Business Law 2026: Business Organisation and External Administration

Flashcards covering business structures, legal definitions of directors and officers, statutory duties, shareholder remedies, and external administration processes based on the BUSI 1001 lecture transcript.

Sole Trader

An individual natural person who owns a business enterprise as principal, where the business is not a separate entity and the owner has unlimited liability.

Partnership

The relation that subsists between persons carrying on a business in common with a view to a profit, as defined under the Partnership Act $1891$ (SA), s $1$.

Joint Venture

A contractual arrangement where separate business entities conduct a combined project, sharing resulting products as independent operators rather than as a business in common.

Trust

An obligation imposed on a person or entity (the trustee) to hold property for the benefit of beneficiaries, potentially governed by the Trustee Act $1936$ (SA).

Unincorporated Association

Typically clubs or societies with no legal personality and no specific legislation, leading to uncertainty regarding liability for debts.

Incorporated Association

A social or cultural organization incorporated under state legislation, such as the Associations Incorporation Act $1985$ (SA), which provides a separate legal entity and limited liability.

Separate Legal Entity

The principle established in Salomon v Salomon that a company is a separate person from its members and is not an agent or trustee of its controller.

Proprietary Company

A company with between $1$ and $50$ non-employee shareholders that cannot seek public funding, except for crowd-sourced funding, and must have at least $1$ resident director.

Public Company

A company that can seek public funds with disclosure, can be listed or unlisted, and must have at least $3$ directors, with at least $2$ being Australian residents.

Director (s $9$)

A person appointed to the position of a director or alternate director, including de facto directors and shadow directors.

Shadow Director

A person or body corporate who is not validly appointed but whose instructions or wishes the directors of the company are accustomed to follow.

De Facto Director

A person who is not validly appointed as a director but acts in the position of a director.

Officer (s $9$)

A director or secretary, or a person who participates in decisions with a substantial effect on the business or has the capacity to significantly affect the corporation's financial standing.

Company Secretary

An officer responsible for administrative affairs and compliance, required for all public companies but optional for proprietary companies.

Director ID

A lifelong registration required for every director, linked to myGov, used to prevent fraudulent director identities.

Fiduciary Relationship

The nature of the relationship between a director and a company that imposes a high standard of loyalty, including general law duties to act in good faith and avoid conflicts.

Section $180(1)$

The statutory duty requiring a director or officer to exercise care and diligence that a reasonable person would exercise in the corporation's circumstances.

Section $181$

The statutory duty for directors and officers to exercise powers in good faith in the best interests of the corporation and for a proper purpose.

Business Judgment Rule (s $180(2)$)

A defense against breach of duty of care where a director acts in good faith, without material personal interest, while informed, and with a rational belief it is in the company's best interests.

Insolvent Trading (s $588G$)

A contravention where a director fails to prevent a company from incurring debt while the company is insolvent or when there are reasonable grounds for suspecting insolvency.

Insolvency

The state defined by a company's inability to pay its debts as and when they become due and payable.

Statutory Derivative Action (s $236$)

A right allowing a member, former member, or officer to bring or intervene in legal proceedings on behalf of a company with leave from the Court.

Oppression Remedy (s $232$)

Relief granted by the Court when company conduct is contrary to the interests of members as a whole or is oppressive, unfairly prejudicial, or unfairly discriminatory.

Winding Up

Liquidation of a company involving orderly distribution of assets, cessation of trading for insolvent companies, and investigation of company affairs.

Statutory Demand (s $459E$)

A formal demand by a creditor for a debt over a specified limit which, if not complied with or set aside within $21$ days, creates a presumption of insolvency.

Receivership

An external administration where a secured creditor appoints a receiver (controller) to realize property to satisfy a debt.

Voluntary Administration (Part $5.3A$)

A process aimed at maximizing the chances of an insolvent company continuing or resulting in a better return for creditors than immediate liquidation.

Small Business Restructuring (Part $5.3B$)

A simplified insolvency process for companies with total liabilities not exceeding $1,000,000$, allowing the company to remain in control while developing a debt restructuring plan.

Section $420A$

The duty of a controller exercising a power of sale to take all reasonable care to sell property for its market value or the best price reasonably obtainable.

Auditor

An independent professional appointed to assess a company's financial report and provide an opinion on its compliance with auditing standards.