LAWS1091 Business Associations - HD and Dean's List Full Course Notes

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HD and Dean's List Extensive Complete Course Notes. Covering every topic and lecture for the whole term. Topics covered: Week 1A (Company Types, Formation and the Decision to Incorporate): Limitations of sole trader and partnership structures (personal liability, asset partitioning problem, financing difficulties, succession problems), types of companies under Corporations Act s 9 and s 112 (company limited by shares, company limited by guarantee, unlimited company, no liability company, proprietary company under s 45A: max 50 non-employee shareholders, public company), corporate groups under ss 46 to 47 (control of board composition, majority votes, majority issued share capital, Mount Edon Gold Mines v Burmine Ltd (1994) 12 ACSR 727 on economic reality of control), registration under ss 117 to 119 (8-step procedure: Form 201 lodgment, ACN, certificate of registration, company comes into existence on beginning of day of registration s 119), promoters (fiduciary duties, Gluckstein v Barnes AC 240 on promoter disclosure to independent board vs captive board, remedies: rescission, account of profits, equitable compensation), pre-registration contracts under s 131 (personal liability of contracting party under s 131(1), ratification releases the party under s 131(2), court orders allocating loss under s 131(4)), key legal consequences of incorporation (separate legal personality, entity shielding, limited member liability under s 516, perpetual succession, transferable shares, nexus of contracts), shares (ordinary shares vs preference shares comparison table: dividends, liquidation ranking, voting, priority), contractarian justification for shareholder voting (shareholders as residual risk-bearers). Weeks 1B to 2 (Separate Legal Entity and Piercing the Corporate Veil): Salomon v A Salomon and Co Ltd AC 22 (company is separate legal person from subscribers, motive and intention irrelevant, Lord Macnaghten principle, policy debates on formalism vs creditor protection), Lee v Lee's Air Farming Ltd UKPC 33 (sole controller can be employee of own company, capacity changes depending on role), four economic benefits of entity shielding (lowers creditor monitoring costs, protects going concern value, promotes capital accumulation and diversification, enables free transferability of shares), five rationales for limited liability (encourages risk-taking, risk transfer to diversified investors, eliminates inter-shareholder monitoring, promotes efficient share market, supports market for corporate control), three types of creditors table (adjusting voluntary creditors, non-adjusting voluntary creditors, involuntary creditors as most vulnerable), limited liability and moral hazard. Piercing the veil: four established grounds (sham or cloak, agency, fraud or improper purpose, statutory piercing), Gilford Motor Co Ltd v Horne Ch 935 (company formed solely to evade non-solicitation covenant, injunction against both company and Horne), Briggs v James Hardie and Co Pty Ltd (1989) 16 NSWLR 549 (Rogers A-JA: no single coherent principle, mere parent-subsidiary relationship and control insufficient), statutory piercing under s 588G. Weeks 2 to 3 (Corporate Constitution, Division of Powers and Meetings): Internal management under s 134 (replaceable rules under s 141, constitution, or combination), replaceable rules (not applicable to single-director single-shareholder proprietary companies per s 135(1), non-compliance not a Corporations Act breach per s 135(3)), constitution adoption (pre-registration by unanimous consent s 136(1)(a), post-registration by special resolution s 136(1)(b), amendment by special resolution s 136(2), entrenchment under s 136(3), accrued rights protection s 136(5), class rights under ss 246B to 246C), constitution as statutory contract under s 140(1) (three relationships: company and members, company and directors or company secretaries, members inter se), Hickman v Kent or Romney Marsh Sheep-Breeders' Association 1 Ch 881 (three propositions: no third-party rights, no outsider-capacity rights, member-capacity rights enforceable), Eley v Positive Government Security Life Assurance Co (1876) (member cannot enforce article in outsider capacity). Directors: de jure, de facto (s 9(1)(b)(i)), shadow directors (s 9(1)(b)(ii)), Grimaldi v Chameleon Mining NL (No 2) FCAFC 6 (shadow director need not give instructions on every decision), appointment (s 201A minimums, Form 201, members by ordinary resolution s 201G, directors between meetings s 201H, individuals only s 201B(1)), types of directors table (executive, non-executive, managing director under ss 201J and 198C, chairperson, alternate director under s 201K, nominee director under s 187), removal (resignation s 203A, proprietary company ordinary resolution s 203C, public company mandatory provision s 203D: ordinary resolution, two months written notice, right to make representations, cannot be displaced by constitution). Division of powers: board management authority under s 198A (bring proceedings, borrow, issue shares, appoint managers), delegation under ss 198C and 198D, powers reserved to general meeting (amending constitution, removing directors, Chapter 2E approvals, major fundamental changes), Re Duomatic Ltd 1 All ER 161 (unanimous informal assent as binding as formal resolution, three requirements, limits), Re Compaction Systems 2 NSWLR 47 (Duomatic principle in Australia). Directors' meetings (convening by any director s 248C, technology meetings s 248D, quorum two directors s 248F, majority with casting vote s 248G, written resolutions s 248A, minutes s 251A, validation of irregularities under s 1322). General meetings: AGM within five months of financial year end s 250N, EGM under s 249D (5 percent requisition, 21-day directors' compliance, member self-call s 249E), notice requirements (28 days public companies s 249HA, 21 days others s 249H(1), content under s 249L: place, date, time, general nature, special resolution text), Re Marra Developments Ltd (1976) and Fraser v NRMA Holdings Ltd FCA 9 (notice must be adequate, intelligible and non-misleading by omission), conduct of meetings (s 249S reasonable opportunity to participate, quorum s 249T, chair s 249U, voting s 250E and ss 250J to 250M, proxies s 249X). Weeks 3 to 4 (Corporate Attribution, Contracting and Capacity): Corporate capacity under s 124 (individual's legal capacity and powers, abolition of ultra vires, s 125 objects clauses do not invalidate acts but member may seek injunction), Meridian Global Funds Management Asia Ltd v Securities Commission 2 AC 500 (Lord Hoffmann's three levels of attribution: primary rules in constitution, general rules via agency law, special rules for specific regulatory purposes), actual authority (express: board resolution or written delegation under s 126; implied: usual authority arising from role and acquiescence, Hely-Hutchinson v Brayhead Ltd 1 QB 549 on acquiescence of those with actual authority as sufficient), apparent authority (four requirements from Freeman and Lockyer v Buckhurst Park Properties : company representation by those with actual authority, reasonable reliance, no actual notice of restriction), Freeman and Lockyer analysis applied, Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising Co (1975) 133 CLR 72 (agent cannot represent own authority), indoor management rule (Royal British Bank v Turquand (1856): assume internal procedures followed, two qualifications: actual notice and insider knowledge), statutory assumptions under ss 128 to 130 (s 129(1) constitution compliance, s 129(2) ASIC-registered director, s 129(3) held-out officer, s 129(4) duties properly performed, ss 129(5) to (6) document execution, s 128(3) forgery, s 128(4) actual knowledge or suspicion exception, s 130 abolition of constructive notice), three-step practical problem-solving approach. Weeks 4 to 5 (Directors' Duties: Overview, Care and Loyalty): Managerial agency problem (directors and managers may act in own interests), five examples of managerial agency costs (excessive compensation, self-dealing, corporate opportunity appropriation, shirking, hubris, perquisites), dual framework under Corporations Act and general law (s 185 preserving both), duties table (s 180(1) care and diligence, s 180(2) business judgment rule, s 181(1) good faith and proper purpose, s 182 improper use of position, s 183 improper use of information, s 184 criminal liability, s 588G insolvent trading, s 185 saving provision), who owes duties (directors de jure, de facto and shadow, and officers under s 9(1)(b) functional test), ASIC v King HCA 4 (group executives are officers of subsidiaries without formal position), Shafron v ASIC HCA 18 (company secretary and general counsel is officer for participating in significant board decisions), duties owed to the company not shareholders (Percival v Wright 2 Ch 421), company's interests as interests of present and future members as a whole (Gaiman v NAMH), creditors' interests approaching insolvency (Walker v Wimborne (1976) 137 CLR 1). Duty of care and diligence under s 180(1): evolution from lenient Re City Equitable Fire Insurance Co Ch 407 standard (subjective, intermittent, trust in officers) to AWA Ltd v Daniels (1992) and Daniels v Anderson (1995) 37 NSWLR 438 (objective, equivalent to tort negligence, no distinction executive vs non-executive), applying s 180(1) (foreseeable risks, probability and magnitude, benefits, director's responsibilities, company circumstances), ASIC v Cassimatis (No 8) FCA 1023 and appeal (Storm Financial: foreseeable regulatory risk breached s 180(1)), ASIC v Healey (2011) 278 ALR 618 (Centro directors: approval of financial statements is non-delegable, directors must read and understand, measure of financial literacy required). Business judgment rule under s 180(2) (four elements: good faith for proper purpose, no material personal interest, informed to extent reasonably appropriate, rational belief in best interests, operates as defence not presumption, passive inaction not a business judgment, compliance with law not a judgment, applies only to s 180(1)). Reliance under s 189 (good faith, independent assessment, reasonable, not uncritical), delegation under ss 198D and 190 (board responsible for delegate, two exceptions for reasonable belief in compliance and competence). Week 5 (Insolvent Trading, s 588G): Five elements (director, debt incurred, company insolvent at time under s 95A cash-flow test, reasonable grounds for suspecting insolvency, director awareness or reasonable awareness), four defences under s 588H (reasonable grounds to expect solvency, reasonable reliance on information, illness or good reason, all reasonable steps taken), safe harbour under s 588GA (course of action reasonably likely to lead to better outcome, director bears burden, not available if employee entitlements unpaid). Week 7A (Duty of Loyalty, Conflicts of Interest and Corporate Opportunities): No-conflict rule (Aberdeen Railway Co v Blaikie Brothers (1854): universal application regardless of fairness or good faith, transaction voidable, account for profits, courts refuse to assess objective fairness using Ex parte James rationale), self-dealing (ss 182 and 183, disclosure of material personal interest under s 191, restriction on presence and voting under s 195 for public companies and s 194 for proprietary companies, Chapter 2E member approval for financial benefits to related parties of public companies), UK comparison (s 177 Companies Act 2006: board disclosure default for self-dealing, not shareholder approval, more permissive than Australian Chapter 2E). Good faith and proper purpose under s 181 (two distinct limbs, primary or substantial purpose test, applies to all fiduciary powers including share issuance, convening meetings, share calls). No-profit rule and corporate opportunities: Regal (Hastings) Ltd v Gulliver UKHL 1 (directors personally subscribed to subsidiary shares, liable to account regardless of company's inability to fund, directors' honesty, benefit to company, escape route via fully informed shareholder consent), Furs Ltd v Tomkies HCA 3 (no-profit rule in Australia, law does not inquire into fairness or absence of damage), Cook v Deeks UKPC 10 (directors diverted railway contract to personal company, majority shareholders could not ratify own fraud on minority), Industrial Development Consultants Ltd v Cooley 1 WLR 443 (managing director learnt of opportunity in directorial capacity, resignation to exploit it was itself breach), Peso Silver Mines v Cropper (genuine bona fide rejection of opportunity by board severs connection), Queensland Mines Ltd v Hudson (1978) 52 ALJR 399 (board approval with full information sufficient where board represents all shareholders). Liability waivers (s 199A: no exemption or indemnity against liability to company, s 199B: no insurance premium for wilful breach or ss 182 to 183 contraventions, s 1318: court relief for honest and fair circumstances). Weeks 7B to 8 (Enforcement, Members' Remedies and External Administration): Proper plaintiff rule from Foss v Harbottle (1843) (company is proper plaintiff, internal management principle, five exceptions from Edwards v Halliwell ). Statutory derivative action under ss 236 to 237: five criteria for leave under s 237(2) (company will not itself bring proceedings, applicant acts in good faith, best interests of company, serious question to be tried, 14 days notice), s 237(3) rebuttable presumption against leave where directors applied business judgment rule, s 239 ratification not a bar, Swansson v RA Pratt Properties NSWSC 583 (good faith requires genuine belief in meritorious claim without collateral purpose, best interests analysis: company character, business impact, alternative remedies, defendant assets). Constitutional contract enforcement under s 140(1) (members qua members only), shareholder agreements (confidentiality, flexibility, outside s 140 framework, unanimity for amendment, fetter on directorial discretion limitation). Oppression remedy under ss 232 to 233: two limbs (s 232(d): contrary to interests of members as a whole, s 232(e): oppressive, unfairly prejudicial or discriminatory to a member), objective standard of commercial unfairness, Wayde v NSW Rugby League Ltd (1985) 180 CLR 459 (no oppression: board acted in good faith, inevitable prejudice not oppression, reasonable directors in relevant domain would regard as fair), recurring oppression scenarios (exclusion from management, denial of information, diversion of assets, no dividends, differential treatment, voting misuse), wide remedial powers under s 233 (winding up, share purchase most common, receiver, injunction, constitutional alteration, any appropriate order). Just and equitable winding up under s 461(1)(k): Ebrahimi v Westbourne Galleries Ltd AC 360 (quasi-partnership: personal relationship, mutual understanding of management participation, restriction on share transfer, Lord Wilberforce on equitable superimposition), Re Tivoli Freeholds Ltd VR 445 (substratum failure), ss 461(1)(e) to (g) (directors acting in own interests, oppressive conduct of company affairs). Statutory injunction under s 1324 (interests affected beyond general public interest, damages in lieu of or in addition to injunction). Weeks 8 to 10 (External Administration, Winding Up and Liquidation): Insolvency definition under s 95A (cash-flow test, unable to pay debts as and when due), external administration forms table (receivership, voluntary administration, scheme of arrangement, winding up). Voluntary administration under ss 435A to 449D: initiation under s 436A (directors believe company insolvent or about to become), moratorium on proceedings during administration (ss 440 to 440D: no enforcement of security subject to 13-business-day exception for substantial parties, no civil proceedings, no execution, no enforcement of personal guarantees), administrator's role (takes control, investigates, first creditors' meeting within 8 business days, second creditors' meeting under s 439A: execute DOCA, return to board, or wind up), DOCA under s 444B (binds all unsecured creditors, execution within 15 business days), administrator's personal liability with right of indemnity under ss 443A to 443B. Receivership (appointed by secured creditor under security agreement on default, agent of company, primary obligation to realise security and repay creditor, court-appointed receivers under ss 1323 and 233). Scheme of arrangement under s 411 (court order to convene, majority in number holding 75% in value, two court applications, binding on all creditors in class). Compulsory winding up under ss 459A to 489E (applicants under s 459P, statutory demand procedure under ss 459E and 459C: 21-day compliance period, presumption of insolvency for failure to comply), liquidators (registration required, general powers under s 477(1), specific powers under s 477(2), duties combining agency, fiduciary and statutory obligations, directors' powers cease on order, disposals void under s 468(1), leave required for legal proceedings against company under s 471B). Voidable transactions under Part and s 588FE: table with look-back periods (unfair preferences s 588FA: 6 months or 2 years related parties, uncommercial transactions s 588FB: 2 years or 10 years related parties, unfair loans s 588FD: any time, unreasonable director-related transactions s 588FDA: 4 years). Priority in distribution under ss 555 and 556(1) (secured creditors outside process, costs of winding up including liquidator remuneration, prior external administration costs, employee entitlements, general unsecured creditors pari passu, members last under s 563A). Deregistration under ss 601AA and 601AB (company ceases to exist, remaining property vests in ASIC).