Corporation Law

  • Category:
    Business
  • Document type:
    Essay
  • Level:
    Undergraduate
  • Page:
    3
  • Words:
    2246

10Corporation Law

Corporation Law

Introduction

Corporation law or other words (law of business association) is an act that is developed and amended to govern how companies operate their businesses (Cox, & Hazen, 2012). The corporation law has the power to dictate any company concerning its steps all the way from registration to interaction with stakeholders. Since a company involves the interaction of different members for it to run smoothly and consistently the relationship between the company and corporation law governs its members. Some illegal business transactions may develop from the company’s directors and associates that are meant to hit and affect the community either directly or indirectly obtaining money. The relationship of the company to its shareholders has, therefore, to be protected by the act. Also, the interaction of the consumers and other stakeholders in the community to the company’s directors and employees is under corporation law. The primary goal of partnership law in business set up is ideally the security to protect each and every person in the business transaction regarding a particular company (Cox, & Hazen, 2012). In the situation where there is no law to control and maintain order in business activities, some business members are then exposed at risk of losing their wealth especially the stakeholders. Corporation law is, therefore, a business association like any other including a partnership that has the mandate to control the business in the fairest and honest manner (Emerson, 2004).

A company director is an individual chosen from a group of managers given the duty to lead or supervise a company or a particular area of the company (Crew, 2005). The director also has some qualifications that define their position. These requirements include an age above eighteen years old, should not be a board corporate, required to have been discharged bankrupt, they can’t serve as directors in more than 25 companies and lastly should not be disqualified (Crew, 2005). Other definitions of a director to a company are any individual responsible for the transparency of the company. The Australian corporation law enhances the performance of company directors. By so doing, the law under the corporation act 2001 also governs the conduct of the directors of a company for the best of the company. According to the Australia corporation law, a company director is someone accountable for all business transactions in the company and controls the relationship of the company with its shareholders, employees, and the customers (Griffin, 2007). The duties of the directors are all focused on the best outcome for the company. From the directors of a company, there is a board of committee that works hand in hand to ensure that all goals be achieved in the company. In this organizational structure of a company’s management, the chief director has the following duties and responsibilities under the corporation law. One of the most important duties is the legal duty to act in good belief considering the best benefit of the company (Griffin, 2007).

Acting in good faith considering the best interest of the company

Under this duty, the best interest of the company entails the employees, the company in a group company, the creditors and the existing and future members. Concerning the best interest of the employees, the director duty in the company is to observe that human rights are adhered to, and employee’s rights are not violated and misused. There are obligations a company is limited to towards its conduct to the employees. These obligations under the Australia corporation law include prevention of unfair discrimination in the company and promotion of equality. Unfair discrimination is observed in many companies as well as other institutions. This misconduct has been limited and should not be practiced as obligated by the Australia corporation law. On the promotion of equality under best interest of employees as indicated by the act, it is the fiduciary duty of the director to ensure that all employees are treated in the best way possible. The employees are determinants of the company’s outcomes as well as the best interest of the company.

Another interest of the company under the Australia corporation law is the benefit of creditors. The existing obligation between the company and the creditors is something very critical when we get repaying the debts. The Australia law of corporation ensures that these requirements are followed under the agreement. Some of the laws designed under the business corporation act promote equality among all members of the company. The interest of existing and future members is also under the corporation law. According to this interest, the act depicts the type of relationship between the members and the company. The benefit of employees and creditors are implemented in the social and ethic committee of the company which is also responsible for monitoring the company’s activities relating its ecosystem, labour, and employment.

Ensuring proper records of the company

As a director of the company the law also depicts that should ensure proper records are in place (Ramsay, 2007). The company’s records include financial records, a list of members and any data concerning what belongs to the company. The director is responsible for any missing financial data concerning the company. The importance of financial record in the company is to show true and fair financial transactions. Financial records are not just records but should be up to date. Another importance of financial record keeping as instructed by the corporation law is to explain the financial position and performance of the company. The director, therefore, ensures that proper and up to date financial records are available in case of any financial auditions of the company, and it’s also an obligation under the tax laws (Ramsay, 2007). According to Australia corporation law, the financial reports are audited and lodged ASIC. This is the policy under the act that governs both proprietary and public companies. The financial records of interest according to Australia corporation law are general ledger, creditor and purchase records, investment records and tax returns and calculations (Ramsay, 2007).

Registration of their company with ASIC

It is also the responsibility of a director to register the company with ASIC according to Australia corporation act which is mandatory (Parliament of Australia, 2013). Company registration ensures that the company has a number which bears the initials as (ACN) Australia company number. The ACN of the company carries its name with it in all business areas of the company. Regarding the duties of company director, registration is mandatory according to the act. Registration of companies ensures that all public and proprietary companies display the company’s name on every negotiable document of the company like cheques. Also, registration enables identification of the company in the ASIC data as depicted by the ASIC. The ABN (Australian business number) of all companies is unique to particular companies.

Care and diligence

According to the Australia corporation law, a director has the responsibility to observe care and diligence in their duties (Webster, 2008). Regarding this responsibility, the directors should have in mind how other individuals could have done in that position. Other good willing people given the same office, duties and responsibilities will exercise their powers in the best care and diligence. Every duty as directed by the act is for the benefit of all associates of the company. It’s also the responsibility of the director to have the will of promoting the success of the business (Webster, 2008).

Keeping registers of members (stakeholders)

As the director of the company, the Australia corporation law gives the duty to ensure that all the records of stakeholders (Webster, 2008, p78). The shareholders of the company are the owners of the business, and they are highly moved by the company’s financial position. Other willing stakeholders are also included in the records of members. The Australia corporation law obligates the directors to have fully updated records as their responsibilities. In addition to record keeping as a duty, the director also has the obligation to ensure that the company gives annual reports as directed by the act. The annual record of the company entails all the files concerning the company’s financial, members and investments. According to the Australia law of the corporation, the records are reviewed by the ASIC. The company report after being done by the ASIC the company’s director also has the responsibility to pass a solvency resolution in duration of two months so that the company can estimate the company’s position to repay the debts if available. The duty of the director to ensure that the company has lodged a financial report with the ASIC is a responsibility on the other hand to determine the grounds of the company (Parliament of Australia, 2013). According to the Australia corporation law, the director has the duty to provide the company’s solvency resolution within the duration of two months after the review of the company’s report which is monitored using a form 485 according to ASIC (Parliament of Australia, 2013).

Keeping the ASIC informed of any changes in the company details

It is the responsibility of the director to keep the ASIC informed with some essential changes of the company details (Parliament of Australia, 2013). The common changes are changes of officeholders and place of registers store which is done with a given period. Another information change is the resignation of a director or the secretary of the company. These changes are very critical when the ASIC gets to review the records. Other changes that the director has a duty to inform the ASIC are the issue of new insurance, change of company name, and negative solvency resolution. The director also has an obligation to act according to the company’s constitution and besides exercising his powers for the purpose only depicted by the law. Other responsibilities of a director to a company are not using the company’s property or opportunities for personal benefit unless permitted by the company’s constitution.

Evolution of the director duties

Regarding the duties of a director, there has been an evolution that has taken to improve the securities of the company clearly. In the past, the duties of the director were a monopoly. By being a monopoly, the director had the power to do their functions according to their will and personal drive (Emerson, 2004). Again other practices were Independent Corporation of the company which was governed by the directors. The independent corporation allowed the company shareholders to raise capital from the public and invest the capital without considering the personal risk. Another practice of the past was that the directors did not assume the functions of the managers. They exercised their powers and duties but breached their duty of care. In comparison to the present practice of today’s directors, there is a great evolution. The current directors have their functions different from managers not like in the past. The duties of a director are no longer the monopoly, and laws and corporation acts are now governing the directors. In the past, there have been court cases concerning the security and money issues affecting the shareholders and stakeholders of the company. The duties of directors in proprietary companies have little difference with directors in public companies due to limitation. In private companies, there are limitations on shares and capital shares. Another difference between proprietary and public companies is the process of disciplining a director who has breached the laws of the act.

Consequences faced by a director after contravening a law and the future direction of director’s duties

The consequences faced by a director in case of breaching the law are incarceration, heavy fines and also award damages (Parliament of Australia, 2013). According to the Australia corporation law, the directors have the dedication, to be honest enough in dealing with all company’s activities. Having in mind that the directors are in a position to face the trial chamber in court if any breach of duty is observed, the court has the authority to direct the above consequences. In Australia, the ASIC keeps in watch of all directors and case of any dishonest some steps are taken against the director (Parliament of Australia, 2013). The committee board of the company has the duty to sue the directors due to any inappropriate handling of company resources. The future direction of director’s duties in Australia is that their duties will be closely monitored and evaluated frequently. To do away with the current closure of business firms, there is a plan of amending the corporation acts in all partnerships. The amendment of acts will help in governing the directors so that honesty and truth in their duties are observed.

References

Bruce, M., 2010, Rights and duties of directors. Haywards Heath, West Sussex, Bloomsbury Professional.

Crew, A., 2005, The whole duty of a director. His rights, duties, powers, legal liabilities. London, Gee & Co.

Cox, J. D., & Hazen, T. L., 2012, Corporation law. Chicago, Ill, American Bar Association, General Pratice, Solo & Small Firm Division.

Emerson, R. W., 2004, Business law. Hauppauge, N.Y., Barron’s.

Griffin, W. F., 2007, Fiduciary duties of directors, officers & owners of closely-held businesses. Boston, MA, MCLE.

Ramsay, I. M., 2007, Corporate governance and the duties of company directors. Melbourne, University of Melbourne, Centre for Corporate Law & Securities Regulation.

Parliament of Australia, 2013, The performance of the Australian Securities and Investments Commission. http://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Economics/ASIC

Webster, H. K., 2008, Fiduciary duties of nonprofit directors and officers. Arlington, VA, Tax Management.

Appendix

ASIC -Australia securities and investment commission.

ABN – Australia business number.

ACN – Australia company number.