Accounting Essay

1131 words - 5 pages

HI5027 Corporate Law

About companies

§ Introduction to companies § The architecture of companies § Historical development § Separate legal personality

Week 1 Introduction to Companies Company Law

HI5027 Corporate Law Holmes Institute 2011


Introduction to companies


§ What are companies and why do we have them? § What are the key attributes of a company?

§ The dominant form of business organisation § Over 1.7 million companies in Australia § Created through a process of registration under statute - an artificial legal person § Have the special legal attribute of separate personality

HI5027 Corporate Law Holmes Institute 2011


HI5027 Corporate ...view middle of the document...

manage the business (in large companies, delegate to CEO and other executives) § Directors are not always members § Members have a right to vote on some issues, but usually not on general management decisions

§ Corporations aggregate as separate legal persons § Joint stock as a means of financial participation § Incorporation as of right from mid 19th century § Limited liability from mid 19th century

HI5027 Corporate Law Holmes Institute 2011


HI5027 Corporate Law Holmes Institute 2011


Important developments for small business

Separate legal entity doctrine

§ Distinction between public and proprietary companies § Salomon s case § Sole director/shareholder companies

§ The company is a legal person separate from its participants § This means that:
Ø its obligations and property are its own and not those of its participants Ø its existence continues unchanged even if the identity of the participants changes

HI5027 Corporate Law Holmes Institute 2011


HI5027 Corporate Law Holmes Institute 2011



Salomon v Salomon (1897)

Salomon (cont)

shoe business

§ Issue - was Mr Salomon entitled to priority under the debenture over other, unsecured creditors of the company?
Pty Ltd company


cash, debenture


§ Depends on whether the company and its controller are separate legal entities, and not agents or trustees for each other § Court said yes


HI5027 Corporate Law Holmes Institute 2011 13 HI5027 Corporate Law Holmes Institute 2011 14

Characteristics of companies

Company law

§ Important features of companies arising from their separate legal personality
Ø can incur obligations and hold rights, and sue and be sued, in their own name Ø can contract with their controllers Ø have perpetual succession Ø are separate taxpayers Ø participants (may) have limited liability

§ Scope and operation of company law § Sources of company law § Regulation of companies

HI5027 Corporate Law Holmes Institute 2011


HI5027 Corporate Law Holmes Institute 2011


What is company law?

Purpose of company law

§ General term used to describe the legal rules governing:
Ø formation and termination of companies Ø characteristics of companies Ø relationships between participants in companies (such as members and officers) Ø aspects of companies dealings with outsiders

§ Has both facilitative and regulatory functions § Facilitative in that it provides the legal framework for people to deal with each other § Regulatory in that it controls behaviour to achieve social ends

HI5027 Corporate Law Holmes Institute 2011


HI5027 Corporate Law Holmes Institute 2011



Purpose (cont)

Operation of company law

§ Aims/purposes include:
Ø investor protection Ø commercial stability and consumer confidence Ø balancing competing interests Ø certainty - standard form rules

§ Operates as a source of private...

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