company law Essay

1659 Words7 Pages
QUESTION 1
Issue: the issue about company’s constitution and whether the loan contract between ABC bank and Sambal Pty Ltd is invalid.

State the law:
Section 140 of the corporations act states that:
“A company’s constitution (if any) and any replaceable rules that apple to the company have effect as a contract:
(a) Between the company and each member; and
(b) Between the company and each director and company secretary; and
(c) Between a member and each other member;
Apply the law:
According to section 140, a company’s constitution is only an internal governance rule, it cannot be enforced by outsider and also cannot be used and act between a company member and an outsider (Corporation Act, 2001).

In this case, Sambal Pty
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S1324(2) states that where a person has refused or failed, is refusing or failing, or is proposing to refuse or fail, to do an act or thing that the person is required by this Act to do, the Court may, on the application of:
ASIC; or any person whose interests have been, are or would be affected by the refusal or failure to do that act or thing; grant an injunction, on such terms as the Court thinks appropriate, requiring the first mentioned person to do that act or thing.

(3) Application
The board of Rich Pty Ltd has committed oppressive conduct, specifically, unfairly restricting dividends.
In this case, the directors refuse to give reasons or explanations of failing to pay dividends. By paying no dividends to the shareholders, the directors can possibly benefit their own interests such as paying them excessive remuneration out of the profits that should be paid as dividends that constitutes oppression. Under s232 of the Corporations Act, remedies where there is oppression allows Susan to seek her rights by an order held by the court to regulate the conduct of the affairs of the company in the future. For example, remove several directors and appoint new directors.
Furthermore, according to s1324, the court can grant an injunction to any person who has breached the Corporations Act. One of the directors’ duties is to act in the interest of the company. To
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