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1、LOBO Week 1,1,THE LAW OF BUSINESS ORGANISATIONS,LOBO Week 1,2,Law of Business Organizations,Course Coordinator&Lecturer:Daniel MatasTutors:Pat HealionSusan Jones,LOBO Week 1,3,COURSE AIMS,To understand,as non-lawyers:1.Identify the main legal forms of business organisations and explain their strengt
2、hs and weaknesses2.Understand the legal structure of a company3.Explain the legal rights and duties of parties to the corporation(governance),LOBO Week 1,4,Course aimscontinued,4.Identify potential legal pitfalls for parties dealing with and acting for corporations5.Identify and resolve basic legal
3、issues encountered in dealing with corporations in a professional manner6.Understand the basics of corporate finance and failure,LOBO Week 1,5,CLASS EXPECTATIONSBased on mutual respect,No talkingwhisper or write a note if you need toNo mobile phones,pagers etc.Drinks ok,no foodPlease be on time to l
4、ectures,LOBO Week 1,6,ASSESSMENT,FOUR ASSESSMENTSIn class quiz 5%Feb 27Mid-term examination 35%April 2Memo 10%Due April 9Final examination 50%In final exam period,LOBO Week 1,7,TEXTBOOK,You will not survive withoutHanrahan,Ramsay&Stapledon:Commercial Applications of Company Law(9th ed.Preferred),LOB
5、O Week 1,8,BLACKBOARD WEB SITE,Course Website is at:http:/blackboard.newcastle.edu.au/,LOBO Week 1,9,LECTURES,Wednesdays 5:00 pm-7:00 pmSlide summaries will be posted to the WebLectures and slides are NOT the total course:you must attend tutorials and read the textbook,LOBO Week 1,10,TUTORIALS:ENROL
6、MENT,Enroll on WebRemember your tute time,place and tutorStart in Week 2Case study&problem questions begin on page 539 of the prescribed textTutorial timetable on blackboard,LOBO Week 1,11,COURSE OUTLINE,LOBO Week 1,12,Topic One,TYPES OF BUSINESS STRUCTURES,LOBO Week 1,13,INTRODUCTION,General Classi
7、fications:Sole tradersPartnerships Co-venturing through:unincorporated associationsincorporated associationsCommercial/business v non-commercial,LOBO Week 1,14,CHOICE FACTORS,Risks of business to proprietorsCosts:set-up,maintenanceRegulationLikelihood of growth:need for flexibility in proprietors or
8、 for financeControl and privacyTax:on creation,ongoing,&on sale,LOBO Week 1,15,SOLE TRADER,No formal registration or reporting-little costStatutory obligations with respect to Workers Compensation,Government licencing,workplace safety&employment protection.Unlimited liability for debts and tortsTrad
9、er remains personally liable for the debts&other liabilities without limitationFor example,trader remains responsible for the act&omissions of employees acting within the scope of their authority,LOBO Week 1,16,SOLE TRADER,Entrepreneur has complete controlLimited funding for expansionComplete confid
10、entialityEverything earned is income of proprietor,LOBO Week 1,17,COVENTURING,Unincorporated Organisations:PartnershipsAssociationsJoint venturesMain features:Not“entities”separate from their ownersExist by agreement-no need for external registration or approval,LOBO Week 1,18,FEATURES OF PARTNERSHI
11、PS,Cheap to set up and maintainEverything earned is income of proprietorsPartners have unlimited liability for debts and tortsPartners jointly and severally liablePartners have direct controlChanges are cumbersome,limited funding for expansion,LOBO Week 1,19,JOINT VENTURES,Common interest activities
12、 set up by contract for individual profitA once-off venture Precise legal status not clear Apt to describe any sort of co-venturing:UDC v Brian Contractually based,LOBO Week 1,20,JOINT VENTURES,“A partnership with the element of commonality missing”It is very easy to establish a partnership at law,e
13、ven though you just wanted a“JV”Partnership where instead of doing something for mutual profit,you are doing something mutually for individual profit.,LOBO Week 1,21,DIFFERENCES BETWEEN JOINT VENTURES&P/SHIPS,PartnershipContinuing businessJoint&Several liabilityShare profits of the PartnershipCant e
14、asily assign Partnership interestFiduciary obligations,Joint VentureOne off enterpriseSeveral liabilityReceive share of profits separatelyCan dispose of interest in the Joint VentureNo fiduciary obligations,LOBO Week 1,22,UNINCORPORATED ASSOCIATIONS,Generally limited to non-profit organisationsClubs
15、,charitiesUsually have a“Constitution”Relationship is one where they are not carrying on a business Membership:free to come and goImprecise legal statusLiability of Committee for most debts/obligations,LOBO Week 1,23,UNINCORPORATED ASSOCIATIONS,Not recognised as a separate legal entityTherefore,asso
16、ciation cannot:Own property;Enter contracts;orSue or be sued in its own name,LOBO Week 1,24,INCORPORATED ASSOCIATIONS,General term is“corporation”Includes:Company-Corporations ActStatutory corporations(e.g.Uni of Newcastle)Strata title corporationsIncorporated clubs/bodies-Associations Incorporation
17、 ActFinance companies,co-operatives,building societies etc-separate Acts,LOBO Week 1,25,INCORPORATED(non profit)ASSOCIATIONS,Incorporation under the Associations Incorporation Act(1984)NSWLimited liability for membersAct permits 5 or more persons to incorporate provided it is not carried on for for
18、the object of trading or securing pecuniary gain for its members.Must appoint a public officer who works with the Dept Fair TradingMust notify Dept if rules or object change,LOBO Week 1,26,INCORPORATED(non profit)ASSOCIATIONS,General meetings convened annually with income and expenditure for last fi
19、nancial year&assets&liabilities tabledYearly accounting statement lodged with Dept within 1 month of GMAssociation must maintain public liability insurance with insurer for$2millionMembers not liable to contribute to discharge of the associations liabilities unless:,LOBO Week 1,27,INCORPORATED(non p
20、rofit)ASSOCIATIONS,The liability insurance is not maintained orThe associations incurs liability fraudulentlyOn winding up,surplus property not distributed amongst members but rather vested in other non profit associations which have substantially similar goals.Can make a profit as a consequence of
21、its activity but profit must be used for the purposes of the association&may not be paid to members,LOBO Week 1,28,INCORPORATED ASSOCIATIONS,The most common type is the Company Main features:Artificial entities Legally separate from their ownersCreated by registration,LOBO Week 1,29,STATISTICS,There
22、 are more than 1.5 million Australian CompaniesOf which approximately 2000 are listed on the ASX(0.15%)But in financial year ending 30 June 2007,these large listed Companies had a market capitalisation of$1.63 trillionLarge Companies account for approximately 60%65%of total Company income Approx 90%
23、of all business undertaken in Australia is through the Company format,LOBO Week 1,30,THE COMPANY,Higher establishment and maintenance costsLimited liability of owners for company debts and if the business goes bad“members”=“shareholders”in a company limited by sharesOwners do not necessarily get pro
24、fits-the entity owns them,LOBO Week 1,31,THE COMPANY(contd),A two-edged sword for managing the future:owner control potentially limitedseparation of management from ownershipmust make some information publicpublic and large private companies particularlygreater opportunities for raising capitalflexi
25、ble and adaptable,LOBO Week 1,32,SHAREHOLDERS(S/H),(Income generating ASSETS),DIRECTORS,Elect,Dividends,Capital,COMPANY,THE COMPANY,Contracts:SuppliersCustomers,LOBO Week 1,33,PRELIMINARY ASSESSMENT,Companies-greater financial security and flexibility,but less control and more expensePartnerships-ch
26、eaper to set up and offer greater control but less financial security and flexibility,LOBO Week 1,34,FACTORS AFFECTING THE DECISION TO INCORPORATE,Limited Liability Incorporation insulates members from claims against the CompanyPerpetual Succession Company is vested with legal capacity&powers of an
27、individual but remains unaffected by a participants death or bankruptcy.Financing Power to create charges over assets or make a public issue of its shares,LOBO Week 1,35,FACTORS AFFECTING THE DECISION TO INCORPORATE,Cost,formality&continuing obligations must disclose information for benefit of membe
28、rs,creditors&the communityIncludes financial position,membership,directors etcPenalties apply for cases of non-disclosureMuch legal complexity Burden of formality is a major cost of incorporation,LOBO Week 1,36,FACTORS AFFECTING THE DECISION TO INCORPORATE,Taxation Control separation of ownership fr
29、om control in many companiesGrowth far greater capacity to grow with a company as opposed to a partnership.,LOBO Week 1,37,Topic Two,ESSENTIAL FEATURES OF COMPANIES AND PARTNERSHIPS,LOBO Week 1,38,ESSENTIAL FEATURES,Companies:separate entity distinct from members“separate legal personality”Partnersh
30、ips:multiple personality indistinct from members,LOBO Week 1,39,CONSEQUENCES OF SEPARATE LEGAL PERSONALITY,Company owns its own debts and assetsMembers have no liability for companys debts or wrongs=“limited liability”(s 516)Members have no beneficial interest in the companys assetsPerpetual success
31、ion,LOBO Week 1,40,OTHER FEATURES OF COMPANIES,Members are not fiduciariesSeparation of ownership from controlTransferability of members interests,LOBO Week 1,41,PARTNERSHIP-DEFINITION,Sec 1:an arrangement between a number of people(ie 2+)is a partnership if:they are carrying on a businessin commonw
32、ith a view to profitAlso the case law definition-Smith v Anderson,LOBO Week 1,42,“CARRYING ON A BUSINESS”,Ballantyne v Raphael(1889)case where court held a syndicate formed for the purposes of purchasing a block of land for subdivision was not a partnershipThe term carrying on contains an element of
33、 continuity or repetition&the syndicate was deemed to be formed for the purposes of an isolated transaction More modern cases suggest one off ventures or activities can be partnerships where sufficiently complex.,LOBO Week 1,43,“IN COMMON”,Mutuality of interests,goals,rights and obligations.S:2 of t
34、he Partnership Act(1892)NSW lists matters to which regard must be had.The legal status which the partners have themselves sought to assignThe sharing of net profits is prima facie,EV of partnershipThe sharing of losses is also said to be a characteristic of partnership,LOBO Week 1,44,“IN COMMON”,The
35、 role in management or decision making taken by the putative partnerThe existence of mutual trust&respectContribution of capitalGuidelines onlyNo guideline is necessarily determinative,LOBO Week 1,45,“WITH A VIEW TO PROFIT”,Cases give examples and some rulesA“business”is distinguishable from:mere in
36、vestmenthobbies,past-timesactivities as an employeeThe intention of profit is an essential element of a partnership,LOBO Week 1,46,WHY IDENTIFY WHETHER A PARTNERSHIP IS PRESENT,Because it will affect:How it contractsHow it is managedLiabilityDebtsRightsObligations(fiduciary),LOBO Week 1,47,Other Pri
37、nciple Characteristics of A Partnership,Not endowed with a distinct entity statusTherefore,no capacity to acquire rights or obligations independent of the individual partnersA partnership cannot own propertyAll partners bear unlimited liability for debts&obligations incurred by partnership unless pa
38、rtners register a limited partnershipEvery partner is an agent of the partnership,LOBO Week 1,48,OTHER DISTINCTIONS,CompaniesCreated by registrationArtificial person acting through human agentsCommercial and non-commercial usesSue in own nameContract with members,PartnershipsCreated by agreementPart
39、ners are legal agents of the partnershipMust conduct a“business”Sue in name of partnersCannot contract with partners,LOBO Week 1,49,PURPOSE&ROLE OF COMPANIES AND CORPORATIONS LAW,Lecture 2,LOBO Week 1,50,The historical development of companies,Corporations aggregate as separate legal personsJoint st
40、ock as a means of financial participationIncorporation as of right from mid 19th centuryLimited liability from mid 19th century,LOBO Week 1,51,Companies,The dominant form of business organisationOver 1.5 million companies in AustraliaCreated through a process of registration under statute-an“artific
41、ial legal person”Have the special legal attribute of separate personality,LOBO Week 1,52,What is the purpose of companies?,Traditionally,a means by which a large group of people with capital and management resources could come together to conduct an enterprise on an ongoing basisNow also widely used
42、 for small business and by individuals,LOBO Week 1,53,Purpose cont,Market needs Deficiencies of other options-p/shipAllow larger capital raisingsAllow risk to be shared,minimised and spread to promote economic expansion(limited liability)Allow membership to vary easilyPerpetual successionAllow passi
43、ve investment Put control in the hands of most skilled,LOBO Week 1,54,Small and large companies,Most companies are small businessesAbout 2000 companies are listed.(Listed companies are companies in which you can buy or sell shares through the ASX.),LOBO Week 1,55,The architecture of companies,Capita
44、l structureequity capital(shares)debt capitalManagement structureboard of directors and other officersmembers(shareholders),LOBO Week 1,56,Capital structure,Companies have one or more shareholders(also called members)who have invested money by subscribing for shares(or acquiring shares from an exist
45、ing shareholder)Companies often also have creditorsdebt holders,LOBO Week 1,57,Management structure,Board of directors manage the business(in large companies,delegate to CEO and other executives)Directors are not necessarily membersMembers have a right to vote on some issues,but usually not on gener
46、al management decisions,LOBO Week 1,58,SHAREHOLDERS(S/H),(Income generating ASSETS),DIRECTORS,Elect,Dividends,Capital,COMPANY,THE COMPANY,Contracts:SuppliersCustomers,Employees,Officers(eg.CEO,MD etc),LOBO Week 1,59,Important developments for small business,Distinction between public and proprietary
47、 companiesSalomons caseSole director/shareholder companies,LOBO Week 1,60,Company law,Scope and operation of company lawSources of company lawRegulation of companies,LOBO Week 1,61,ROLE OF THE LAW,Provides:A way for companies to be createdA structure within which companies can operateA set of rules
48、which regulate how that structure is used to prevent abuse Enabler,facilitator,regulator,protector,LOBO Week 1,62,What is company law?,General term used to describe the legal rules governing:formation and termination of companiescharacteristics of companiesrelationships between participants in compa
49、nies(such as members and officers)aspects of companies dealings with outsiders,LOBO Week 1,63,Purpose of company law,Has both facilitative and regulatory functionsFacilitative in that it provides the legal framework for people to deal with each otherRegulatory in that it controls behaviour to achiev
50、e social ends,LOBO Week 1,64,Purpose(cont),Aims/purposes include:investor protectioncommercial stability and consumer confidencebalancing competing interestscertainty-standard form rulesAsk yourself throughout the subject-does the law achieve these aims?,LOBO Week 1,65,Operation of company law,Opera
