Company Law Once a Public Company Is Essay

Excerpt from Essay :

Company Law

once a public company is incorporated all duties of the promoter and potential liabilities end, including any regarding a pre-registration contract as per s 131 Corporations Act 2001. Discuss the truth of this statement

It is essential to define the term in discussion and its relation to the subject at hand. Who is this promoter? The promoter is not fixed into a definition within the Corporations Act nor within the confines of common law. However, the court recognizes the promoter as a term used in business. Therefore, the term promoter has a vast meaning that enables it to allow flexibility for persons within the scope of law on promoters. Promoters are the persons actively involved in the process of founding a company (Symon, 2006 p 19). The typical duties of the promoter include the ability to negotiate preliminary agreements and construction of the constitution for the company. They also identify prospective shareholders, directors and raising capital for the company both before and after incorporation. The promoter also pays the registration fee for the company and registers it with ASIC.

Once confirmed as a promoter of a company, the person has obligations to act honestly and with best interests for the company. However, it is not practical for the promoter to join contractual relations with the company. Nonetheless, the promoter has the duty to make complete disclosure of the company. However, there ought to be an independent board of directors to oversee the activities unless the company is a sole proprietorship. According to the Corporations Act 2001, the company can only make a contract by using its common seal (s 127(2)) or via the sealing of the contract by an agent who could be the director of the company (s 126) (Australia, 2009 p 111). However, the promoter is only liable to the contract made before the ratification of the company under the Corporations Act 2001 s 131(1). Once there is an agreement of time set before and with a reasonable time limit. As it applies in the s 131(2), the person is totally responsible for the contract made on behalf of the company before its ratification. However, the same Act initially implied that the contract by the promoter would not be enforceable at common law if the agreement were before the ratification of the company.

In this argument, there is no legality for the unincorporated company to pursue a contract made before ratification. In view of this section of the Corporations Act, it is evident that the law, under s 131(2) identifies the person acting on behalf of the company, who in this case is the promoter, to be liable for the liabilities on the company and their duty (Symon, 2006 p 67). Thus, the statement that, after incorporation, all duties and potential liabilities of the promoter end, including the pre-registration contract is not true. The promoter remains liable as the act states for the actions that have liabilities for the company both before and after incorporation.

Question 2

The arguments the supplier would put forwards to show that the company was liable

Issue: Does the company have liability to the failure to pay the supplier?

Law: the power of a company to make, vary, discharge or ratify a contract can be exercised by an individual who is acting with the express or implied authority of the company for and on behalf of the company. The power of the company can be exercised without using a common seal for the company as outlined in s 126 (1) of the Corporations Act 2001 (Australia., 2013, p 77). A person can presume that the company complies with its constitution (if any) and any requirements of this Act that relate to the company as replaceable rules, s 129(1). A person may presume that a person who appears from the information provided by the company that is accessible to the public from ASIC, to be a director or company secretary: has been fittingly appointed s 129 (2(a)). Moreover, has the influence to exercise the command and execute the duties habitually exercised or executed by a director or company secretary of a similar company s 129(2(b)) (Australia, 2009 p 101). A person may presume that any person held out by the company to be a representative or agent of the company: has been suitably selected s 129 (3(a)). Moreover has the right to implement the powers and execute duties routinely exercised by that officeholder or agent in a comparable company, s 129(3(b)). In addition, if a company has a constitution, it may contain express restriction on, or prohibition of the company to exercise its powers. The exercise of power by the company is not invalid only because it is differing to an express restriction or exclusion in the constitution of the company s 125 (1).

Application: the supplier in this case presents the arguments from the Corporations Act 2001 basing on several sections. The first section, s 126(1) is fully compliant with by the company; therefore, X acted on behalf of the company legally and; thus, there is an obligation for the company MC to honor the contract terms and pay the supplier. Additionally, according to the Corporations Act's 129 (2(a)) and 129 (2(b)), which outline the legal authority of X in the company. The identifying of X by the company in line with ASIC as a director of the company and added presentation of her as a sole agent of the company, capable of handling decisions for the company complies with these two sections of the act. Therefore, it is clear, from s 129 (3(a)), and 129 (3(b)) that she acted with full knowledge of the company. The supplier is right to assume that X was an appointed member of MC and had the capacity to act award the contract. Therefore, the company should honor the contract and pay the supplier in view of these sections of the Corporations Act 2001.

Conclusion: Mocean Connections Company Limited is bound by the contract. Although the contract was not ratified, the commission to the contract by X makes executable as X acted in her rightful capacity for the company as the supplier assumed. The company is liable.

Issue: the company was not liable to the contract.

Law: if a company has a constitution, it may contain express restriction on, or prohibition of the company to exercise its powers. The exercise of power by the company is not null purely because it is converse to an express restraint or prohibition in the constitution of the company s 125 (1) (Australia, Baxt & Harris, 2009 p 89). Agent exercising the influence of the company to compose contracts: this section does not impinge on the procedure of a law that requires a fastidious course of action to be complied with, relative to the contract. A company may execute a document without using the common seal if it is signed by two directors of the company s 127 (1(a)) or a director and a company secretary of the company s 127 (1(b)). A person is not at liberty to make a supposition in section 129 if at the instance of the transactions they knew or supposed that the postulation was incorrect s 128 (4). Information available to the public from ASIC does not represent notice s 130 of the Corporations Act 2001.

Application: according to the corporations act section 125 (1), the company MC builds the case that it did have restrictions and prohibitions concerning the execution of a contract (Australia, Baxt & Harris, 2009 p 67). According to the company constitution, the contract had to have approval of the board. Therefore, in this case, the director X signed the contract alone and this nullifies the argument of the validity of the contract. Additionally, as s 127 (1(a)) and…

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