers

What is required for an agent to possess apparent authority?

A representation made that the agent had authority Signup and view all the answers

Which scenario describes a situation where apparent authority is NOT established?

An agent makes a representation without anyone having actual authority Signup and view all the answers

In the case of Brick and Pipe Industries Ltd v Occidental Life Nominees Pty Ltd, what was the key factor that allowed Furst to have apparent authority?

Goldberg had actual authority to represent Brick and Pipe Signup and view all the answers

What consequence follows if a representation of authority is made by someone who only has apparent authority?

The representation will not bind the company Signup and view all the answers

Which of the following is NOT a requirement for an agent to exercise apparent authority?

The agent was acting in good faith Signup and view all the answers

Which representation disqualifies an agent from having apparent authority?

The agent claiming they have secret knowledge of authority Signup and view all the answers

In legal terms, what does a representation need to involve for apparent authority to be established?

An explicit statement of authority from the agent Signup and view all the answers

What must a third party do to establish reliance on a representation for apparent authority?

Act upon the representation in a reasonable manner Signup and view all the answers

Study Notes

Introduction to Business Organisations

Unit explores law structures for conducting business activities, focusing mainly on company law.
Company law regulates the creation, operation, and regulation of companies and their relationships.

Core Topics

Nature of companies and the Australian regulatory framework, along with corporate law theories.
Examination of partnerships and their legal implications.
Understanding the separate legal entity doctrine, company formation, and types of companies.
Overview of corporate governance rules and regulatory bodies.
Corporate finance related to shares, share capital, dividends, and fundraising processes.
Directors' duties, including obligations regarding insolvent trading.
Rights and remedies available to members of a company.
Management of companies in financial distress: receivership, voluntary administration, winding up, and liquidation.

Insolvency and Directors' Duties

Under section 588G, directors must prevent a company from incurring debts when insolvent.
Section 95A(2) defines insolvency as the inability to pay debts as they become due.
Personal liability of directors arises for debts incurred post-insolvency or debts leading to insolvency.
Directors are liable for returning share capital that leaves the company insolvent under section 588G.

Corporate Group Structure

A holding company controls a subsidiary company as per section 9.
Conditions for subsidiary status include control of board composition, voting power over meetings, and share capital holdings as outlined in section 46.

Liability in Partnerships

Misapplication of money or property by a partner makes the firm liable, as stated in section 14.
Partners are jointly and severally liable for liabilities incurred by the firm.

Types of Liabilities

Joint liability: All parties are equally responsible for a single obligation. Once one party fulfills the obligation, others are released.
Several liability: Each party is independently liable for their own part.
Joint and several liability: Each party is liable for the whole obligation, regardless of individual shares.

Company Classifications

Large proprietary companies meet at least two of three criteria: consolidated revenue of 50million+;grossassetsof50 million+; gross assets of 50million+;grossassetsof25 million+; 100+ employees.
Small proprietary companies fall below any two of these thresholds.

Public vs. Proprietary Companies

A company that isn't proprietary is classified as a public company under section 9.
Types of companies based on liability include:
- Company limited by shares.
- Company limited by guarantee.
- Unlimited company.
- No liability company options available for mining companies.

Company Limited by Shares

Funded by member contributions towards share capital.
Members' claims for repayment arise only after all company debts are settled.
Contributions generally are not repaid before winding up, except under specific conditions.

Apparent Authority in Agency Law

Requirements for an agent to hold apparent authority:
- A representation of authority is made.
- Made by someone with actual authority.
- The person relied on this representation.
Case study example: Brick and Pipe Industries Ltd v Occidental Life Nominees Pty Ltd highlights the binding authority of actions taken based on assumed authority.

Key Cases

Brick and Pipe Industries: Establishes the binding nature of guarantees when actual authority is represented.
Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising and Addressing Co Pty Ltd examines the limitations of apparent authority when it is not backed by actual authority.

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Description

This quiz covers the key concepts and topics outlined in the LAWS200 Business Organisations course at Australian Catholic University. It is designed to test your understanding of the material from all six weeks of the course, providing a comprehensive review for students. Perfect for exam preparation or reinforcing classroom learning.

LAWS200 Business Organisations - All Weeks (1-6)