Company Law with references to AGLC

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Requirement

1- Write a repot on "Company Law" with references to AGLC within 2100 words.

Solution

Part A- Third-party legal action against the two business structures

Introduction 

After the commencement of the business, there could be legal issues merge with the operational activities. This report will discuss the role of the third party in creating legal issues for the partnership and company stricture for the two brothers. Hyde and Jekyll and one sister Pat. 

Analysis 

Partnership business is described as the number of people who used to carry out the business together. This is being identified by the partnership act 1963.  There can be a partnership in the sole trader structure also. Under his case, the number of people could be 20 if the business is jointly run by the group of these people . 
Section 21.2 describes the partnership and the third parties in the book, “the legal environment and foundations of business law under volume 1.0. Accordingto section 21.2 operation: the partnership and the third parties. The agency law is being applied I the partnership law. Every partner is the agent of the partnership in order to run the business. Under the liability part of this structure, the agent has the right to make a contract in the context of a principal under the three kind of authority. These are implied, express and apparent .
Express authority is delegated to the agent; implied authority refers to the carrying out the authority of express. Apparent authority arises when a corporation or principal makes an indication to the third party that an agent or partner is authorized to act on its behalf and the third party used to rely on good faith upon such authority. Again, when the partners have the authority than the partnership has to follow that contract made by the partners on his behalf.  This has been discussed under section 21.4.2 partnership authority, express, or apparent. 
Liability of partners in torts is being discussed under section 21.2.1 in contract liability. Under section 13 of UPA, it has been mentioned that partnership is liable for any kind of omission and wrongful act for any partners. Section 13 of UPA also describes the wrongful act and states that partnership is responsible for its partner’s no-fault torts. Under section 405(a) it is mentioned that if a partner is found in breach of the contract, he needs to indemnify the partnership about the money or losses paid to the third party . 

The potential liability to the third party in the company 

Company is a legal entity like the owner of the company. This needs to comply under the corporation act 2001. It means that the business is owned by the shareholders and controlled by the directors. There are different obligations of the company in against the third party under the Australian regulation. It is required to register the company under ASIC. The legal instructing for the third-party obligations and other rules need to be followed by the company. 
Competition and consumer act 2010 (cth) CCA affect the operational activities of the company.  It regulates the area such as consumer protection, product liability and competition policy. Breach of the CCA could bring huge penalties and jail based on the circumstances. Each of the Australian territory and state has occupational health and safety OHS regulation.  This imposes regulation on the company with employees . It is required for the companies to ensure the health of the contractors, employees and other persons. 
Section 68B of the trade practice act describes that the company need not indulge in dangerous recreational activities. This could bring a huge penalty for the company. There needs to be operative language under the section 139A div 9 of the CAA act. Section 64 of the CCA act recreational service suppliers can modify the contract or restrict the contract out of their contractual liability for the recreational service provision . 
Deceptive and misleading conducts could not be done by the business by section 18 of the CCA act of sch 2.  Personal injury in case of mental harm is not recognised until it is confirmed by the psychiatric illness.  This has been explained under section 4 of the CCA. Audit reform and corporate disclosure act 2004 allows the court to reduce the loss of the plaintiff if there is property or economic loss to the plaintiff because if the result of the misconduct of the company or the defendant . 

Conclusion 

Thus, it could be concluded that there are proper regulations for the third-party liability by both of the business structure followed by the advice seekers.  

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Part B- Fiduciary duty and the participants in both business structures

Introduction 

Thus, it is a written report to the supervising partner in terms of considering the fiduciary duty. This will be considered for the partnership business structure and for the company business structure.

Analysis 

Importance of the fiduciary duty in partnership 

After the appointment of the director in the business, there is a certain fiduciary duty that is attached to them. A fiduciary is said to be a person who holds the ethical and legal relationship with multiple parties of the business. In case if this duty is breached by the owner, there could be a personal liability to the director.  This includes the liability for damages, criminal and civil penalties. Thus, indulging in this duty helps the partnership firm to make the business reliable for the customers . The duties which are held by the partnership firm in case of the fiduciary duties are:

  • Duty of fair dealing and good health: It implies that partners need to show good faith and act honestly in the interaction of partnership among each other. It starts with the formation of the business. It continues with the operational activities and ends at the dissolution of the business.

  • Loyalty fiduciary duty: It is required in this duty that the partners need to place their business obligation above personal interest. They need to act in terms of the regulations and holds partnership property "in trust for the benefit of the partners".

  • Care fiduciary duty : It is required to act in a prudent manner while directing and managing the partnership. For example, it could be expected from a general partner that he or she needs to be accurate and complete the business records . Thus, a proper procedure and audit controls could be implemented by the prudent business person for the control of the partnership assets and funds. 

  • Disclosure fiduciary duty: It is required by the partners to comply with the requirements of the disclosure under the partnership. Participating partners need to make full disclosure about the reasonable known risks and the coming benefit of the articular actin. Conflict of interest needs to be disclosed by the relevant partner in this context . 

  • Alteration of the fiduciary duties : These duties are selected by the judicial determinations and state statutory law. Depending on the state partner could expand, limit, or could eliminate these duties. There need to be served an agreement stating that this is relevant according to the circumstances. There are certain duties which could not be eliminated in the star. There could be help of the attorney in determining the relevant fiduciary duties of the partnership business . 

  • Importance of the fiduciary duty in the company: This is majorly required in the company because of the significant liability of the Fiduciary or the director of the company. This requires the director before making any decision for the company. The fiduciary duties that are available for the company are: 

  • Honesty acting fiduciary duty: Director or the fiduciary need to act the best interest and good faith in the business. Their duty requires more than the ordinary sense of honesty in order to work for the overall stakeholders of the business. 

  • Irrelevant use of the inside information: They are the person who keeps all the crucial and confidential information of the business. It is required to maintain the confidentiality of the infraction by not sharing with the irrelevant person.

  • Avoiding conflict of interest and disclosing "material, personal interest.": It is required to disclose all the information related to personal interest. A director who comes to know about the conflict of interest needs to be immediately notified to the board about such conflict.

  • Duty of not abusing a corporate opportunity: Corporate opportunities need to be taken above personal gain. This could lead to the expense of the company. In case if the opportunity is rejected could be used for the personal opportunity .

  • Duty of diligence and care: Discharging the duties need to be done with immense care. There need to be decisions made with good faith, and rational approach needs to be adopted.

  • Duty of not indulging in insolvent trading: It is the duty of the director to prevent the company from being going insolvent. This could be done by making the financial report and directors report at the end of each financial year.

Conclusion 

Thus, in the case of both partnership and company, there is a maximum number of fiduciaries that need to be maintained by the director or the fiduciary. 

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Part C- Significance of the case, ASIC v Vizard (2005)

Introduction 

In this section, there will be a consideration for the ASIC v Vizard (2005), in order to determine the regulations and responsibilities of the director of a company. This will serve as an illustration for this part of the report.

Analysis 

The relevance of the case in explaining the regulations and responsibilities of the director of a company.
Vizard was one of the directors of Telstra, which is a significant company in the telecommunication industry of Australia. He has been appointed as the director of the Telstra in the year 1996. At that time Telstra was known as the Australian and overseas communication corporation ltd. It was incorporated under the corporation act of the Australian territory. Vizard was being addressed under the breach of section 183 of the corporation act 2001.  This is related to the duty of avoiding the conflict of interest by the director, which is under the fiduciary duty of the director of a company .  
It was found that vizard has accessed the information from the internal briefing and board meeting of the company. The documents contain information for the acquisition of IT firms. Vizard has acquired the shares of the firm in which Telstra was going to acquire.  He also created a family trust that was looked at by his accountant. The trades made by the Telstra loses and not a single fund of the Telstra being used by the vizard. After this act of vizard, ASIC started proceedings in terms of the vizard for breaching section 183 of the corporation act .
The result if this act of the Telstra director vizard, there was a penalty of $400000 and the vizard has been disqualified by being serving as director for ten years. The fiduciary rules are given by section 107 of the 1958 companies act. The defendant has been involved in so many trading activities.  It is required for the registered company to maintain a share register which is available for the inspection by the public. This was also logically managed by the defendant in order to hide the shares from the general public. 
Thus, it could be said that this case is the relevant example for the regulations for the director or the fiduciary. There has been significant control over the activities that are required for the director to perform in the interest of the public and the other stakeholders. Vizard has broken the rule of corporation act section 183, which signifies that need to act in avoiding the conflict of interest. Other directors were aware of the fact that the decision of the acquisition is very much confidential and need to be maintained by them. This has been violated vizard ignoring the requirements of the legislation and regulative bodies . Under the act, it has mentioned that the director needs to act honestly and do not make use of any information that could lead to harm to the company. Insolvent trading needs to be completely avoided by the company. There needs to be good corporate governance in the company to ensure the success of it. This director plays an important role in determining the aspects that could help the company to grow. Corporation act 2001 has led the regulation for the fiduciary in order to act according to the interest of the company and the other stakeholders, including the outsiders also .

Conclusion 

Thus, it could be said that it is an important case study in order to know the rules and regulations for the company director. Honesty and avoiding the conflict of interest is being the prominent one. 

Part D-Importance of a partnership agreement

The need for the written partnership agreement

There is a major requirement if the written partnership agreement n the partnership business. This s because of the following four reasons for dung this:

  1. Reducing the impact of this dispute- In case of any external and internal dispute, his written document could be used to remove the assumptions and conjectures.  

  2. Avoiding unwanted dissolution- The written document lists the relevant way of the dissolution, and unnecessary dissolution could be stopped. The examples of written dissolution methods are: In case the partner dies, insolvency of the partner, written agreement of the partnership expires and many more required insolvency decisions by the consent of the partners. 

  3. Ability in the reconstitution of the partnership- This could tale lace in the business that the business associate wants to leave, and the other members want to continue the firm. ATO has provided this benefit under which the continuing firm has not to look for the GSTIN, TFN and ABN. These all could be retained.

  4. Equal distribution of the salary- There could be flexibility in the salary by the drafted agreement. It could reflect whether the salary of the partners is variable or fixed. 

Exact terms that need to be included in the partnership agreement

  1. Contribution- This included information about the investment made by each partner in incorporating the business. This could also be related to the time, customers, effort, equipment, and so many other contributions beach partner.

  2. Distributions- This is related to the distribution of the profit by the partners. There needs to be ration fixed for avoiding future disputes related to salary.

  3. Details of each partner- It includes the name, address, contact details and other personal information in order to get the record of the partners which could be checked while required.

  4. Ownership-  The agreement needs to describe how the partners are going to handle the ownership is several events. This could be the death of the significant partner, retirement and bankruptcy. They could bean in a non-compete clause in order to deal with the leaving of the partner, stealing the customers and setting a new company. 

  5. Decision making- There could be a decision-making structure in order to take a fast and relevant decision for the business. There could be mutual consent of all the partners in this case.

  6. Dispute resolution- Setting up the strategy for the dispute resolution could be significant in successfully running the business. This is because there could e conflict in the idea that could bring dispute.  

  7. Dissolution- Setting the steps for the company dissolution will act as an effective tool in dealing with unnecessary dissolution.

Reference list 

  • Book 

  • Allen, W. T., &Kraakman, R. (2016). Commentaries and cases on the law of business organization. Wolters Kluwer law & business. Retrieved on 26.07.2019, from: https://s3.amazonaws.com/academia.edu.documents/4660343/busorg.pdf?response-content-disposition=inline%3B%20filename%3DCommentaries_and_cases_on_the_law_of_bus.pdf&X-Amz-Algorithm=AWS4-HMAC-SHA256&X-Amz-Credential=AKIAIWOWYYGZ2Y53UL3A%2F20190816%2Fus-east-1%2Fs3%2Faws4_request&X-Amz-Date=20190816T062449Z&X-Amz-Expires=3600&X-Amz-SignedHeaders=host&X-Amz-Signature=49abdbcbfa5321e97a65f68d73876892932ecc3461ac9d3801e83b5c64dcf05a

  • Steingold, F. S., &Steingold, D. (2019). Legal guide for starting & running a small business. Nolo. Retrieved on 1.08.2019, from: http://www.untag-smd.ac.id/files/Perpustakaan_Digital_1/BUSINESS%20Legal%20Guide%20For%20Starting%20Running%20A%20Small%20Business%208th%20Edition.PDF

  •  Journals 

  • Blair, M. M., & Stout, L. A. (2017). A team production theory of corporate law. In Corporate Governance (pp. 169-250). Gower. Retrieved on 25.07.2019, from: https://ir.vanderbilt.edu/bitstream/handle/1803/5806/Team_Production_Theory.pdf?sequence=1

  • Kohler, T. (2016). Corporate accelerators: Building bridges between corporations and startups. Business Horizons, 59(3), 347-357. Retrieved on 27.07.2019, from: http://iranarze.ir/wp-content/uploads/2016/10/E2559.pdf

  • Bayern, S. (2016). The Implications of Modern Business–Entity Law for the Regulation of Autonomous Systems. European Journal of Risk Regulation, 7(2), 297-309. Retrieved on 28.07.2019, from: https://law.stanford.edu/wp-content/uploads/2017/11/19-1-4-bayern-final_0.pdf

  • Gupta, A., Briscoe, F., &Hambrick, D. C. (2017). Red, blue, and purple firms: Organizational political ideology and corporate social responsibility. Strategic Management Journal, 38(5), 1018-1040. Retrieved on 29.07.2019, from: http://www.personal.psu.edu/fsb10/papers/Gupta_Briscoe_Hambrick_2016_SMJ_Red_&_Blue_Firms_CSR.pdf

  • Reinecke, J., & Ansari, S. (2016). Taming wicked problems: The role of framing in the construction of corporate social responsibility. Journal of Management Studies, 53(3), 299-329. Retrieved on 30.07.2019, from: https://www.repository.cam.ac.uk/bitstream/handle/1810/248232/Reinecke%20and%20Ansari%202015%20Journal%20of%20Management%20Studies.pdf?sequence=1

  • Dari-Mattiacci, G., Gelderblom, O., Jonker, J., &Perotti, E. C. (2017). The emergence of the corporate form. The Journal of Law, Economics, and Organization, 33(2), 193-236. Retrieved on 31.07.2019, from: https://law.yale.edu/system/files/documents/pdf/cbl/VOC_050_GDM.pdf

  • Eriksson, D., &Svensson, G. (2016). The process of responsibility, decoupling point, and disengagement of moral and social responsibility in supply chains: Empirical findings and prescriptive thoughts. Journal of Business Ethics, 134(2), 281-298. Retrieved on 1.08.2019, from: http://www.diva-portal.org/smash/get/diva2:1049045/FULLTEXT01.pdf

  • Kortmann, S., &Piller, F. (2016). Open business models and closed-loop value chains: Redefining the firm-consumer relationship. California Management Review, 58(3), 88-108. Retrieved on 1.08.2019, from: https://dspace.mit.edu/bitstream/handle/1721.1/110537/Kortmann-2016-Open%20Business%20Models.pdf?sequence=1&isAllowed=y

  • Rauterberg, G., & Talley, E. (2017). Contracting out of the fiduciary duty of loyalty: An empirical analysis of corporate opportunity waivers. Colum. L. Rev., 117, 1075. Retrieved on 3.08.2019, from: https://repository.law.umich.edu/cgi/viewcontent.cgi?article=2931&context=articles

  • Eisenberg, M. A. (2017). Legal models of management structure in the modern corporation: Officers, directors, and accountants. In Corporate Governance (pp. 103-167). Gower. Retrieved on 4.08.2019, from: https://scholarship.law.berkeley.edu/cgi/viewcontent.cgi?article=2505&context=californialawreview

  • Saebi, T., & Foss, N. J. (2015). Business models for open innovation: Matching heterogeneous open innovation strategies with business model dimensions. European Management Journal, 33(3), 201-213. Retrieved on 5.08.2019, from:  https://openaccess.nhh.no/nhh-xmlui/bitstream/handle/11250/298636/Saebi_Business.pdf?sequence=3&isAllowed=y

  • Online article 

  • Conard, A. F. (2017). A Behavioral Analysis of Directors' Liability for Negligence. Duke LJ, 895. Retrieved on 6.08.2019, from:   https://scholarship.law.duke.edu/cgi/viewcontent.cgi?article=2409&context=dlj

  • Small, M. L. (2018). The Evolving Role of the Director in Corporate Governance. Hastings LJ, 30, 1353. Retrieved on 7.08.2019, from:   https://repository.uchastings.edu/cgi/viewcontent.cgi?article=2614&context=hastings_law_journal

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