LBE w3 (1)

Registration of Companies-Procedure Often people get lawyers or accountants to get their company registered. Application needs to be made to ASIC with fee and also lodge 'reservation of name' (if applicable)

Company names- Corporations Act requirements: the problem of choosing a name Company can use its ACN as its name s148 and must include Ltd as part of the name (unless unlimited or s150 exemption applies granted if it meets requirements so non-profit, charitable type companies) s148. This is because it's a consumer protection provision- warning that they can only look to company to pay their debts (not to members personally)

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What names will ASIC register? This slide gives rules for company names

Company names-other law: Passing off You may pick a name that ASIC is happy to register but it may be similar to someone else's company name so you may be liable for the tort of passing off (passing off your business and services as though you're someone else) Plaintiff will have to prove misrepresentation by trader in the course of trade to prospective customers, intended to injure plaintiff's business or goodwill and caused actual damage to the plaintiff and so on listed in slide

BM Auto Sales Pty Ltd v Budget Rent a Car System Pty Ltd Didn't have office or business in the NT so someone else thought they would register a business name in the NT with a similar name (budget rent a car). The existing budget rent a car was able to successfully sue the NT one for the tort of passing off (it had a national reputation that the NT people were using, people in the NT would know about budget even though it wasn't operating there)

other law: s18 Australian Consumer Law Choice of name might result in a breach of s18 if it misleads and deceives or has the potential to

Opals Australia Pty Ltd v Opal Austaliana Pty Ltd (1993) Applicant had for many years carried on business under the name 'Opals Australia' was able to restrain respondent form carrying on business under the name 'Opal Australiana'

Pre-registration contracts- problems at common law 'Promoters' Arranging things on behalf of the company before it comes into existence. Company comes into existence when it gets certificate of registration. The issue is who is liable on the contract (company doesn't exist at the time, but people never intended on being personally liable, they were doing things on behalf of the company) the Corporations Act provides some sort of solution.

Keiner v Baxter Contract entered into by promoter before company came into existence. Promoter was held personally liable for the contract. You can't ratify the contract unless principle was in existence at the time of the contract.Black v Smallwood in this case although the contract entered into was a pre-registration contract, the parties did not think it was, they mistakenly believed company was in existence. In this case promoter was not held liable because there was no intention that they would be personally liable. And as far as the other party was concerned, the intention was to deal with the company. Third parties

s131 solution for a pre-registration contract This allows company to ratify contract which has purported to have been made by promoter on behalf on the company before registration. Common law rule would not allow ratification (you can't ratify unless you are existing as a principle when contract has been made) but if company is happy with what the promoter has done and what's to ratify they can. So if company does not ratify or does not become registered, the promoter is still liable under s131 (2) so not all risk is eliminated for promoter. Under s131(3) if company is registered but does not ratify and court thinks its not reasonable against ratifying, it again reduces risk for promoter (e.g. if they have entered a perfectly reasonable contract) but ultimately up to the courts131(4) if company is registered and ratifies but fails to perform the contract, the court can make an order against the promoter.Promoters- People bringing about formation of company are in position where they can abuse the power they have to their own advantage (they can sell property to this newly formed company at a gross over price) Because of this, fiduciary duties (duties of good faith) are imposed on promoters. This is to put company's interest ahead of their own

Internal governance rules Because we have an artificial legal entity we need to have rules to know how it's going to operate. These are called internal governance rules. There are three alternatives that are ok. the corporations act has some specific sections which are option called replaceable rules s141. These are default set of rules which will apply to internal operations of company if they don;t choose to do anything else. Replaceable rules aren't all in the one place. The corporations Act says if you don't want to write your own set of rules you can use ours. It could also have it's constitution (the company's own set of rules) or can do a combination of both using s134

Pre-1998 companies might still have their old constitutions, often reference to memorandum and articles of association

Relying on the replaceable rules Not all are suitable for all types of companies, some companies may wish to do things not provided for e.g. issue partly-paid shares, some things companies don't like 'pre-emption provision s254D' 

Constitution required for certain types of companies NL companies' object must be mining purposes. Rules assume companies are limited by shares. Range of reasons why companies will want to have own constitution or partly written constitution and relying on remaining replaceable rules.Adopting a constitution Can be done when the company is registered or later. Constitution after registration requires a special resolution of members (75%)alteration of the constitution If you want to alter, again need special resolution (75%) Restrictions are imposed by the courts, e.g. you can't oppress minority shareholders see ch9

Legal effect of the internal governance rules s140-effect as contract the internal governance rules take effect as a contract (special type of contract that creates 3 contracts in one, between company and each member Hickman v Kent and Romney Marsh Sheep Breeders Association where constitution said disputes should be referred to arbitration member can't enforce any provision in constitution, only ones that affects their capacity as a member of the company Eley v The positive government security life assurance co appointed Eley as solicitor, was unable to enforce that provision because it did not affect him in his capacity as a member) also creates contract between company and each director and company secretary, the company's constitution can be changed by special resolution (normally you can't just change the contract without both parties consent) Shuttleworth v Cox Brothers & Co (maidenhead Ltd) 1927. The constitution appointed a director for life but then it was changed via special resolution and the director was unable to sue because contract was legitimately changed contract between each member and each other member Rayfield v Hands (1958) requirement that if member wanted to sell shares, they had to tell directors and directors had to purchase them at a fair price and directors said it wasn't enforceable against them but court said yes because it affects their capacity as members. 

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