Overview of Corporations Law in Australia

Corporations Act 2001 (Cth)

Federal statute governing corporations in Australia.

Separate Legal Entity

Corporation distinct from its owners and managers.

Corporate Personality

Legal recognition of a corporation as a person.

Salomon v A Salomon & Co Ltd

Case establishing corporate personality principle.

Company Lifespan

Continues until deregistered or liquidated.

Proprietary Company

Max 50 members; cannot raise public funds.

Public Company

Unlimited members; can raise funds publicly.

Small Proprietary Company

Revenue < $25 million; assets < $12.5 million.

Large Proprietary Company

Does not meet small company criteria.

Reporting Requirements

Small companies generally exempt from audits.

One Director/One Shareholder Company

Can operate with a single member.

Privileges of Proprietary Companies

Simplified processes; fewer meeting obligations.

Companies Limited by Shares

Liability limited to unpaid share amounts.

ASIC

Australian Securities and Investments Commission.

Deregistration

Process of formally removing a company from register.

Inactivity Deregistration

ASIC can deregister companies for inactivity.

Liquidation

Process of winding up a company's affairs.

Contractual Capacity

Ability to enter contracts in the corporation's name.

Shareholder Liability

Limited to unpaid amounts on shares held.

Company Ownership

Corporation owns property, not its members.

Corporate Actions

Corporation can sue or be sued independently.

Director Appointment Process

Simpler for proprietary companies with fewer members.

Companies Limited by Guarantee

Members guarantee payment if company is wound up.

Unlimited Companies

Shareholders liable for unlimited company debts.

No-Liability Companies

Shareholders not liable for unpaid share amounts.

Directors' Duties

Governed by common and statutory law.

Fiduciary Duties

Directors owe loyalty and care to the company.

Civil Penalties

Financial penalties for breaches of duty.

Criminal Penalties

Legal consequences for serious breaches.

Liability for Damages

Directors can be liable for company losses.

Royal Commission Insights

Directors must prioritize long-term company advantages.

Good Faith Duty (s 181)

Act in best interests of the company.

Care and Diligence Duty (s 180)

Act as a reasonable person would in similar circumstances.

Use of Position Duty (s 182)

Avoid using position for personal gain.

Use of Information Duty (s 183)

Do not misuse company information for harm.

Dishonesty Breaches (s 184)

Can lead to criminal liability for directors.

De Facto Directors

Act like directors without formal appointment.

Shadow Directors

Influential individuals whose directions are followed.

Key Case: ASIC v King

Defined 'officer' based on influence, not title.

Duty of Care Standard

Objective standard based on reasonable person.

ASIC v Hellicar (2012)

Directors breached duty by misleading ASX announcement.

Forrest v ASIC (2012)

CEO did not breach duty regarding agreements.

Common Law Insight

Directors must understand business and monitor operations.

Section 180(1)

Mandates directors to exercise care and diligence.

Centro Case

Directors must understand financial statements personally.

Liability in Cassimatis

Directors accountable for corporate misconduct indirectly.

Cruickshank's Breach

Failure to disclose material information to market.

ASIC v Blumenthal

Penalized for lack of oversight on contracts.

ASIC v Wilson (No 3)

Directors may breach duty without actual misconduct.

Pecuniary Penalties

Financial penalties imposed on directors for breaches.

Business Judgment Rule

Defends directors against care and diligence breaches.

Good Faith Requirement

Directors must act honestly and for proper purposes.

Material Personal Interest

Directors should have no personal stake in decisions.

Informed Decision-Making

Directors must adequately inform themselves before acting.

Rational Belief Standard

Belief must be rational for business decisions.

Definition of Business Judgment

Decisions regarding company's business operations.

ASX Listing Rule 3.1

Requires timely disclosure of material information.

Regulatory Risk Exposure

Directors can breach duty by creating foreseeable risks.

Directors' Accountability

Increasing personal accountability for financial integrity.

Ignorance Defense

Ignorance is not a valid defense under s 180.

Diligence Standard

High standard of diligence required from directors.

Financial Integrity

Ensuring accuracy and compliance in financial reporting.

Common Law Duties

Includes equitable duties alongside statutory obligations.

One.Tel Collapse

Context for ASIC v Rich case regarding director liability.

Duty of Good Faith

Directors must act in best interests of corporation.

Improper Purpose

Using powers for personal gain violates duty of good faith.

ASIC v Adler (2002)

Adler misused funds for personal benefit, breaching s 181.

Duty Regarding Use of Position

Prohibits improper advantage from position held.

ASIC v Blumenthal (2024)

Blumenthal breached s 181 due to conflict of interest.

Duty Regarding Use of Information

Prohibits misuse of corporate information for personal gain.

ASIC v Vizard (2005)

Vizard misused confidential info, fined $390,000.

Criminal Offences

Breaches of ss 181-183 become criminal if dishonest.

Real-World Pressures

Courts consider external pressures on directors' decisions.

Key Requirements of s 181

Act in good faith, for proper corporate purpose.

Conflict of Interest

Directors must avoid personal interests conflicting with corporation.

Secret Profits

Directors cannot profit secretly from corporate opportunities.

Competing Demands

Directors face multiple attention demands affecting decisions.

Directors' Liability

Judged by knowledge at the time of decision.

Minimal Risk

Low risk can justify significant potential benefits.

Honest Decisions

Directors protected for making honest, informed choices.

Corporate Role

Information obtained through corporate position must be safeguarded.

Inflating Share Price

Misusing position to manipulate stock prices is prohibited.

Disqualification from Directorship

Legal consequence for breaches of corporate duties.

Fines for Breaches

Financial penalties imposed for violations of corporate law.

s 184(1)

Criminal offence for breaching good faith duty.

s 184(2)

Criminal offence for misuse of position.

s 184(3)

Criminal offence for misuse of information.

s 180

No criminal offence for care and diligence breaches.

Commonwealth DPP

Prosecutes breaches of directors' duties.

Civil Penalty Provisions

Sections 180-183 impose civil penalties.

Civil pecuniary penalties

Financial penalties for breaches of directors' duties.

Disqualification from managing corporations

Possible consequence of civil penalty breaches.

Maximum civil penalties for individuals

Greater of 5,000 units or 3× benefit.

Maximum civil penalties for corporations

Greater of 50,000 units or 10% turnover.

Compensation orders

Courts can order repayment for losses.

s 1317H

Legal provision for compensation orders.

s 1317S

Courts may excuse honest directors.

Criminal offences under s 184

Applies to dishonest or reckless breaches.

Penalties for individuals

Up to 15 years imprisonment or fines.

Penalties for corporations

Fines up to 45,000 penalty units.