Law of Business Organisation Ethics and Corporate

Question: Describe about the Law of Business Organisation for Ethics and Corporate. Answer: Part 1 Registration of a Company in Australia The name chosen for a Proprietary Limited Company can also be its Australian Company Number (ACN). This is the unique number given automatically by ASIC when the company is registered. It is mandatory for a proprietary company to include the word 'Proprietary' or its abbreviation 'Pty' in the name. If the members liability is limited then the company name should end as 'Proprietary Limited', explains Barkoczy, (2013). The internal management of a company can be governed through: theCorporations Act, 2001 by applying the replaceable rules AND a Constitution; OR the combination of both under section 135 and 136 of the Act. Constitution The law does not require a proprietary company to lodge its Constitution while applying for registration although it must keep a records and make it available when required, as detailed by Barkoczy, (2013). Replaceable Rules Under section 135(1), Replaceable Rules are not applicable to a proprietary company. Issue of Shares Companies usually issue differenttypesof shares such as ordinary or preference shares. They also issue differentclassesof shares, such as 'A' and 'B' Class of Ordinary Shares, explains Barkoczy, (2013). Different classes have different rights such as: for distinguishing the voting rights of the holders; for prioritising dividend distribution; for issuing shares for raising funds which have debt features; by issuing shares which can be redeemed in the future by those investors who only invest for a specified term. Ordinary Shares These are the most common type shares and are generally issued under different classes for granting different voting rights to the holders. These type of shares are most suitable investors who wish to exert control through voting rights and participate in earnings through dividends and growth through capital of the company. Generally, the super voting multiple ratio is about 10 votes for the higher class of share, although the exact rights may vary from company to company. Usually, the Class A shares have a superior voting right compared to Class B shares, but most companies do not specify a standard nomenclature, asserts Coughlan, (2003). Preference Shares These are generally superior, in value earning, to the ordinary shares, because they are given first preference or right when dividend is declared although the holders of these shares do not have any voting rights. The objectives of holders are to invest for income purpose and do not wish to have voting rights or seek involvement in companys management, asserts Fernando, (2010). PART 2: Section 198A 198A (1): Management of Business The directors of a company are responsible for managing the business of the company. Section 9 of the Act defines director as a person who is appointed through a resolution by the board. Hence, directors are required to govern on behalf of shareholders of the company. Section 198A (1) of the Act states that The business of a company is to be managed by or under the direction of the directors. In this respect, the directors are bound by their legal duties and responsibilities imposed by the Act. These legal duties and responsibilities are applicable to different type of organisational structures, including the public as well as the proprietary companies, as per Keown et al, (2012). 198A (2):Exercise of Powers Proprietary companies should have at least one director and he must ordinarily reside in Australia (s 201A). The director can exercise all powers conceded by the company management except the powers which are restricted by the Act or company's constitution, such as issuing shares and debentures and borrowing money, says Keown et al, (2012). PART 2: Section 191 This section mainly focusses on the term material personal interest defining it as something which can influence a director's vote and does not create a conflict of duty, unless the director personally stands to benefit from the interest, directly or indirectly. This concept of the material personal interest has gained importance in the context of conflicts of interest as defined under different statutes of the Act, and these have, until now, been providing a firm guidance as to its literal meaning, assert Nethercott, Devos Richardson, (2010). Under section 191 of the Act, it is required that complete disclosure of the material personal interests are made by the director to the board at the time of appointment. Section 195 of the Act directs those directors of public companies, to be excluded from meetings who have a material personal interest in any matter which is to come for discussion. However, section 195 is applicable only to those material personal interests which require dis closure under section 191 of the Act, the directors may not be required under section 195 to be excluded from the meeting when the matter is being considered, details Nethercott, Devos Richardson, (2010). PART 2: Section 250R (2) (3) Entitlement to Vote It is for the Board to determine that as per section 250R (2) of the Act, the persons who are eligible for voting at a Meeting shall be only those persons who have registered themselves as Shareholders, explain Reynolds, Williams Savage, (2000). This recent amendments introduced under the Corporations Amendment (Improving Accountability on Director and Executive Remuneration) Act 2011 have placed a greater scrutiny on following the voting process by the Key Management Personnel (KMP) of the company. These recent amendments to section 250R now prohibit persons from casting their vote on resolutions which are concerned to their own remuneration and may cause a conflict of interest, as per Keown et al, (2012). Proxies Section 250R (3) deals with those shareholders who being entitled for attending as well as voting at a Meeting, is also entitled for appointing a proxy for attending and voting on its behalf by using the Proxy Form which accompanies the Notice of Meeting, confirms Keown et al, (2012). As the instructions for filling the Proxy Form are attached with this Notice of Meeting, boards are required to market confidence among the shareholders in general that their company is complying with all the legal obligations and consequently, in relation to the provisions, the Boards can also demonstrate to the shareholders in general that the voting process being practiced at the general meetings are being conducted properly. It is the responsibility of the chairman of the meeting to ensure that only those votes, which are permitted under section 250R (2) have been counted, asserts Barkoczy, (2013). References: Barkoczy, S. 2013. Foundations of Taxation Law, 5th ed. CCH Australia Limited, North Ryde, NSW. Coughlan, L.2003, The Law and You. Pascal Press, Glebe, NSW. Fernando, A.C. 2010, Business Ethics and Corporate Governance. Pearson Education India, New Delhi. Keown, A.J., Martin, J.D., Petty, J.W. and Scott, D.F. 2012, Financial Management: Principles and Applications, 10th ed. Pearson Education India, New Delhi. Nethercott, L., Devos, K. and Richardson, G. 2010. Australian taxation study manual: questions and suggested solutions, 20th ed. CCH Australia Limited, Sydney. Reynolds, W., Williams, A. J. and Savage, W. 2000, Your Own Business: A Practical Guide to Success. (3rd ed.). Cengage Learning Australia, Sydney.