Research Essay

Topics: Board of directors, Stock, Corporation Pages: 20 (4503 words) Published: September 4, 2011


Study Period 1 2011


It is only possible to cover a limited number of questions in each seminar. The questions are intended to reflect major principles where possible, but in some weeks it has been necessary, due to limited space, to omit questions on important issues.



In order to properly work with this unit you need to become proficient in working with the Corporations Act (CA). To commence that process please locate the following references:

(a)“Auditors” in the index

(b) The definition of “financial records” under CA s9

(c)CA s117

(d)CA s124

(e) CA s135(2)

(f)CA ss 180(1),(2)

(g)Chapter 2E

(h) Part 2E.2


Relda Insurance Ltd has received an application from Yendor Pty Ltd to take out an insurance policy covering the motor vehicles driven by the employees of Yendor Pty Ltd.

Using the CA and cases, explain whether a company has the legal capacity to: (i) own assets (such as motor vehicles);
(ii) enter into a contract (such as an insurance policy); (iii) employ people.


Premium Plumbing Pty Ltd (Premium) required further capital for expansion and borrowed $200,000 from Eastpac Bank Ltd (Eastpac). After a time, an unforeseeable misfortune occurred causing Premium to suffer a large loss. It immediately advised Eastpac and stopped trading. Premium is unable to meet the repayments due on its bank loan and has few assets. Eastpac is considering ways to recover its money.

Would Eastpac Bank Ltd be successful in enforcing its claim against: (i) the directors,
(ii) the shareholders, or
(iii) the employees
of Premium Plumbing Pty Ltd?

[Quote sections and cases to support your opinion]


For many years Ali has been the chief chemist with the Pop-a-Pill Drug Company Ltd. His employment contract in clause 33 requires that in the event of Ali leaving his employment, he will not work “in competition with the Pop-a-Pill Drug Company Ltd for 1 year”. Ali registered an Australian company [Gee Chemicals Pty Ltd] and when he resigned from Pop-a-Pill he immediately became the managing director of Gee Chemicals.

Pop-a-Pill claims Ali is in breach of contract. Ali says that Gee Chemicals is in competition with Pop-a-Pill Drug, but he personally is not. Later, Gee Chemicals Pty Ltd is found to be selling drugs in breach of the law. Ali claims that he is only an employee and that it is the company that has broken the law, not he.

[A detailed discussion of contract law or criminal law is not required here]



Wizard Pty Ltd does not have a constitution.

Mr Henry Potter owns 1000 shares in the company and attends a meeting of members. The chairperson of the meeting is Wendy Wizard. Henry challenges Wendy’s right to be the chairperson of the members’ meeting and claims that the members should be able to appoint anyone they chose. Wendy rejects Harry’s claim.

Henry claims that the members will remove the directors but Wendy asserts that the members do not have such a power.

Determine who is correct on each of these matters.

[Clue: Commence by Examining s141 to ascertain the appropriate rule]


Shareholders of Stones Ltd have been selling parts of their shareholdings, thus increasing the total number of members. The company has no constitution. The managing director, Mick is unhappy about this trend as the cost of maintaining the share register and sending materials to members is increasing. He wishes to implement a rule to give the directors power to control the transfer of shares so that they can restrict the number of members.

Advise Mick if he can successfully achieve his...
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