2012

Name of the Institute Name of the Student

[AUSTRALIAN COMPANY LAW]

[Type the abstract of the document here. The abstract is typically a short summary of the contents of the document. Type the abstract of the document here. The abstract is typically a short summary of the contents of the document.]

Question 1 Under the Australian Law, an incorporated association is one which has its own separate legal entity and which comes into existence with the two or more people uniting together to achieve a common aim of either makings profits or serving the community under a legal name and by mutual understandings. The incorporation is governed and ruled by the Australian Law existing in each state. The advantages of incorporating an organization are as follows: 1. Separate Legal Entity: The prime advantage of incorporating the associations is the owning of separate legal entity for the members of the company and allowing them multiple benefits for the separate legal entity where the members liability of the company is limited to the shareholdings of the each member. 2. Enter into transaction in its own name: The Company being incorporated has the full capacity to enter into transaction in its own name. This gives the advantage of the members being not involved in the transactions. 3. Perpetual Succession: This is also an added advantage to the corporation where the perpetual succession of the company continues whether the members stay in the corporation or not. This gives the company an unlimited life to continue its existence. 4. Lower administrative costs: The incorporations cost lower administrative costs as compared to the benefits accrued from them. This is an important consideration as most of the members take a step back because of a mindset that incorporations are costlier than the proprietorship or partnership business. 5. Higher formulations of funds: The incorporations are known for raising capital at a better pace than the other types of entities. Because corporations are having a separate legal entity and better managerial resources, they are quite common in the eyes of the public

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and the institutions. Because of high net worth companies, the raising of capital is much easier. 6. Tax benefits: Having incorporations gives you benefits of taxation. The incorporations are said to have wider tax benefits such as simple tax structure, wide range of expenses, directors salary withdrawn as expenses, credits and depreciation benefits, they are better of paying lower taxes than the other type of entities. Some of the disadvantages of incorporating a business are as follows: 1. Restrictions and Interference: As we know, every coin has two sides and when one treats you with benefits the other one takes the benefit out of you. The same is the case with the incorporations. After incorporating, the legal systems of the business grow and there are many restrictions on the business so as to maintain the loyalty and faith amongst the consumers and the stakeholders of the business. There are much interference in the way of the ASIC, which interferes in the matters of the corporations raising capital via the IPO route, the government of the continent, to check whether the corporations are paying fair taxes and activities being carried on fair grounds and etc. 2. Disclosure and Reporting requirements: An incorporation of a business requires disclosure requirements as per the ASIC directions and thus, the business has to follow the same and carry on its activities accordingly. The maintaining of registers and following the companies reporting requirements, it has to be involved in this complex structure, which is absent in other type of entities. 3. Cancellation of Incorporation: The registrar general of the Australian continent has the right to cancel the incorporation certificate of any business house on the grounds if they fail to adhere to the norms and regulations of the regulators and the published authorities. Under the Australian Law, the Registrar General has the power to cancel
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the incorporation of any business given that he finds that it would be inappropriate due to scale, nature or value of the activities of the association. 4. Annual Regulatory Costs and other Accounting Issues: Annual costs of operating the incorporated business are paid to the account of the Office of Regulatory Services. In the case of companies limited by guarantee, the costs are tad higher than the incorporated associations. Accounting assumptions sometimes becomes a difficulty for these incorporations when there is a clash between the government and the accounting body. After looking at the above scenario and the requirements as specified by Nicola regarding her business, it would be appropriate to incorporate an INCORPORATED ASSOCIATION under the Associations Incorporated Act 1991. Many of us would argue to advise them the companies limited by guarantee, which is also a good option under the incorporations. But looking at the needs and requirements of Nicola, the incorporated association on one hand would cover all the negatives of the companies limited by guarantee such as higher costs, taxation costs, reporting and regulatory requirements and etc. The advantages of both the entities are similar in nature whereas one has more disadvantages over the other. Hence, it would be appropriate for Nicola to go for Associated Incorporation as she would be less concerned about her liabilities and debts of the partnership which would be covered up by the associated incorporations and the perpetual succession of the business would also continue even if one of them decides to leave the business. References http://www.ehow.com/about_4706267_advantages-disadvantages-incorporation.html http://www.actcoss.org.au/oik/infosheets/structureandstrategy/compltd.html

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http://www.actcoss.org.au/oik/infosheets/structureandstrategy/incassoc.html http://www.ourcommunity.com.au/management/management_article.jsp?articleId=16

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Question 2 A) The Australian Securities and Investments Commission have its own powers and rights to impose penalties on the corporations and the officers related with the corporations. But before going towards the penalty impositions of the ASIC, we should first be looking at the problem which has been created by the 17 year old entrepreneurial. Under the ASIC rules and regulations, the officers or directors of the company should nowhere hide the informations that are required by the ASIC regulations. Under the Part 9.4 of the Corporations Act, ASIC has the power to issue notices to any person of the company which has been involved in the following acts of: Doing something that a person is forbidden to do under the Corporations Act Not doing something which the person is required to do under the Corporations Act.

And certainly by not disclosing the correct age of 17, Marcia has violated the laws of the ASIC. Hence ASIC has the right to issue a notice of penalty, not more than $137.50 if the concerned person is natural person. Along with this, Marcia should provide an undertaking that she will no longer contravene any regulations of the corporation law. This initiative is taken by the ASIC in order to bring uniformity in the principles and that there should be a limit within which the individuals and the corporations must act. B) Under the ASIC corporation law, if a person wants to incorporate a proprietary company, the company must include the words proprietary or rather Pty in the name in order to make the name complete. They are also to show the liability of the company of the members unless the liability is unlimited i.e. if liability is limited, then Pty ltd or vice versa. The name chosen should not be already registered, which in case the person has to

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opt other name. There are certain phases which cannot be included in the name such as Building society, trust, chamber of commerce and etc.

Hence, as per the norms of the ASIC, Marcia will be able to register the name as Marcias Guaranteed Sparkle Pty Ltd, suggesting that Marcia has limited liability in the company and in order to do so, Marcia should first reserve her name for the company with the IP Australia Website, so that no other person can use the name before she uses it. This process involves fee which is given in the application guide. Once the application is approved, the name stays valid for two months which in case needs to be extended, and then second fee needs to be paid. The name so reserved does remain reserved for unlimited period.

C) Yes, Marcia needs to have a registered office in order to complete the registration process of incorporation as after the application for the registration is received with the correct amount of fee, then the ASIC sends the ACN number for the company to the registered office of the company.

She can certainly use the parents home address as the registered office but in order to do so, she needs to have a written consent from them so that they do not have any obligation further in the course of the operation of the corporation. The office certainly needs to be open for the public as the company is Pty Ltd and the public has their interest in the concern.

D) The ACN so acquired by the company and as per the Directions of the ASIC should be displayed clearly and visibly at every place of business which is open to the public. In

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details, the same needs to be displayed in every public document which is issued by the company or on their behalf and is duly signed by the officers, every instrument that the company enters into be it negotiable or other, and all such documents and papers which are to be duly submitted to the ASIC all under the corporations Act. Hence, the same needs to be certainly displayed in the accounts of the company and also outside her parents house, which is the registered office as well as open to the public. References http://www.asic.gov.au/asic/asic.nsf/byId/PMIDCA256AE900038AEACA256AFB007F6B4 8?opendocument http://www.asic.gov.au/asic/ASIC.NSF/byHeadline/Company%20compliance http://www.asic.gov.au/asic/ASIC.NSF/byHeadline/Starting%20a%20company%20or%20bu siness http://www.asic.gov.au/asic/asic.nsf/byheadline/Company+officeholders?openDocument

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Question 3 A) Under the ASIC laws, the appointment of a company director or secretary is regulated under the norms that the new appointment of the director or secretary must not be related to the under mentioned persons such as

Persons who are declared as bankrupt under the bankruptcy act Persons who are subject to a personal insolvency under any personal agreement or an arrangement under the bankruptcy act

Persons subject to the composition under the Bankruptcy Act Persons who are convicted of having committed any crime or fraud under the company law. Such as falsifying of accounts, embezzlement of cash and etc.

Any bodies or corporations, as directors can only be incapacitated by a person. A corporation can be a shareholder of another corporation but nowhere can be appointed as the director of the company as the director needs to take decisions and manage the corporations.

Persons who are of unsound mind or suffering from diseases which possess a threat to the company in the near future or the operations of the company.

In the given circumstances, his family company cannot be appointed as a director because the company does not have the legal rights to own a position which should be owned by a natural person. However, the company may not appoint a company secretary as the ASIC norms says that the company must appoint a director or a secretary, and as we know the company can have the directors as mentioned by the three owners.

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B) Ms. Avoider, who still has to serve a period of 5 months as for her conviction of falsifying the accounts of the company, falls under the 4th clause of the appointment of directors which says that any person who has been involved in the fraud or crime of the company law, cannot be appointed as a director. Hence, she cannot be appointed as a director for the next 5 months.

C) Mr. Marginal who is suffering from the Alzheimers disease seems to be a person of unsound mind. Such a person cannot incapacitate as a director of the company since they possess a threat to the companys goodwill and assets. Hence he cannot be appointed as a director at any point of his life.

D) The track record of Mr. Shifty implies that she has been indulging with the companies in order to secure money from the unsecured creditors and later on not paying them their required sum of money, which has been loaned from them. Such an act is punishable in the eyes of the Australian law and the ASIC which does not allows the owners such as Mr. Shifty to operate such companies because such an act misguides the investors and stakeholders of the company, commonly known as white collar crimes, where the money of the individuals are pocketed by the top level officers of the company. Hence, Mr. Shifty might have to face legal proceedings under the track record of having wrong doings in the name of companies.

References http://www.bdo.com.au/__data/assets/pdf_file/0007/110689/Family-Business-News-Issue6.pdf
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http://www.asic.gov.au/asic/asic.nsf/byheadline/Your+company+and+the+law?openDocume nt http://www.asic.gov.au/asic/asic.nsf/byheadline/Checklist+for+registered+companies+and+th eir+officers?opendocument http://www.asic.gov.au/asic/asic.nsf/byheadline/Running+your+company?openDocument http://www.legislation.sa.gov.au/LZ/C/A/ASSOCIATIONS%20INCORPORATION%20AC T%201985/CURRENT/1985.30.UN.PDF

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