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You are required to attempt problem-solving assignment based on a case scenario dealing with materials Essay Example

  • Category:
    Law
  • Document type:
    Assignment
  • Level:
    Undergraduate
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    2623

The Australia company’s law

The legal action of Carla

2001 cooperate act has designed some laws that govern the operation of cooperation in Australia. For instance, division six of the Act section 47 explains how one should carry out a business mainly controlling the corporate’s board. The law states that taking the implication of the situation where the composition of a company’s board is controlled by an alternative corporate body, the board’s composition is assumed to be managed by the other group. The team can remove all or appoint, of the managers of the body mentioned at first due to this division. The other group will have authority to make the said selection if the person from the group mentioned first cannot be selected as a manager without the other body to exercise such power in the favor of the individual. As well, if the appointment of the person from the first group mentioned as a manager follows mostly from the director of the body. Besides the law requires that if the two or more partners engage in the authority of management, everyone should independently have a right to act in the enforcement of the law (Sealy, Barry, Rider-1998). Also, for any transaction, the approval of all partners that manage the company is required unless when this needs decision deferment.

Also, according to cooperate act (2001) in section 201F the act defines rules governing the appointing of the director in a proprietor company. According to the law, if there is a shareholder of a proprietary company who is the only director may designate another director through keeping the record of appointment and signing it. As well, the director is appointed if the only person who is the director and only shareholder dies or cannot manage the company due to mental ineffectiveness. Besides, the manager will be appointed if the current manager is declared bankruptcy. Also, the appointment is made if there only one person who the only shareholder and director of the company.

Similarly, section 135 and 206 A defines the rules and condition for removing a manager from the company and replacing another manager. A person is disqualified from the management group if he or she make the decision that affects apart or the whole company. Also, if he or she exercise the power that significantly affects the financial status of the enterprise. As well a person is removed from management if he or she gives instruction or wishes to other directors knowing the directors are costumed to act in agreement with his or her wishes ( Tomasic,Roman, Stephen Bottomley, and Rob McQueen-2002). The ASIC under section 127AA requires that the company keeps the record of the disqualified person.

In the view of the BLAW case study, Carla should not appoint Mo as a marketing manager since other members of the company are not involved in selecting her. Therefore, other members of Eleganza Pty Limited like Cecily, Jim, and Bruce should be engaged in making the decision of changing the marketing manager since Carla was initially chosen by both shareholders. Both members should be given a chance to exercise their right of enforcing the law of the company. Also, Betty is not the only director and only shareholder in the company since there other shareholders like Carla, Cecily, Jim and Bruce. Besides the shareholders were supposed to agree in appointing the new manager to replace Carla, who appointed through the constitution to run as a marketing manager for five years.

Consequently, Carla will succeed if she commences the legal action since Betty has violated the company’s constitution. She has failed to enforce clause three of the company constitution which require Carla to act as the manager of the company for five years. It is an offense to disqualify Carla from the management body of the business since she did not commit any offence that will result in her disqualification. Although Betty entered into a contract of with Fancy Heels Pty Ltd in purchasing fifty pairs of shoes which did not work out, she figures d another way fixing this contract. There her decision does not affect the company’s financial status. She was able to discover that adding shoes in their business will affect it negatively. This is the duty that was supposed to be performed by Carla, who was the marketing manager. Betty is making the decision alone without consulting other members of the company.

According to section 135 and 206 of the act, Carla is not supposed to be disqualified from the management of the enterprise. Betty has violated that law by appointing her friend as the marketing manager. Carla has neither made any decision that affects the company’s financial status nor gave the wishes or direction that apron enforcement affects the company negatively. Also, Carla is not bankrupt in her position as the market manager, and she is also not insane that may lead to her disqualification. Betty is making the design alone as if she is the only shareholder and director of the company .she is operating as a sole proprietor and yet it is a corporation.

Therefore, there should be partnership agreement in appointing the new marketing manager. For the success of the company both shareholders should agree to make any decision or transaction that affect the business. Since the company’s constitution adopted the cooperate act, members should follow its principles clearly to avoid violation of the company’s law. Carla needs justice since the business has violated the clause that was agreed on during the making of the constitution.

Characteristics of proprietary business and partnerships

The partnership is where two or more people decide to operate a business together with the aim of making the profit. Proprietary companies are the businesses that do not sell their shares to the public in general. Exclusive company and partnership a number of characteristics. To start with a company, first, in collaboration all partners have the same goal and each partner is accountable for other partner’s decision regarding the business .second, in partnership all partners from the legal point of view the same treatment. They share the profit losses equally if there is no agreement and are equally responsible for the trading and any activities of the business. Third, all the parties are severally and jointly responsible for the partnership’s obligations. Also, the agreement of partnership should keep the record of the terms and agree on the relevant feature of the business. There is no legal existence of the company that is separate from partners who form the partnership. Besides, the liability of the business‘s obligation and debt is severally and jointly unlimited. Similarly, each business partner can be sued and can be subjected to the payment of full amount of debt of the firm. When this happens, the partner is allowed to sue against the other members of partnership for their debt.

The proprietary company comprises of some characteristics. First, the director of the company must approve share transfer and the shareholder who is new only becomes the company’s member on registration of the company’s transfer of the shares to them. Therefore, the company’s transfer of shares is restricted. Second, the company consists of a minimum of one member to the maximum of 50 shareholders. Third, the company’s liability of shareholders is limited to the amount that is uncalled owing on the shareholder’s shares. Also, proprietary company adds “Pty Ltd” after its name. Besides the company accounted depending whether his classified as a large company or small business.

The proprietary company and partnership have some advantages and disadvantages. To start the company has the following benefits and disadvantages.

Advantages partnership

• The business nature can be changed using agreement between partners

• It is not expensive to set up

• Members do not incur too much tax and it lacks formalities.

• The partnership can maintain its secrecy except requirement detail by the relevant business act.

• The partners can pool their experiences and capital any time they want.

Disadvantages

• The partners are sufficiently reliable for the business hence, if one partner does not meet his or her debt share of the partnership, other members will pay the debts.

• The transfer of ownership is less flexible as compared to companies.

• If one partner dies or retires, it may be difficult to sustain the business.

• The partners experience difficult to contract with the other firm.

Advantages of proprietary company

• The shareholder is not responsible for the company’s reliabilities. They are only reliable to lose only the subscribed share capital. When the company does not pay the debts, the directors are responsible for such debt.

• The company retains its profit after tax that assists in the future expansion of the business.

• It is easy for the company to spread its ownership.

• In the event of permanent disability or death of one of the shareholders, the company continuous to run.

Disadvantages of proprietary company

• Financial records require particular statement and declaration to be made.

• Making loans lead to tax consequences to the directors and shareholders.

• It is expensive and time-consuming to comply with the requirement of corporate law.

• There are limited liabilities since lender needs director’s personal guarantees.

Considering Betty and Carlo were working as a partnership, both partners would be responsible for debts like losses incurred as a result of fail to work on a studio contract that was signed by Betty. Also, the liability of elegant shoes that Betty entered which later failed to work in their company would be shared by both partners in the enterprise. In contrary if Betty and Carlo operated as the proprietary company which they choose all the liabilities that resulted from the contract of lease of the studio and purchasing of elegant shoes would be only be paid by the company and the directors of the enterprise .This implies that it only Betty and Carlo who will be responsible for the liabilities without involving other shareholders.

Taking care of release of studio liability

According to corporation act, section 1317E, it defines the general duties and responsibilities of directors and officer. The company like Eleganza Pty Ltd’ comprises of the managing team where Betty is a sole director and Carla was supposed to act as the marketing manager acting to the company’s constitution. Their duties are clearly officers and a director must discharge their duties and practice their powers with the diligence and care. They should exercise this attention and intelligence as if they were officers or directors of the company in the circumstances of corporation. Moreover, as they held the office and has director or directors has the same responsibility within the company. Besides, the officers or director should make business judgment with care and diligence, and perform their duties with equity at common law in respect to the ruling. In making the business decision, they should show proper purpose and have good faith. They should not have personal interest in the judgment. Similarly, they should understand the subject matter to the point they believe is appropriate. In addition the decision should be for the better of the company.

In section 197 of duties to discharge liabilities, corporation act states that the directors is reliable for obligation and debts incurred by the company. It states that the director of the company is liable to release the liability when he or she incurs the liability as trustee. Also the director should indemnify fully against the trust assets liabilities when the company has breach of trust and it’s performing outside the scope of its authority (Penrith, Deborah, and Deborah-2008).

Therefore considering the case study Betty whom sole director and Carla who is marketing manager have definite duties and responsibility to carry out. They should carry out those duties and make business decision with intelligence and care. They should also consider the wellbeing of the company instead of personal interest.

Consequently, Betty should be responsible for the lease of studio contract because she the sole director of the company. The constitution guarantee her that duties of discharging the liabilities of the company. She is the trustee of the company and hence should exercise that power and therefore take the responsibility of the outcome of the studio that was signed by her.

Separate legal entity

The separate legal entity means that the company legal existence which is separate from its managers, owners, employees, operators and managers. Also, it implies that accompany will have its obligations, properties, and rights ( Higgins-1970). As well the company’s assets and money belongs to the company and must be utilized for the purpose of the company. The shareholders of the company have the right to enter into contract, dispose and own assets and properties and can be sued or can sue. Accompany that is registered as the separate legal entity enjoys its rights, properties, status and liabilities to the extent when ASIC deregisters it.

The company’s shareholders are not liable for debts of the company. The obligation of the shareholders is to pay the shares to the enterprise. However, when the shareholder is the director, he or she may not be limited to another share holder because of laws of commercial practice. The director may be responsible for the company’s debt at a time where the business fails to pay the debts in time. He or she may be required to compensate the losses of the enterprise in order to breach the duties of the director in the company. Also, the director may also be subjected to the penalty of civil. Besides, if the company have properties on trust, the liability will be carried by the manager who is the trustee of the company in case of losses.

Therefore since Eleganza Pty Ltd’ operate as the separate legal entity, Betty, who the director is responsible for any liability that may occur ( Glover, Craig and Wasserman-2003). Other that being a shareholder, she is also a sole director hence will not enjoy the benefit of limited liabilities of the shareholders. Betty also should be liable in the company for any debts or losses since she is also the market manager. Other shareholders like Cecily, Jim, and Bruce, are not responsible for any debts of the company since they are only the shareholder. They have limited liability towards the company

Work cited

Tomasic, Roman, Stephen Bottomley, and Rob McQueen. Corporations Law in Australia. Higgins, P F. P. The Law of Partnership in Australia and New Zealand. Sydney: Law Book Co, 1970. Print

. Carlton, Vic: Melbourne University Press, 2008. Print.Varieties of Capitalism, Corporate Governance and EmployeesMarshall, Shelley, Ian M. Ramsay, and Richard Mitchell.

Sydney: Federation Press, 2002. Print

. London: Kluwer Law International, 1998. PrintThe Realm of Company Law: A Collection of Papers in Honour of Professor Leonard Sealy, Sj Berwin Professor of Corporate Law at the University of Cambridge

. Washington: International Business Publications, 2009. PrintAustralia Company Laws and Regulations Handbook: Vol. 1 Strategic Information and Basic Regulations

. East Lansing: Michigan State University Press, 1958. Print.The Australian Encyclopaedia

. Sydney: CCH Australia, 2008. Print.Australian Master Accountants Guide 2008/09

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Penrith, Deborah, and Deborah Penrith. Australia. Richmond: Crimson, 2008. Print.

Separate Legal Entity. S.l.: Duc, 2012. Print.

Glover, Stephen I, and Craig M. Wasserman. Partnerships, Joint Ventures & Strategic Alliances. New York, N.Y: Law Journal Press, 2003. Continually updated resource Bottom of Form

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Affaire De Certaines Terres À Phosphates À Nauru =: (nauru C. Australie). La Haye: Cour Internat. de Justice, 2004. Print.

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Separate Legal Entity. S.l.: Duc, 2012. Print.

Glover Stephen I, and Craig M. Wasserman., Partnerships, Joint Ventures & Strategic Alliances. New York, N.Y: Law Journal Press, 2003. Continually updated resource Bottom of Form