Types of Companies: Course Notes

Topics: Stock, Corporation, Liquidation Pages: 30 (6019 words) Published: September 9, 2012
Partnerships and companies contract through agents.
Partners can be agents of the partnership; directors agents of the company. Most cases agents have actual authority
If no authority then ostensible authority may apply.

Not for profit for members.
Unincorporated > 2 members
Liability to outsiders uncertain
Incorporated >5 members
Members liability limited
Associated can be sued

Sole Trader
One person owns business
Take profit and bear losses
Unlimited personal liability applies
Minimal formalities

Relevant statute is in the Partnership Act
Each state of Australia has a Partnership Act
The Partnership Act determines the obligations of the partners to each other and to outsiders A partnerships where two or more carry on business in common with a view to profit (s.1) Partners are agents of the partnership (s.5)

Important factor – whether the partner is carrying out the usual Partnership Business Partners liability to outsiders can be:
Joint (s.9) – contract
Join and several (s.12) tort and fraud
Case: Polkinghorne v Holland
Partners arrangements between themselves do not prejudice outsiders’rights under the partnership act. Partners have unlimited personal liability
Partners may be liable to outsiders even after leaving the partnership (s.17, s.36) Partners are fiduciaries (s.29, s.30)
Case: UDC v Brian

Companies legislation originated from England
In Australia:
States passed companies Acts similar to English legislation
In 2nd half of the 20th century, Australia moves towards federal control for company law Achieving uniform company law failed (due to high court) until the Corporations Act 2001 (Cth). Section 51 (20) of the Constitution restricted national scheme Cases: Re Wakim ex parte McNally

R V Hughes
Constant reformation to meet changes.
Eg. CLERP Act 1999, CLERP Act 2004
Government bodies such as CAMAC consider reform proposals and recommend ammendments to law.

All companies that operate in Australia must be registered.
Companies are registered at ASIC (s117)
Upon registration, issued: Certificate of Registration (s118) ACN – 9 digit number

Effects of Registration
Company comes into legal existence (s119)
Company has perpetual Succession and exists until deregistered (S601 AD) Shares may change hands, but the corporate entity countinues without change. Companies are legal individuals; they have the legal capacity of an individual plus ‘body corporate’powers (s124) Issue shares (share capital)

Issue debentures (loan capital)
Power to acquire, hold and dispose of property
Grant floating charge
Register as a company in a foreign jurisdiction
Capable of suing and being sued
As a separate legal entity, a company is distinct and separate - includes it’s own members and directors (Corporate Veil) CV cases; Salomon v Salomon (Company & controllers)
Macaura v Northern Assurance (Company & members)
Lee v Lee’s Air Farming (company & employee)
Corporate Veil protects (in most cases) company management from liability, however court will neglect this if it is used for fraud or to avoid contractual or legal obligations & insolvent trading. Gilford Motor Co Ltd v Horne (contractual avoidance)

Creasey v Breachwood Motors Ltd (legal obligation)

Types of Companies

Companies classified by:
Member Liability
Limited by shares (public or proprietary)
Limited by guarantee (public only)
No liability (public only)
Unlimited liability (public or proprietary)
Companies limited by shares – most common
In companies limited by shares, shareholders liability is limited to unpaid value of their shares (s 516) Public Status:
Public companies (Ltd)
Listed (ASX)
Proprietary companies (Pty Ltd)

Corporate Group Structures:
A subsidiary company is one controlled by a holding or parent company (s46) Where there is 100% ownership of a company, it is called a wholly owned...
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