australian securities & investments commission (asic) pg72-87
AUSTRALIAN SECURITIES & INVESTMENTS COMMISSION (ASIC) PG72-87 .......................................................................................3 UNINCORPORATED CORPORATIONS/BUSINESS ASSOCIATIONS PG91-93 ........................................................................................8 PARTNERSHIPS/ UNLIMITED LIABILITY ...................................................................................................................................................................................... 8 CORPORATIONS ................................................................................................................ ........................................................................................9 FORMATION ........................................................................................................................................................................................................................................ 9 NORMAL OPERATION ..................................................................................................................................................................................................................... 10 ANATOMY… PG.59…. ................................................................................................................................................................................................................. 10 TYPES OF REGISTERED CORPORATIONS / CLASSIFICATION OF COMPANIES ................................................................................ 11 PROPRIETARY COMPANY (PTY LTD.) ...................................................................................................................................................................................... 11 LIMITED BY SHARES (S121(1) (PTY LTD).............................................................................................................................................................................. 12 UNLIMITED COMPANY .................................................................................................................................................................................................................... 13 PUBLIC COMPANY (LTD) PG 95 ................................................................................................................................................................................................. 13 LIMITED BY GUARANTEE .............................................................................................................................................................................................................. 13 NO LIABILITY COMPANIES............................................................................................................................................................................................................. 14 SUBSIDIARY COMPANIES .............................................................................................................................................................................................................. 14 THE INCORPORATION PROCESS ................................................................................................................................................ ...................... 15 REGISTRATION OF COMPANY ..................................................................................................................................................................................................... 15 INCORPORATION OF A COMPANY .............................................................................................................................................................................................. 16 REGISTERED OFFICE .................................................................................................................................................................................................................... 19 SHARES: REGISTRATION OF MEMBERS/SHAREHOLDERS ................................................................................................................................................ 19 CORPORATE PERSONALITY SEPARATE LEGAL ENTITY ................................................................................. ........................................ 21 THE CORPORATE VEIL ................................................................................................................................................................................................................. 22 CORPORATE LIABILITY – THE AUTHORITY TO CONTRACT .................................................................................................................. 24 DIRECTLY .......................................................................................................................................................................................................................................... 24 THROUGH AN AGENT (AGENCY)................................................................................................................................................................................................ 25 CONTRACT ANSWER GUIDE ........................................................................................................................................................................................................ 30 SUING AND BEING SUED ............................................................................................................................................................................................................... 30 CORPORATE LIABILITY – IN TORT AND CRIME ................................................................................................................................................. 30 CORPORATE CONSTITUTION AND RR ........................................................................................................................................................... 31 REPLACEABLE RULES ................................................................................................................................................................................................................... 31 CONSTITUTION OF A COMPANY.................................................................................................................................................................................................. 32 OFFICERS .................................................................................................................... .............................................................................................. 37 COMPANY SECRETARY ................................................................................................................................................................................................................ 37 DIRECTORS ....................................................................................................................................................................................................................................... 38 T YPES OF DIRECTORS................................................................................................................................................................................................................... 39 EXECUTIVE DIRECTORS’ SERVICE CONTRACTS ................................................................................................................................................................... 40 DIRECTORS POWERS .................................................................................................................................................................................................................... 40 DIRECTORS DUTIES ................................................................................................................................................... ........................................... 41 DUTY TO EXERCISE SKILL, CARE & DILIGENCE S180 ........................................................................................................................................................ 42 DUTY TO ACT IN GOOD FAITH .................................................................................................................................................................................................... 43 DUTY TO AVOID CONFLICT OF INTEREST ................................................................................................................................................................................ 45 DUTY TO NOT MAKE SECRET PROFITS .................................................................................................................................................................................... 45 DUTY TO PREVENT INSOLVENT TRADING BY A COMPANY (S 588G) ............................................................................................................................ 47 DIRECTOR’S FIDUCIARY DUTY TO INDIVIDUAL SHAREHOLDERS ..................................................................................................................................... 49 DUTY TO ACT PERSONALLY- DELEGATION AND RELIANCE ............................................................................................................................................. 50 DIRECTOR DUTY ANSWER GUIDE .............................................................................................................................................................................................. 50 MEMBERS ..................................................................................................................... ............................................................................................ 52 MEMBERS’ PERSONAL RIGHTS IN CORPORATE GOVERNANCE MATTERS ............................................................................... 53 SHAREHOLDERS/MEMBERS’ RIGHTS AND REMEDIES ............................................................................................................................ 54 MEMBERS/SHAREHOLDER LITIGATION UNDER GL ............................................................................................................................................................. 54 MINORITY MEMBERS/SHAREHOLDER PROTECTION GL .................................................................................................................................................... 54 VARYING AND CANCELLING CLASS RIGHTS ........................................................................................................................................................................... 55 MISLEADING OR DECEPTIVE CONDUCT (CIVIL LIABILITY ONLY) ...................................................................................................................................... 56 STATUTORY DERIVATIVE ACTIONS – PART 2F.1A ............................................................................................................................................................. 56 STATUTORY PERSONAL ACTIONS – PART 2F.1A ............................................................................................................................................................... 57 OPPRESSION .................................................................................................................................................................................................................................... 57 PROTECTION OF MINORITY SHAREHOLDERS: EQUITABLE RESTRICTIONS ON MAJORITY VOTING POWERS ................................................. 59 MANAGING A CORPORATION/ DIVISION OF POWER ............................................................................................................................... 60 THE BOARD OF DIRECTORS ........................................................................................................................................................................................... 60 MEETINGS .................................................................................................................... ............................................................................................ 62 2 BOARD MEETINGS.......................................................................................................................................................................................................................... 62 POWERS OF THE GENERAL MEETING ..................................................................................................................................................................................... 64 PROXIES AND BODY CORPORATE REPRESENTATIVES ....................................................................................................................................................... 66 VOTING AT MEETINGS ................................................................................................................................................................................................................... 66 DISCLOSURE RE GMS .................................................................................................................................................................................................................. 67 IRREGULARITIES .............................................................................................................................................................................................................................. 68 GENERAL MEETING’S RESIDUAL CONTROL OVER DIRECTORS.................................................................................................................................... 68 EXTRAORDINARY GENERAL MEETING .................................................................................................................................................................................... 69 AGMS REQUIREMENTS FOR PUBLIC COMPANIES ............................................................................................................................................................... 70 SHARES ...................................................................................................................................................................................................................... 71 ISSUING SHARES ............................................................................................................................................................................................................................. 72 TRANSFER OF SHARES ................................................................................................................................................................................................................. 74 CLASSES OF SHARES ................................................................................................................................................................................................................... 75 PROTECTION OF CLASS RIGHTS .............................................................................................................................................................................................. 76 DIVIDENDS ........................................................................................................................................................................................................................................ 76 SHARE CAPITAL MAINTENANCE ............................................................................................ .......................................................................... 77 CHANGING SHARES/CAPITAL .................................................................................................................................................................................................... 77 REDUCING SHARE CAPITAL........................................................................................................................................................................................................ 78 SHARE BUY-BACKS ........................................................................................................................................................................................................................ 80 CORPORATION GROUPS AND THEIR OWN SHARES ........................................................................................................................................................... 82 OTHER WAYS OF WAREHOUSING SHARES ............................................................................................................................................................................ 82 WINDING UP/LIQUIDATION ...................................................................................................... ........................................................................ 83 MEMBERS’ VOLUNTARY WINDING UP ....................................................................................................................................................................................... 83 LIQUIDATORS DUTIES AND POWERS ........................................................................................................................................................................................ 85 3
Australian Securities & Investments Commission (ASIC) pg72-87 Regulators A. ASX a. ASX is incorporated b. ASX listing rules prescribe standards for companies to be listed on ASX c. Creates and regulates financial market Seeks to promote: d. Fair and well-informed market for financial securities e. An internationally competitive market ASIC / Role pg 73 ASIC is a corporation created under the Asic Act (s 8 ASIC) Watchdog of CA (s 5B CA) - ASIC is responsible for controlling, regulating and administering Corporations Act 2001. ASIC acts under the: 1. Supervision: ASIC Act s12; and 2. Direction: ASIC Act s14; of the Treasurer of the Commonwealth government. Role of ASIC 1. Registry a. Registration of corporations b. Issuing Certificates of Incorporations c. Accepting documents required to be lodged under the Act d. Providing access to the public of the information lodged with ASCI 2. Regulator a. Investigation of corporations b. Enforcement against Corporations and Corporate Officers for breaches of the Act Searchable registers and documents Wherever the Act provides that a document must be “lodged”, it must be lodged at ASIC, and that document is then available to be searched by any person: s1274(2). By making a search at ASIC you can find: 1. That the Corporation exists; 2. Where the Corporation exists; 3. Where the Corporation’s assets are; and 4. Up to a point whether or not a particular person is authorised to commit the Corporation to a contract. Company or organisation name; Unique identification number (ABN, CAN, ARBN, ARSN); Type of company or organisation; Registration date; Next review date; Location of registered office; Whether the organisation holds a professional licence or registration; Principle place of business Directors; Shareholders; Current or historical extract; Company changes extract; Roles and relationships; and Copy of a certificate showing details of registration of corporations. Providing information to ASIC ASIC is empowered to collect information in any awful way though most of the information that it holds is provided by people under the Act: Vinton Smith Dougal Ltd v ASC (1997) The Act provides that irregularities in the management of a Corporation must be reported to ASIC: ss283DA, 311, 422, 438D, 476, 533 & 990K. Where a person is obliged to report an irregularity they obtain a qualified privilege: ss426, 442E, 535, 990L & 1289.
Power to exempt compliance with the Corporations Act A. Financial reporting ss340-341 B. Management investment schemes s601QA C. Takeovers s655A D. Fundraising s741 E. Product disclosure statements s1020F
ASIC’s powers to investigate ASIC may undertake an investigation of an irregularity either formally, or informally. Where an investigation is commenced formally (under ASIC s13) additional powers are enabled. ASIC may commence formal investigations under ASIC Act s13(1). ASIC can obtain search warrants under the Crimes Act 1914 (Cth) ASIC has the power to summons a person where it has reasonable ground to believe that the person has information relevant to an investigation (ASIC Act s19) Commencem ent of FORM AL INVESTIGATIONSS S13 ASIC Act When? Where ASIC has reason to suspect that: 1. A contravention (breach) of the Act s13 2. Fraud or dishonest conduct in the management of a corporation 3. Breach of any other law in the conduct in the management of a corporation
There is no requirement of a formal decision, or any formal steps to effectively commence a formal investigation: Little River Goldfield NL v Moulds (1991) Once the investigation is commenced it is not limited to its terms of reference, but may consider any question falling within its powers: ASIC Act s (2); ASC v Lucas (1992) Doesn’t have to end with a prosecution: ASIC v Elm Financial Services Pty Ltd (2004)
Search warrants ASIC can obtain a search warrant under the Crimes Act 1914 (Cth). The product of the search can be used for criminal prosecutions, but not for civil proceedings, except with the permission of the document holder. Documents taken during the search can be held by ASIC during the course of the matter, but must be returned at the end of the matter: ASIC v Rich (2005) Power to examine persons ASIC has the power to summons a person were it has a reasonable ground to believe that the person has information relevant to an investigation: ASIC Act s19. ASIC’s power is to require attendance at an interview, or to render “reasonable assistance” including doing physical acts: ASC v Kutzner (1998) Includes signing releases to allow third parties to release information: Smith v Papamihail (1998) S68 (1) No excuse of self incrimination Notice ASIC summons a person for examination or to render assistance by a notice. The notice must provide: 1. The subject matter of the investigation: ASIC Act s19(3): a. The description of the subject matter should be sufficiently detailed to allow the person to obtain effective legal advice: ASC v Graco (1991) b. There is no requirement that the person being investigated by identified: Stockbridge v Ogilvie (1993) 2. The right to obtain legal advice: ASIC Act s23; and 3. The privilege against self-incrimination, where applicable: ASIC Act s68. Evidence The examination of the person is recorded: ASIC Act s24(1). The evidence so produced can be used in: 1. Criminal prosecutions: ASIC Act s49; 2. Civil proceedings: ASIC Act s50;or 3. Actions for the benefit of others: s1330; 4. Given to others for use in their own actions: ASIC Act s25. Walsh v Permanent Trustee Australia Ltd (1996) Copies of the recordings must accompany the final report of the investigation: ASIC Act s27.
Australian Securities & Investments Commission (ASIC) pg72-87 Regulators A. ASX a. ASX is incorporated b. ASX listing rules prescribe standards for companies to be listed on ASX c. Creates and regulates financial market Seeks to promote: d. Fair and well-informed market for financial securities e. An internationally competitive market ASIC / Role pg 73 ASIC is a corporation created under the Asic Act (s 8 ASIC) Watchdog of CA (s 5B CA) - ASIC is responsible for controlling, regulating and administering Corporations Act 2001. ASIC acts under the: 1. Supervision: ASIC Act s12; and 2. Direction: ASIC Act s14; of the Treasurer of the Commonwealth government. Role of ASIC 1. Registry a. Registration of corporations b. Issuing Certificates of Incorporations c. Accepting documents required to be lodged under the Act d. Providing access to the public of the information lodged with ASCI 2. Regulator a. Investigation of corporations b. Enforcement against Corporations and Corporate Officers for breaches of the Act Searchable registers and documents Wherever the Act provides that a document must be “lodged”, it must be lodged at ASIC, and that document is then available to be searched by any person: s1274(2). By making a search at ASIC you can find: 1. That the Corporation exists; 2. Where the Corporation exists; 3. Where the Corporation’s assets are; and 4. Up to a point whether or not a particular person is authorised to commit the Corporation to a contract. Company or organisation name; Unique identification number (ABN, CAN, ARBN, ARSN); Type of company or organisation; Registration date; Next review date; Location of registered office; Whether the organisation holds a professional licence or registration; Principle place of business Directors; Shareholders; Current or historical extract; Company changes extract; Roles and relationships; and Copy of a certificate showing details of registration of corporations. Providing information to ASIC ASIC is empowered to collect information in any awful way though most of the information that it holds is provided by people under the Act: Vinton Smith Dougal Ltd v ASC (1997) The Act provides that irregularities in the management of a Corporation must be reported to ASIC: ss283DA, 311, 422, 438D, 476, 533 & 990K. Where a person is obliged to report an irregularity they obtain a qualified privilege: ss426, 442E, 535, 990L & 1289.
Power to exempt compliance with the Corporations Act A. Financial reporting ss340-341 B. Management investment schemes s601QA C. Takeovers s655A D. Fundraising s741 E. Product disclosure statements s1020F
ASIC’s powers to investigate ASIC may undertake an investigation of an irregularity either formally, or informally. Where an investigation is commenced formally (under ASIC s13) additional powers are enabled. ASIC may commence formal investigations under ASIC Act s13(1). ASIC can obtain search warrants under the Crimes Act 1914 (Cth) ASIC has the power to summons a person where it has reasonable ground to believe that the person has information relevant to an investigation (ASIC Act s19) Commencem ent of FORM AL INVESTIGATIONSS S13 ASIC Act When? Where ASIC has reason to suspect that: 1. A contravention (breach) of the Act s13 2. Fraud or dishonest conduct in the management of a corporation 3. Breach of any other law in the conduct in the management of a corporation
There is no requirement of a formal decision, or any formal steps to effectively commence a formal investigation: Little River Goldfield NL v Moulds (1991) Once the investigation is commenced it is not limited to its terms of reference, but may consider any question falling within its powers: ASIC Act s (2); ASC v Lucas (1992) Doesn’t have to end with a prosecution: ASIC v Elm Financial Services Pty Ltd (2004)
Search warrants ASIC can obtain a search warrant under the Crimes Act 1914 (Cth). The product of the search can be used for criminal prosecutions, but not for civil proceedings, except with the permission of the document holder. Documents taken during the search can be held by ASIC during the course of the matter, but must be returned at the end of the matter: ASIC v Rich (2005) Power to examine persons ASIC has the power to summons a person were it has a reasonable ground to believe that the person has information relevant to an investigation: ASIC Act s19. ASIC’s power is to require attendance at an interview, or to render “reasonable assistance” including doing physical acts: ASC v Kutzner (1998) Includes signing releases to allow third parties to release information: Smith v Papamihail (1998) S68 (1) No excuse of self incrimination Notice ASIC summons a person for examination or to render assistance by a notice. The notice must provide: 1. The subject matter of the investigation: ASIC Act s19(3): a. The description of the subject matter should be sufficiently detailed to allow the person to obtain effective legal advice: ASC v Graco (1991) b. There is no requirement that the person being investigated by identified: Stockbridge v Ogilvie (1993) 2. The right to obtain legal advice: ASIC Act s23; and 3. The privilege against self-incrimination, where applicable: ASIC Act s68. Evidence The examination of the person is recorded: ASIC Act s24(1). The evidence so produced can be used in: 1. Criminal prosecutions: ASIC Act s49; 2. Civil proceedings: ASIC Act s50;or 3. Actions for the benefit of others: s1330; 4. Given to others for use in their own actions: ASIC Act s25. Walsh v Permanent Trustee Australia Ltd (1996) Copies of the recordings must accompany the final report of the investigation: ASIC Act s27.
