Corporation law Essay Example

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9The corporation Law

The corporation Law

Legal Advice to Jack and Jill

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The corporation Law

Legal Advice to Jack and Jill

In order to come up with the best legal solution for the Batik Pty Ltd (BPL) Corporation, the whole concept of corporation law must be well understood. Therefore, a corporation is a legal entity that is generated under the state laws made to come up with a body, as a distinct legal entity that has its own opportunities and responsibilities different from those of its members.­­­ The ultimate aim of a corporation is to conduct business1. For example, the Batik Pty Ltd Corporation that runs business for the members who include Adam, Jane, Jack and Jill among others. Most corporations nowadays are created through registration where a corporation must have the certificate of incorporation. Note that all the corporations exist strictly as a corporate law product. Thus, a corporate law is an act that governs the corporations, their financial products, services and other related purposes.

Procedures involved in changing a Managing Director

To begin with, it should be noted that Adam violated the ownership and control law of corporation. This is the law that governs the rights of persons and other legal entities, which gives them the freedom to vote and receive dividends as declared by the vote of directors. It should be noted that all the members of the board of directors are shareholders as well as stockholders2. Thus, jack and Jill in this case are members of the corporation’s trustee class. It is much possible to remove Adam as the managing director of BPL since he is violating the rights of the other Board of directors and members. There is a legal procedure that jack and Jill need to follow in order to get their contentment in the corporation. First, Jack and Jill need to identify the issues that have been violated. The refusal or rejection from Adam to listen to their proposal is the major issue since all corporations have the objective of running and expanding business through making profits. They need to report this issue to the state government under the incorporation law by arguing that they have no confidence on their director since their business is going down.

It should be clear that the board of director’s members is collectively responsible for the company’s strategy, management, policy and financial affairs. Jack and Jill should proceed as follows. They should let the whole board of directors to know and understand the issue well because it is their duty to supervise the executive director and the general affairs of the corporation as well as providing a general advice to the executive director. This may somehow shake Adam since he is well aware that it is a legal step for them to advice him. Incase he fails or rejects to listen to their advice, then the whole board of directors can go ahead to call for an election where they can vote for anew managing director. Before the election, they can as well change the structure of their constitution3. Adam had come up with a constitution that says he will be the managing director for life, that during voting each of his shares carries two votes, and that Jane will be the solicitor for life. This constitution is not okay, because it favors some people especially Adam himself and therefore it needs to be revised before resolving the case. After coming up with another constitution is when they can go ahead to have an election to get rid of him as their managing directors because before that, it is difficult to proceed with election since the constitution says that Adam will remain the managing director for life. Note that Adam may refuse the whole process since he has a higher authority as the managing director.

In case he refuses such a suggestion then it becomes a conflict between him and the rest of the directors. A conflict on officers or all directors that act together may involve the third party in solving it4. The BPL Corporation can go further to solve its indifference by involving a third party, which is the higher authority that governs all the state corporations. Note that the interest of one or more directors is a corporation’s conflict that should never have any impact on company’s representation by authority of directors. At the higher authority, which may involve the court system, Adam can never remain the managing director of BPL since the rest of the board will have their rights met through achieving justice.

Whether Jack and Jill can refuse to pay the Membership fee

It is clear that Jack and Jill have the right to refuse to pay the membership fee that was set by Adam. Note that each corporation must have the certificate of incorporation, which contains important information of the corporation. This is like the constitution of the corporation. The BPL corporation need to have its incorporation certificate changed since the one in use was written by Adam who focused on his own interest5. After the constitution amendments have been done then all the board of directors will be under the rules and regulations that they set. The right includes performing what the majority of the house members agree on. In this case, Adam came up with the idea of paying the membership fee. Unfortunately, majority of the members were against it in fact, all including Jack and Jill were against the proposal. This means that they have the right to refuse to pay the membership fee since more than half of the house was against it.

The corporation law says that all the corporations must be governed by their own certificate of incorporation, which must be created by the members of the board6. Therefore, after the BPL, board members create the certificate of incorporation then they may precede refusing or passing any proposal made by any member of the board. No one of them has the authority to suggest an issue and proceed on implementing it without the agreement of the house. Now that the majority of the members of the board have refused the proposal of paying the membership fee, Adam has no authority to implement it. Therefore, they all have the right to refuse paying the membership fee. All the amendments and resolutions in the board will only be adopted by a simple majority of votes that are cast during a meeting in which majority of the members are present or represented. Each member is only allowed to cast one vote. In case of a tie vote, the proposal will automatically be rejected. Therefore, it is clear that the directions of Adam are misleading and his constitution should be rejected since he wrote in it that his shares carry two votes each, that is wrong according to the corporation laws.

Whether Jack and Jill can Remove Jane as a solicitor and confiscate her unpaid shares

The board of directors has the legal authority to hire fire and compensate top management as well as providing security to their invested capital. When meetings are held at a regular interval or held occasionally, the board will be able to identify the potential problems, discuss them and avoid them completely for future success. Note that in as much as the executive director may be independent and come up with their independent views and proposals, they may not always come up with effective results in a more potential corporate governance thus may not be able to increase the performance. It is no doubt that Jack and Jill can remove Jane as the solicitor through collaborating with the rest of the members of the board. This is because as mentioned above they have the authority to hire and fire any person as well as protecting their invested capital7. Therefore it is easy to go ahead and fire Jane as their solicitor as per the laws of the corporation. Besides, Jane had paid half of the shares that she was supposed to pay. She only paid 50 shares out of 100 shares meaning that her unpaid shares can be confiscated and the corporation still runs efficiently with a new solicitor.

Different structures of the board are most favorable for different firms. The access to information gives the board the ability to monitor the executives of the firm. The superior knowledge of the decision making process is posed by the executive director therefore evaluating the uppermost management based on the decision’s quality which most of the time leads to excellent outcome in financial performance. Therefore, once the election is carried on in the BPL corporation and the executive director who was Adam changed to somebody else who has the potential to make look beyond the financial criteria, the corporation can go ahead to improve its competitiveness and performance even without the unpaid shares of Jane. Through the voting process, Jane can as well be removed as the solicitor by voting her out through majority of the votes as the law states8. Somebody else can take the position and improve the company’s performance. Elimination of Jane as the solicitor is effective since she reasons like Adam that is why she supported everything he proposed and that is the reason as to why the corporation was experiencing drops in profits.

Removal of Adam as the executive director through voting process

It is clear that Jack and Jill can collaborate with all the other members of the board excluding Jane and employ their majority voting power to amend the constitution and give themselves the power to get rid of Adam as their executive director. As mentioned earlier, the current managing director is very ignorant and rejects the views of other members of the board. The best process of solving such a problem is coming up with means of getting him out of the managing director chair. This is done through amending the constitution that was created by Adam so that the constitution can give them the power to vote him out9. To begin with, Jack and Jill must let the rest of the members of the board to know the whole issue well enough so that they can give them support by collaborating with them and being against Adam. The constitution that was created by Adam was only favoring him and Jane while it was biased on other members of the board. Therefore, the whole issue should exclude Jane since the constitution favors her and she can never support its amendment. Moreover, she can share the idea with Adam who may proceed on to interfere with the process.

The voting process should be done in two ways. First, the board of directors needs to come up with the vote of no confidence on their managing director, Adam. After that Adam then needs to step down in accordance to the law giving way for the general election of a new executive director. All the amendments and resolutions in the board will only be adopted by a simple majority of votes that are cast during a meeting in which majority of the members are present or represented10. Each member is only allowed to cast one vote. In case of a tie vote, the proposal will automatically be rejected. Therefore, the results of the votes will have the new executive director winning with three-quarters of the total votes. Note that the vote of no confidence is optional depending on the view of Adam in that, if he agrees to go for a general election then the process is skipped but when he refuses, then the vote of no confidence puts him out. Adam can be among the candidates vying for the seat incase the first process is skipped but if implemented, the law denies him the chance to stand as a candidate.

References

Clarke, Thomas & deal Rama, Marie (eds.) (2006) «Corporate Governance and Globalization (3 Volume Series)» ISBN 978-1-4129-2899-1 London and Thousand Oaks, CA: SAGE,

Clarke, Thomas & deal Rama, Marie (eds.) (2008) «Fundamentals of Corporate Governance (4 Volume Series)» London and Thousand Oaks, CA: SAGE, ISBN 978-1-4129-3589-0

Colley, J., Doyle, J., Logan, G., Stettinius, W., What is Corporate Governance? (McGraw-Hill, December 2004) ISBN

Crawford, C. J. (2007). Compliance & conviction: the evolution of enlightened corporate governance. Santa Clara, Calif: XCEO. ISBN 0-976-90190-9 9780976901914

Denis, D.K. and J.J. McConnell (2003), International Corporate Governance. Journal of Financial and Quantitative Analysis, 38 (1): 1-36.

Erturk, Ismail, Froud, Julie, Johal, Sukhdev and Williams, Karel (2004) Corporate Governance and Disappointment Review of International Political Economy, 11 (4): 677-713.Garrett, Allison, (2007) «Themes and Variations: The Convergence of Corporate Governance Practices in Major World Markets,» 32 Denv. J. Int’l L. & Pol’y).

1
Denis, D.K. and J.J. McConnell (2003), International Corporate Governance. Journal of Financial and Quantitative Analysis, 38 (1): 1-36.

2
Crawford, C. J. (2007). Compliance & conviction: the evolution of enlightened corporate governance. 9780976901914ISBN 0-976-90190-9 Santa Clara, Calif: XCEO.

3
Denis, D.K. and J.J. McConnell (2003), International Corporate Governance. Journal of Financial and Quantitative Analysis, 38 (1): 1-36.

4
Clarke, Thomas & dela Rama, Marie (eds.) (2008) «Fundamentals of Corporate Governance (4 Volume Series)»ISBN 978-1-4129-3589-0 London and Thousand Oaks, CA: SAGE,

5
Allison, (2007) «Themes and Variations: The Convergence of Corporate Governance Practices in Major World Markets,» 32 Denv. J. Int’l L. & Pol’y).

6
Erturk, Ismail, Froud, Julie, Johal, Sukhdev and Williams, Karel (2004) Corporate Governance and Disappointment Review of International Political Economy, 11 (4): 677-713.Garrett,

7
Allison, (2007) «Themes and Variations: The Convergence of Corporate Governance Practices in Major World Markets,» 32 Denv. J. Int’l L. & Pol’y).

8
Clarke, Thomas & dela Rama, Marie (eds.) (2006) «Corporate Governance and Globalization (3 Volume Series)»ISBN 978-1-4129-2899-1 London and Thousand Oaks, CA: SAGE,

9
Colley, J., Doyle, J., Logan, G., Stettinius, W., What is Corporate Governance ? (McGraw-Hill, December 2004) ISBN

10
Crawford, C. J. (2007). Compliance & conviction: the evolution of enlightened corporate governance. 9780976901914 ISBN 0-976-90190-9 Santa Clara, Calif: XCEO.