Law Of Business Organisation Assignment

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Introduction:

The Australian Securities & Investments Commission (ASIC) is an independent Australian government body that acts in Business Organisation Law as Australia’s corporate regulator. ASIC’s role is to enforce and regulate company and financial services laws to protect Australian consumers, investors and creditors. ASIC was established on 1 July 1998 following recommendations from the Wallis Inquiry. ASIC’s authority and scope is determined pursuant to the Australian Law Securities and Investments Commission Act, 2001. Company Directors provide for the legal regulation of corporate governance with the help of the ASIC rules in the contemporary business marketing environment.

Business Organisation Law

In the Law Case study, the “In what way do the duties and obligations imposed on Company Directors provide for the legal regulation of corporate governance in the twenty-first century?” discussed as per the relevance of the materials.

Legislative framework:

ASIC provides the legal frame work in terms of the allocation of various factors of the sec 180,181,182,183,184,185 of the corporation act and also sec 191 and 588 g of the corporation act.

ASIC administers the following legislation (or relevant parts of it), as well as relevant regulations made under it:

Australian Securities and Investments Commission Act 2001, Corporations Act 2001, Business Names Registration Act 2011, Names Registration (Transitional and Consequential Provisions) Act 2011, Insurance Contracts Act 1984, Superannuation (Resolution of Complaints) Act 1993, Superannuation Industry (Supervision) Act 1993, Retirement Savings Accounts Act 1997, Life Insurance Act 1995, National Consumer Credit Protection Act 2009, and Medical Indemnity (Prudential Supervision and Product Standards) Act 2003[1].

Other regulators also administer some parts of these Acts. For example, parts of the last four Acts dealing with prudential regulation are administered by the Australian Prudential Regulation Authority (APRA).

Company Directors must comply with the legal regulation of corporate governance so that the business practice can be effective.

Corporation act 2001:

The Corporations Act 2001 (Cth) (the Corporations Act, or informally as the ‘Corps’ Act) is an act of the Commonwealth of Australia that sets out the laws dealing with business entities in Australia at federal and interstate level. It focuses primarily on companies, although it also covers some laws relating to other entities such as partnerships and managed investment schemes.

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The Corporate Law Economic Reform Program Act 2004 reforms simplified the statute. At several thousand pages long, the statute dwarfs those of other nations such as Sweden, whose corporations statute, comparatively, is less than 200 pages long. The Corporations Act is the principal legislation regulating companies in Australia. It regulates matters such as the formation and operation of companies (in conjunction with a constitution that may be adopted by a company), duties of officers, takeovers and fundraising.

What does the law expect from the employee personally?

As a director or a general employee must:

  • be honest and careful in the operational dealings at all times
  • know what the respective company is doing
  • take extra care if the company is operating a business because the employee may be handling other people’s money
  • make sure that company can pay its debts on time
  • see that company keeps proper financial records
  • act in the company’s best interests, even if this may not be in employees own interests, and even though the employee may have set up the company just for personal or taxation reasons, and
  • use any information the employee get through the position of the employee properly and in the best interests of the company. Using that information to gain, directly or indirectly, an advantage for respective party or for any other person, or to harm the company may be a crime or may expose the employee to other claims. This information need not be confidential; if the employee uses it the wrong way and dishonestly, it may still be a crime.

If the employee have personal interests that might conflict with the duty as a director, the employee must generally disclose these at a directors’ meeting. This rule does not apply if the employees are the only director of a proprietary company[3].

Constitutional basis: The Commonwealth corporations law was the subject of a successful High Court of Australia challenge in New South Wales v Commonwealth (1990) 169 CLR 482 (‘The Corporations Act Case’). In that case the Commonwealth was found to have insufficient power to legislate in relation to the formation of companies. Section 51(xx) of the Australian Constitution was found to provide sufficient power for legislation applicable only to foreign corporations and corporations already formed within the Commonwealth. This decision led to the creation of a co-operative scheme, involving a referral of power from the Australian States. All Australian States have adopted the Corporations Act 2001 (Cth).

Under the Corporations Agreement between the States and the Commonwealth, all changes to the Act must be referred to the Ministerial Council for Corporations (MINCO) for approval. The cooperative scheme has come under pressure in recent times as the Commonwealth Government has sought to rely on the corporations’ power to legislate for its Industrial Relations reform agenda. This has led to some Labor States threatening to withdraw from the Corporations Agreement in Business Organisation Law.

1)  The operation of this Business Organisation Law Act in the referring States is based on:

(a) The legislative powers that the Commonwealth Parliament has under section 51 of the Constitution (other than paragraph 51(xxxvii)); and

(b)  The legislative powers that the Commonwealth Parliament has in respect of matters to which this Act relates because those matters are referred to it by the Parliaments of the referring States under paragraph 51(xxxvii) of the Constitution.

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(2)  The operation of this Act in the Northern Territory and the Capital Territory is based on:

(a) The legislative powers that the Commonwealth Parliament has under section 122 of the Constitution to make laws for the government of those Territories; and

(b) The legislative powers that the Commonwealth Parliament has under section 51 of the Constitution[4].

Despite subsection 22(3) of the Acts Interpretation Act 1901, this Act as applying in those territories is a law of the Commonwealth.

(3)  The operation of this Act outside Australia is based on:

(a)  The legislative power the Commonwealth Parliament has under paragraph 51(xxix) of the Constitution; and

(b)  The other legislative powers that the Commonwealth Parliament has under section 51 of the Constitution; and

(c)  The legislative powers that the Commonwealth Parliament has under section 122 of the Constitution to make laws for the government of those Territories.

(4)  The operation of this Act in a State that is not a referring State is based on:

(a)  The legislative powers that the Commonwealth Parliament has under section 51 (other than paragraph 51(xxxvii)) and section 122 of the Constitution; and

(b)  The legislative powers that the Commonwealth Parliament has in respect of matters to which this Act relates because those matters are referred to it by the Parliaments of the referring States under paragraph 51(xxxvii) of the Constitution.

General territorial application of Act:

Geographical coverage of “this jurisdiction”: (1)  Section 9 defines this jurisdiction as the area that provides the essential corporate control [5]

Relevant cases as examples:

The fact remains that company’s Business Organisation Law is inescapably complex. Indeed, its complexity is treacherous. When I studied the subject at the Sydney University Law School in 1958 under Professor Ross Parsons, the Companies Act 1936 (NSW), still modelled on the nineteenth-century statutes of England, covered but 248 pages in the consolidated statutes. It had 380 sections and 13 schedules. Now the popular compilation of Australian corporations and securities legislation covers nearly 2,400 pages, including index. The Corporations Act 2001 (Cth) comprises 2,550 pages. Including the sections added since the original enactment, there are nearly 1,500 sections. And this says nothing of the substantial schedules to the Act, the detailed provisions of the Corporations Regulations and the companion statutes that must be known and applied, especially the Australian Securities and Investments Commission Act 2001 (Cth) and the Regulations made under it.

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In 1958, when Murray Gleeson and a learner shared their labours in company law note taking, it was conceivable that a law student would have a good idea of the detail of all applicable companies’ legislation. However, it is now next to impossible to expect our successors (still less non-lawyer officers and ordinary citizens) to keep so much detail in their heads. Company law has become a province of the expert. Experts there must be, because the law is constantly being changed. The changes arise from demonstrated cases of statutory omission and from numerous instances of abuse and misuse of company power to which the Business Organisation Law makers seek to respond.

Corporate governance what does it mean:

The system of rules, practices and processes by which a company is directed and controlled. Corporate governance essentially involves balancing the interests of the many stakeholders in a company – these include its shareholders, management, customers, suppliers, financiers, government and the community. Since corporate governance also provides the framework for attaining a company’s objectives, it encompasses practically every sphere of management, from action plans and internal controls to performance measurement and corporate disclosure.

he business morality or ethic must permeate the entire operation from top to bottom and embrace all stakeholders best corporate governance practice is an integral part of good management practice also permeating the entire operation, and not an esoteric specialist addressed by lawyers, auditors and sociologists [7]. The principles of this approach are therefore framed in relation to the conventional way of looking at how a business should be properly run. Our Five Golden Rules of best corporate governance practice are:

Ethics: a clear ethical basis to the business

Align Business Goals: appropriate goals arrived at through the creation of a suitable stakeholder decision-making model

Strategic management: an effective strategy process which incorporates stakeholder value

Organisation: an organisation suitably structured to effect good corporate governance

Reporting: reporting systems structured to provide transparency and accountability

How does ASIC plays a role in this CGR:

First, ASIC monitors and enforces compliance with the various provisions of the Corporations Act that are designed to influence and control the exercise of power by directors and managers. These provisions include, for example, those dealing with:

duties of directors; transactions with related parties; and meetings of company shareholders.

Recently this aspect of ASIC’s responsibility has kept us rather busy. We embarked two years ago on a deliberate strategy of being more visible in our enforcement activity. We believe that without visible enforcement, regulation can never be fully effective. In fact, over regulation and under enforcement typifies many regulatory regimes across the world and requires more attention. Governments need to support the enforcement mandate of their securities and corporate regulators, providing them with effective.

Enforcement:

ASIC is responsible for enforcing the many corporate governance provisions in the Corporations Act. We monitor compliance with these provisions of the Act and, where appropriate, we initiate enforcement proceedings for breaches of these provisions. Depending on the provision, a breach may give rise to criminal or civil sanctions. ASIC cannot actually bring criminal proceedings itself. It conducts the investigation into potential criminal breaches, prepares a brief and then refers the matter to the Commonwealth Director of Public Prosecution. This aspect of ASIC’s corporate governance role has kept it very busy in recent times.

Law reform:

ASIC also advocates, comments on and contributes to proposals to amend the corporate governance provisions of the Act. This is an important, often less visible, contribution to corporate governance in Australia. Once again, this aspect of our role is closely related to our enforcement role. We consider that our monitoring of Australian corporate practice and other enforcement activities put us in a position to make a valuable contribution to law reform. We know how the market operates and what impact suggested reforms may have. We know which parts of Australian law are not working and what changes need to be made to achieve the desired outcomes.

Conclusion:

From the above study of Business Organisation Law different types of effect of the ASIC is outlined in terms of the corporate governance and the management is outlined.

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