Law Of Business Organizations: Cases And Notes Essay


Discuss about the Law of Business Organizations for Cases and Notes.



A propriety Limited Company in most is usually presented as a pty ltd. Its name (propriety) suggests that it privately owned while on the other hand, limited basically makes references to the liability that comes from the limited payment of shareholders debts with reference to their shares. Prior to the registration of propriety limited company within Australian state, it is important for certain considerations to be put in place (Armstrong 2006). The subject considerations revolve around the following; the company to be registered should have at least one director for purposes of administration. The company to be registered should also have an Australian address for an office that is registered.

Nevertheless, the company to be registered should put into consideration the aspect of shareholders and the workers or the employees. It should have if less one shareholder but should not surpass a maximum of 50 employees. The registration of a propriety limited company is under section 117 where a registration form is picked, filled and completed as a way of meeting the requirements that are documented in the form in line with the registration policies and Acts. Apart from the mentioned Policies and Acts, the registration should also comply with ASIC whose full meaning is Australian Securities and Investment Commission.

During the registration of propriety limited company or a pty ltd company, there is a requirement for the provision of a corporate register for filing and is required to match with the 2001 Act of Corporation. After that the Australian Securities and Investment Commission will provide the company in context with the registration certificate to validate its registration.

On the same note, after the registration of a propriety limited company, it is necessary for very close observance on the internal management of the company which is to be governed by combination of rules and constitution that are replaceable to be considered (Australia business and investment opportunities yearbook: practical information and opportunities 2005). The mentioned should be in line with the Corporation Act under section 134 and 135. According to 1936 and 2001 Act of Corporation, replaceable rules are mentioned as sections within the subject Act which have an automatic application with the consideration of the company’s governance and management.

Sections 134 and Sections 135

Other than the already discussed above, the NB section 134 and 135, clearly outlines the powers and rules that are within the constitution. Most of the powers include; the powers of appointment and the powers given or vested upon the directors. It also deals with the regulation of the members and directors meetings. On the same aspect, it provides for the provisions of a number of share classes. This validates the main objective why the internal management of the propriety limited company should be under the governance by the combination of replaceable rules and constitution under section 134 and 135 as already clarified with regards to Corporation Act within the paragraph (Australia 2011).

Section 254A and Section 254A

Under this section, the registration of a propriety limited company (pty ltd) should posses both ordinary shares as well as a class of redeemable preference shares. As mentioned in the introductory remarks with respect in the introductory remarks of this section, the former is covered under section 254A (2) and (3). In the case of preference shares, it’s importance or vitality is realized in the moment or time of company’s registration since it empowers the subject issue. The shares are also pegged to the already discussed concept of constitutionality and rules of NB section 134 and 135 that deals with matters related to repayment of capital, cumulative and noncumulative of dividends. The section in context is therefore equally crucial just like those of NB section 134 and 135 and should also be put into great view when it comes to company’s registration.

In the aspect redeemable preference shares preference share that can be undergo redemption under section 254A (3), it is necessary for registration because it will allow for the propriety limited company to redeem its shares at a time that is fixed or on the happening of certain events. The events in context may be in line with the subject company option or shareholders option. All these are captured in NB section 254A (3). The same section also outlines a number of policies and guidelines that outlines how the preference shares in context are to be redeemed. Other than the policies and guidelines, there are also the corporate rules which must also be served with an equal weight as those of the section in context to ensure that the shares redemption is justifiable.

Section 198A

It was noticed that directors had a habit of making unilateral decisions that injured the progress of the companies. They also took advantage of running the companies a lone to serve their personal interests and embezzle the company’s resources. This section was therefore brought into force to put a check on the directors by ensuring that the ultimate decision lied on the general membership (Bell & Howell Information and Learning 2009). This section spells out the duties of the directors of a company. It also states the limits to which the powers can be exercised. For instance, there are occasions in which only the general meeting can make certain decisions regarding the company. This section prevents the directors from running the company as their personal properties. It promotes a culture of consultation between or among the directors and the entire membership. This reduces the chances of directors misusing the office or misappropriating funds. No unilateral decision can be taken which might jeopardize the progress of the company. It also ensures that shareholders’ confidence is contact. If they are sure that the director’s powers are gagged and they have to be consulted from time to time then they can continue to plough their resources into the company.

Section 191

This section mainly talks about what is supposed to given consideration when registering a company. A company cannot be an individual and therefore legal procedures must to be followed. For example, it was realized that some directors of companies used to register other companies using their names or with names of their close friends or relatives. This could bring a lot of conflicts as the directors could enrich themselves or their friends. The companies were therefore portrayed in a negative light. Many court battles also ensued to the detriment of the affected companied.

This section was therefore introduced and brought to practise or course immediately. The section required that directors of the Australian companies disclose material personal interests. This section is meant to ensure that director’s personal interests do not clash with those of the companies. The director must carefully decide whether his personal interests are material. If a director does not declare his personal interests he or she may have undue advantage when trading with the company. For instance, if the director is operating another business dealing with supplies he/she may over quote the prices making him to transfer the company’s resources to his side business (Hughes 2014).

There are also other cases where when it came to tenders, the directors would compete for their companies to be awarded or allocated the tenders. This would prove nothing but their self interest material, since they are bidding for the same, the competition between the directors company’s and other bidders may not be fair (Latimer 2006). This is because they are the same people who are charged with the duty of giving out the tenders and here they are competing for them. The probability of them winning the tenders was very high (Johns 2012). This section therefore guards against such and puts the company beyond reproach since questions on biasness do not arise.


Historically, directors had very limited choices to make regarding the company’s remunerations. Members with little knowledge would pass rigid and binding resolutions which had to be followed strictly till the next annual general meeting (Smyth 2005). This led to serious problems especially when the economic aspects of a country suffered some instability into lightly.

This was the main reason why this section was brought into light. The section was therefore introduced to allow members to have say on remunerations while also giving directors freedom to make adjustments when convenient. The section 250(R) (2) deals with voting on the remuneration report in an annual general meeting. Subsection (3) opens the vote is not legally bounding to directors (Tomasic, Bottomley & McQueen 2002). The sections ensure that members take part in a most crucial thing, remuneration which is at the heart of every shareholder. This guards the directors against claims of misuse of funds or over and under payment of remunerations.

However, the directors have a leeway to reflect on the decision and depending on their financial experience and expertise carry out some amendments even after the general meeting. The economics of a country is never static and many a times it is unstable. The directors can therefore amend the resolutions based on the economic environment. It gives directors freedom to control remuneration (Vickery & Pendleton 2006).

In conclusion, the registration of a propriety limited company is a detailed and exclusive process that requires a number of documents and provisions as mentioned in the in the subsequent paragraphs with regards to the section provided.


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Australia business and investment opportunities yearbook: practical information and opportunities (2005). Alexandria, Intl Business Publication.

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Bell & Howell Information and Learning. (2009). Australian business law review. Sydney, Law Book Co.

Hughes, C. (2014). From passion to profit: a step-by-step guide to making money from your hobby by selling online. [Place of publication not identified], Writer'S Digest.

Johns, V. (20122). An introduction to the law of business organisations. [Zomba], University of Malawi.

Latimer, P. (1996). Australian business law. North Ryde, N.S.W., CCH Australia.

Nolan, J. L. (1996). Australia business: the portable encyclopedia for doing business with Australia. San Rafael, Calif, World Trade Press.

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Smyth, J. E. (2005). Australian business law. Sydney, Prentice-Hall of Australia.

Tomasic, R., Bottomley, S., & McQueen, R. (2002). Corporations law in Australia. Sydney, Federation Press.

Vickery, R., & Pendleton, W. (2006). Australian business law: principles and applications. Frenchs Forest, N.S.W., Prentice Hall/Pearson Education Australia.

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