, 006)
Undergraduate Core
Units of Credit: 6
Contact hours per week: 4
Convenor: Prof Dimity Kingsford Smith
Phone: 9385 2245
Email: d.kingsfordsmith@unsw.edu.au

1. Course Information
1.1 Teaching staff and classes
1.2 Course description – About BA 1
1.3 Course description – Aims and Content
Course Aims
Learning Outcomes and Graduate Attributes
Teaching Rationale
3
5
6
6
7
7
2. Assessments
2.1
Assessment Scheme
2.2 Assessment Criteria and Overall Grading
2.3 Assessment Timetable
2.4 Formal Matters
Course Outline Appendices available at:
8
10
11
12 https://www.law.unsw.edu.au/secureweb/docs/2009/law_school_course_outline_app endices.pdf
Appendix 1 - UNSW LAW SCHOOL GRADUATE ATTRIBUTES
Appendix 2 - FORMAL MATTERS RELATING TO ASSESSMENT
Appendix 3 - ACADEMIC MISCONDUCT AND PLAGIARISM
Appendix 4 - ADMINISTRATIVE MATTERS AND STUDENT SUPPORT
SERVICES
Notice on Distressing Course Material
3.
4.
Occupation Health and Safety
School of Law Office
Course Schedule
3.1 Course Materials
3.2 Guide to Reading
Additional Resources for Students
12
13
23 4.1 Additional Materials
4.2 Basic Terms and Abbreviations in Corporate Law
4.3 Session 1, 2009 Practice Examination Question
4.4 Help With Good Legal Writing
4.5 Help With Legal Problem Solving
24
30
32
28
5. Continual Course Improvement
5.1 CATEI Evaluation Policy 35
2

Prof Dimity Kingsford Smith
Room 314
Law Faculty Building
Kensington Campus
Ph: 9360 2245 e-mail : d.kingsfordsmith@unsw.edu.au
Mr Scott Donald
Room 226
Law Faculty Building
Kensington Campus
Ph: 9385 2263 e-mail : s.donald@unsw.edu.au
Mr Michael Skinner e-mail :
Room 307B
Law Faculty Building
Kensington Campus
Ph: 9385 9647 mikegskinner@gmail.com
Gill North
Ph: 9908 4828 e-mail: gill@oceanviewinvestments.com
Please email your teachers if you need a consultation. Laptop computers are not to be used in Prof Kingsford Smith and Mr Scott Donald’s classes.
3

Y OUR CLASSES
You have been assigned to one of following classes for Business Associations I .
1
Group
3851/8339
Group
3852/8340
Group
3853/8341
Group
3854/8342
Mon &
Thurs 9-
11
Mon
&Thurs
11-1
Mon &
Thurs
11-1
Mon &
Thurs 2-
4
LAW275
LAW276
G23
G23
Mr Michael
Skinner
Mr Michael
Skinner
Prof Dimity
Kingsford
Smith
Ms Gillian
North
Group
3855/8343
Tues &
Friday
9-11
Tues &
LAW201
Group
3856/8344
Friday
11-1
Material Sciences Material Sciences G11 & LAW302
*All classroom assignments are tentative only; check the latest timetable information at www.law.unsw.edu.au
.
There is a compulsory class quiz for ALL STUDENTS in this subject
Date Time
Wednesday 13 April 2011 1-2 PM
Venue
Online Quiz
Mr Scott
Donald
Mr Scott
Donald
COMMUNICATING ABOUT THE COURSE AND ITS CONTENT
This course uses the webbased teaching and learning program called ‘Blackboard’.
The way to logon to Blackboard is as follows: put ‘UNSW Blackboard’ into Google and follow the links to the log-on page or go to http://telt.unsw.edu.au
Enter your zpass.
The compulsory class quiz will be found and administered on this Blackboard site.
Administrative announcements about the course will be posted here. Frequently asked questions about course content will also be posted on Blackboard, as well as instructors responses. While nothing can replicate the value of questions asked in class, students are encouraged to review the FAQ periodically, to see if questions they have are discussed, or to ask questions themselves if they wish.
1 If you want to change out of your assigned class, go to the Student Services desk on Level 2 of the Law
Building to request a transfer. Teachers have no authority to approve class transfers. You must make your arrangements through Student Services.
4

It is the policy of the Law School as far as possible to allow teachers to teach in their area of research and expertise. This means that students learn from academics and researchers who are experts in their fields. The areas of expertise vary. In the case of this course you can see further about the expertise of your teachers below or by following the links:
Prof Kingsford Smith: http://www.law.unsw.edu.au/staff/kingsfordd/
Mr Scott Donald: http://www.law.unsw.edu.au/staff/donaldm/
Michael Skinner has practices at the Bar in all jurisdictions in Australia and the
United Kingdom for over 30 years, mainly in commercial law, and has taught practitioners and students at UNSW and Sydney University in most commercial law subjects.
Gill North completed a Ph.D. in law (UNSW) on a listed company disclosure framework in Australia in August 2010, and has written a body of scholarly publications on disclosure & capital market conceptual issues. Gill worked at senior levels as an investment banker, analyst and fund manager in London, Tokyo and Sydney and has taught at UNSW, Sydney and
Macquarie Universities.
The wealth of research and expertise of all these teachers ensures that this course is both current and relevant as well as sound in legislative analysis and doctrinal elaboration – as the course description below indicates.
This course is worth 6 units of credit.
Welcome to Business Associations for Session 1 2011. Corporate law, the main object of inquiry in this course, is constantly in the spotlight. A string of high-profile corporate collapses both before and after the Global Financial Crises — in Australia, HIH, OneTel,
Ansett, Storm Financial, Allco, Babcock & Brown and in the US, WorldCom, Enron, Lehman
Bros and AIG Inc — have attracted strong critical commentary by the media, scholars and even documentary makers. Building products company James Hardie was subject to a NSW
Special Commission of Inquiry to investigate whether the company sought to avoid its liabilities for asbestos-related illnesses. In 2009 all the directors of the company were found to have committed contraventions of the director’s duties provisions of the Corporations Act, an area central to our study. Particularly in 2008-09 there have been financial sector corporate collapses, the systemic risk of which has flowed to industrial and services companies. Government has appeared again as the lender of last resort.
What constitutes successful stewardship of a company? Who should have responsibility for corporations and their actions? Whose interests should be considered and protected? Who should be held accountable for corporate collapses? What are the responsibilities of companies and their directors to employees, shareholders and society in general? These are all corporate law questions.
Corporate law, of course, is not just about business. For better or worse, the influence of corporate law is finding its way through to other areas of law and public life.
Consider, for example, the debate about the “corporatisation” of universities, most recently come to head with the abolition of compulsory student union fees; or the exclusion in 2002
(until its re-admittance) of the Rabbitohs (South Sydney) from NRL competition for inadequate club “management” practices; and, more recently, concerns about governance of
5

public sector organizations and financial sector corporations. Corporate law, therefore, has immediate relevance to broader social and public policy issues.
COURSE AIMS
The aims of the course are to make you familiar with the central legislative rules and legal principles of corporations law and in particular:

Foundational principles such as limited liability & rights attached to shares;

Deliberation by the company officers and shareholders;

Appointment and removal of directors;

Duties of directors;

Shareholders rights;

The role of the regulator – the Australian Securities and Investments Commission;

Policy and theoretical ideas important to corporate law.
EXPECTED LEARNING OUTCOMES
One objective of the course is to make you an effective corporate law problem-solver. This involves you acquiring skills leading to the following outcomes:


( stakeholder analysis ) identifying who the human stakeholders are and how their interests might interact and conflict in any given problem;
( textual analysis ) navigating and interpreting the legal texts — both statutory and judicial — that regulate the rights and liabilities of the stakeholders;





( contextual analysis ) determining the policy context(s) within which these legal texts function; and
( critical analysis ) evaluating the extent to which these policy contexts provide a meaningful, coherent or suitable environment for regulating the interests and expectations of stakeholders.
( cultural analysis ) explicating and interrogating the wider culture of investment and management that accounts for why human stakeholders participate in the corporate form in the way that they do — economics and commerce comprise only part of this analysis; other social sciences, such as psychology, political science, history and gender studies, also play an important role;
( facility with theory ) examining, comparing and evaluating the different theoretical models that exist about corporations and their regulation; and
( discretionary decision-making ) through cultural analysis and facility with theory,


 developing and sharpening your ability to make informed judgments about corporate regulation
— in the future, this will allow you to offer value-added business planning advice, develop workable policy reform proposals, and contribute thoughtfully to public policy debates about companies in society.
( reflective practice ) engaging in ongoing professional reflective practice;
( oral skills ) making persuasive presentations or contributing to collegial discussions and debates; and
( writing skills ) writing for different purposes and different audiences (formal essays, and problem-solving analyses).
The UNSW Law School also aims to develop specific attributes (or capabilities) in all of its law graduates. Thus for this course:
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1. core disciplinary knowledge: you will have a functioning and contextual knowledge of corporate law theory, doctrine and main legislative rules;
2. transferable intellectual skills: you will gain intellectual skills of legal problem-solving, critical reflection about corporate laws and their limitations, analysis of legal texts and documents, and an ability to make informed judgments about current events and legal issues surrounding corporations and their officers;
3. research skills: you will have the option to engage in scholarly research about central issues of corporate law including the r egulatory role of director’s duties. The research includes becoming informed and thoughtful about corporate law theory;
4. communication skills: you will develop written and oral skills through the oral and written assessment tasks assigned in this task (see “Assessment” below); and
5. personal and professional skills: you will develop a heightened understanding of the role of corporations in society and their power and be able to reflect on the effectiveness of corporate law to call that power to account.
Accordingly each assessment item relates to one or more of the Law School GAs as set out below at paragraph 2. 3 in the assessment table.
These attributes are described more fully in the Course Outline Appendix 1 at https://www.law.unsw.edu.au/secureweb/docs/2009/law_school_course_outline_ appendices.pdf
In BA1 the teachers aim to give students the opportunity to learn independently, yet within a supported and supportive environment. Being familiar with teaching and learning from both a practical and scholarly perspective the teachers recognise that there are many different learning styles, and many different personalities interacting within a classroom, and beyond.
BA1 teachers thus try to offer a variety of learning experiences to allow the many different students to engage comfortably with the course.
Since a number of teachers will be involved in this subject teaching methods may vary somewhat from group to group, depending on the preference of the individual teacher and the composition of the class. The basic approach taken in the subject is that the teacher leads class discussion of assigned materials which have been prepared beforehand by students. Students will also have opportunities to apply what they are learning, and developing co-operative skills through policy analysis and discussion of contemporary problems and also problem solving of hypothetical questions. These approaches are designed both to foster skills referred to earlier and to encourage a thorough understanding of material which, initially at least, may present conceptual difficulties. In some classes students may be asked to present material.
Thorough preparation for class in this subject is required. It is essential to promote a high level of discussion and analysis. It is also necessary to enable students to understand the principles and concepts under consideration. The materials for the course attempt to present new concepts in a manner that aids understanding, but a failure to grasp material presented earlier in the course may lead to serious difficulties later. It is essential therefore that students keep up to date during the course, and ensure that they understand each area of the course as it is covered in class.
You are therefore expected to read the assigned readings prior to each class. This Course
Guide summarises the reading assignments for each class. On average, you are expected to read 30-40 pages per class. It takes about an hour to read 10 pages of new legal material.
7

Assessment for this course comprises three elements:
1.
Compulsory class participation, for which up to 5 marks will be given;
2. Compulsory online class quiz , marked out of 10 (Quiz: 1-2 PM, Wednesday
13 April 2011) ;
3. Compulsory 2000 word essay (Friday 6 May 2011 by 4pm ), marked out of
30;
4 End-of-session, open book exam , 2 hours duration , marked out of 60.
.
C LASS PARTICIPATION
Students must attend a minimum of 80% of classes to be eligible to undertake assessment in this course. The roll will be called in all classes.
Assessable class participation is designed to o encourage preparation for class o encourage students to learn, think, analyse, reflect and evaluate legal material prior to covering that content in class (GA 1 & 2) o assist students to develop the capacity to think clearly and to present oral arguments (GA 4).
It is also believed that as students will necessarily put much effort into class preparation, it is fair that they receive some reward for this work. Up to 5 marks will be given for students who have a persistent contribution to make in class. The five marks is in addition to the possible
100% of other assessment tasks, and will be given to those students who show a persistent and high quality of participation in classes. Students who advise and consult about an individual absence, whether before or after the class period concerned, will be regarded as having attended (“proxy attendance”) but not as having participated.
COMPULSORY ONLINE CLASS QUIZ
All students in the subject must attend and take the class quiz on classes 1-5 and 7 of the course, which will be held at lunchtime (1-2pm) on Wednesday 13 April 2011 to be done via your computer.
More details about the quiz will be given in the second week of the course. The quiz is designed to encourage students to learn the foundational material of the course so as to progress to the more complex learning of director’s duties.
COMPULSORY RESEARCH ESSAY
Students must submit a 2,000 word essay on one of the topics set out below. The essay is worth 30% and is due on Friday 6 May 2011 at 4pm.
See Additional Material in this course guide for more information on how to write good essays. The essay is designed to encourage depth of thinking and connection between legal rules and principle and the theoretical ideas learned in the course.
ESSAY QUESTIONS:
Read the following quotation and answer one of the three questions below :
In 1944, Otto Kahn-Freund published the following reflections on the state of British corporations law:
8

[O]wing to the ease with which companies can be formed in this country, and owing to the rigidity with which the courts applied the corporate entity concept ever since the calamitous decision in Salomon v Salomon & Co Ltd [1897] AC 22, a single trader or a group of traders are almost tempted by the law to conduct their business in the form of a limited company, even where no particular business risk is involved, and where no outside capital is required. .
. This state of affairs would not necessarily call for reform, if it were not for the fact that the courts have failed to give that protection to the business creditors which should be the corollary of the privilege of limited liability… The flexibility of the law governing this topic contrasts completely with the failure of the courts to mitigate, through the mechanism of the law of agency, the rigidities of the ‘folklore’ of corporate entity in favor of the legitimate interests of the company’s creditors. As it is, the company has often become a means of evading liabilities and of concealing the real interests behind the business.
Modern Law Review , April 1944, pp 54-55.
1. In the light of one of the theoretical models of the corporation you have studied in the course:
(a) Give a succinct account of the Australian law in sections 588G &H of the
Corporations Act, including relevant case law through which the sections have been interpreted;
(b) Consider how well you think sections 588G & H in action address the criticisms made of limited liability by Kahn-Freund?
2. In the light of one of the theoretical models of the corporation you have studied in the course:
(a) Give a succinct account of the Australian law in sections 588V-X of the
Corporations Act, including relevant case law through which the sections have been interpreted;
(b) Consider how well you think sections 588V-X in action address the criticisms made of limited liability by Kahn-Freund?
3. In the light of one of the theoretical models of the corporation you have studied in the course:
(a) Give a succinct account of the Australian law in sub-section 140(2) of the
Corporations Act, including relevant case law through which the sub-section has been interpreted;
(b) How do you think sub-section 140(2) in action is important in relation to the criticisms made of limited liability by Kahn-Freund?
F
INAL EXAM
The final exam will be marked out of 60. It will examine your problem solving ability. The exam will be open book and 2 hours in duration. More detail on the format and approach to the exam and problem solving is to be found in Additional Material at the end of this course guide.
High Distinction [85% and over]: demonstrates an extensive knowledge and understanding of the concepts of the unit of study content and the commensurate high order ability to analyse and evaluate the law, policy goals and the broader legal, economic and social context in which corporations’ law operates.
9

Distinction [75% to 84%]: demonstrates a thorough knowledge and understanding of the concepts of the unit of study content and the unambiguous ability to analyse and evaluate the law and policy goals in the context in which corporations’ law operates.
Credit [65% to 74%]: demonstrates a sound knowledge and understanding of the concepts of the unit of study content and the unambiguous ability to analyse and evaluate the law and policy goals in the context in which corporations’ law operates.
Pass [50% to 64%]: demonstrates a basic knowledge and understanding of the concepts of the unit of study content and has some demonstrated ability to analyse and evaluate the law and policy goals in the context in which corporations’ law operates. .
Fail [less than 50%]: demonstrates insufficient knowledge and understanding of the concepts of the unit of study content AND/OR fails adequately to demonstrate ability to analyse and evaluate the law and policy goals in the context in which corporations’ law operates.
The main criteria upon which you will be examined in any of your assessment tasks is evidence of depth of thinking . Depth of thinking is the extent to which you are able to proceed past the descriptive and into critical ways of thinking. This involves your ability to analyse, synthesise, abstract and generalize the central principles and themes of company law. The basic levels of thinking (from shallow to deep) may be summarised as follows:
• knowledge
• comprehension
• application
• analysis
• synthesis
• evaluation.
More specifically, you can think about the different levels of thinking in these terms:
 ( knowledge ) (recall or recognition): At this level, you are recalling or describing
 specific facts or general concepts. For instance, you may state that s588G imposes a duty on directors to avoid insolvent trading.
( comprehension ) (organisation and selection of facts and ideas): At this level, you



 are making use of what is being communicated without necessarily relating it to other material or seeing its fullest implications. This is like re-telling what you have learnt but in your own words. For example, you may summarise the elements of the duty to avoid insolvent trading in s588G.
( application ) (use of facts, rules, principles and theories): At this level, you are using information — facts, principles, rules, ideas, theories — in concrete situations. For instance, in a problem-solving scenario, you explain whether the facts in the hypothetical show that the director breached his or her duty to avoid insolvent trading. In an essay or reflective note, you may relate an issue or topic to a contemporary event receiving media coverage.
( analysis ) (breaking down information into its constituent elements): At this level, you are making explicit the relationship between ideas and demonstrating that you understand the organisation of the information. For instance, you may explain the relationship between s588G, the defences in s588H and the statutory penalties that apply where a defence cannot be made out.
( synthesis ) (putting together elements to form a whole): At this level, you are arranging elements to constitute a structure not clearly there before. For example, you may compare the creditor protections afforded by s588G with the shareholder protections afforded by limited liability.
( evaluation ) (making judgments about the value of the information): At this level, you are appraising information, methods, theories or arguments based on set criteria . For
10

 instance, you may critique the adequacy of s588G in light of the recent corporate collapses of Ansett, OneTel and HIH and those flowing from the GFC. Evaluation is more important in reflective writing than problem-solving, although you may need to evaluate what principles of law should prevail where an apparent conflict exists.
In addition, your essays will be judged according to:
 ( insight and understanding ) the extent to which you demonstrate an understanding of content, including accuracy of knowledge, quality of insight, conceptual depth and penetration into meaning;
(writing quality ) your quality of writing — your clarity of expression, your originality or creativity and the diversity of concepts included in your work; and
 (effort ) the amount of effort you have applied, how seriously you have taken the task and the extent to which you have been prepared to explore issues.
Assessment Type Date Due Marks
Class Participation
Compulsory Class
Quiz
Examination of 2 hours (plus 10 minutes time) reading
Each class
Wednesday
April 2011
13
1-2pm via your computer
Compulsory Essay Friday 6 May 2011, by 4pm
Date to be set by examination centre
Up to 5 marks
Out of 10
Out of 30
Out of 60
Link to Learning
Outcomes and
GAs.
Attendance, reading understanding and course materials, analytical and oral skills. Links to
GAs 1,2 & 4
Reading understanding and course materials, analytical skills.
Links to GAs
1,2&5
Theoretical knowledge, policy, analytical, reflective and writing skills. Links to GAs 1,2,3&5
Analytical, problem-solving and writing skills.
Links to GAs
1,2,&5
UNIVERSITY POLICIES ON ASSESSMENTS
Information produced by the UNSW Law School regarding assessments can be found through the Law School website, http://www.law.unsw.edu.au
.
Further information about Formal Matters relating to Assessment can be found in the Course Outline Appendix 2 at
11

https://www.law.unsw.edu.au/secureweb/docs/2009/law_school_course_outli ne_appendices.pdf
ACADEMIC MISCONDUCT AND PLAGIARISM
No essays or assignments can be accepted unless you sign the academic misconduct declaration that is included on the Law School assignment cover sheet.
See the Course Outline Appendix 3 at https://www.law.unsw.edu.au/secureweb/docs/2009/law_school_course_outline_app endices.pdf
3.
Reading for each class is set out in the Guide to Readings . For the purposes of class participation (see “ Assessment ”), you are expected to read in advance of each class and be prepared to engage actively in class discussions, problem-solving exercises and other learning activities. On average, you will be expected to read 30-40 pages per topic. It takes about an hour to read 10 pages of new legal material.
Required reading materials:

Business Associations 1, Semester 1, 2011 Reading Materials have been printed by the University and are available for purchase at the UNSW Bookshop. Be sure to get
Volumes 1 & 2.

Redmond, Paul Companies and Securities Law Commentary and Materials , 5 th ed,
2009, LBC.

Corporations Act 2001 (Cth). Be sure to use either a 2011 edition published by one of the commercial publishers, or obtain required provisions on-line from the Comlaw or Austlii ( www.austlii.edu.au
) websites.
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Class 1: Introduction to the Corporation and incorporating under
Australian law
28 February or 1 March
The first class introduces the subject matter of Business Associations 1 – the study of the regulation of corporations. We identify the kinds of corporations that may be incorporated under the Corporations Act 2001(Cth), the processes of registration, and we consider the principal features and characteristics of a corporation.
Reading:

Redmond o [2.05]-[2.65] for a digested history of the how the regulation of corporate enterprise evolved; o [2.70]-[2-105] for a digest of the phases of corporate regulation in
Australia; and o [2-110]-[2-150] for an explanation of the roles of the Australian
Securities and Investment Commission (ASIC) and the Australian
Securities Exchange (ASX).

Corporations Act 2001 (Cth) o For an overview of the main provisions for incorporation and management of a small company, see the “Small Business Guide” in
Part 1.5 (following s 111J). o 45A, 112-114 Types of companies. o 117-121 Procedures for registration.

Redmond [3.10]-[3-140] explains the reasons why business people would choose a corporation as the legal form for operating a business, and how incorporation is effected.
Class 2: Separate legal personality
3/4 March
Each corporation is a separate legal person, bearing its own liabilities. Incorporators enjoy limited liability. These classes explain these concepts and their implications, through a detailed study of the important House of Lords decision in Salomon .
Reading:

Redmond [4-10]-[4-40].

Cases: o Salomon v Salomon & Co Ltd [1897] AC 22 (Extracted in Redmond
[4.30]). o Lee v Lee’s Air Farming Ltd [1961] AC 12 (Extracted in Redmond
[4.35])

Cheffins, B Company Law: Theory, Structure and Operation (1997) at 496-
508 (in Reading Materials at 1:1-7).
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Class 3: Implications of limited liability
7/8 March
We consider the implications of limited liability, through examining a number of cases in which courts have ‘lifted the corporate veil’.
Reading:

James Hardie press releases (in Reading Materials at 2:1-4).

Redmond [4.45]-[4.65] (for an explanation of the grounds for lifting the corporate veil. Especially Smith, Stone and Knight v Birmingham Corporation)

Extract of Spraeg v Paeson Pty Ltd (1990) 94 ALR 679 (in Reading Materials at 3:1-5)

Extracts of Glasbeek, H Wealth by Stealth pp 131-143 (in Reading Materials at 4:1-7)

Briggs v James Hardie & Co Pty Ltd (1989) 7 ACLC 841 (Extracted in
Redmond [4.120]).

Walkovsky v Carlton (1966) 223 NE 2d 6 (in Reading Materials at 5:1-5).
Class 4: The Corporate Constitution and Decision Making by the Board of
Directors
10/11 March
Reading:

Corporations Act ss 134-141. Pay particular attention to the Table of replaceable rules in s 141.

Redmond [3.145]-[3.150]; [5.95]-[5.110].

Redmond [5.105]-[5.135] Especially Automatic Self-Cleansing Filter Syndicate
Co Ltd v Cuningham .

How are directors appointed? See Corporations Act Part 2D.3. See Redmond
[5.210]-[5.230].

What powers do directors have? See s 198A(1) and (2).

How does the Board make effective decisions? See ss 248A-248G.

How can directors be dismissed? See ss 203C, 203D and 203E; Redmond
[5.245]-[5.260] Especially ASIC v Adler .

What rights do directors have to information? See ss 198F; 290.
Class 5: Decision making by the General Meeting
14/15 March
Reading:

Corporations Act
Chapter 2G.2 ‘Meetings of Members’.

For substantive rights of members to adequate notices of meetings and resolutions, see Redmond [6.90]-[6.120]. In particular, see Fraser and
Another v NRMA Holdings and Others (1995) 15 ASCR 590 in Redmond at
[6.120] and Re Marra Developments Ltd (1976) 1 ACLR 470 at:
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http://www.lexisnexis.com.wwwproxy0.library.unsw.edu.au/au/legal/docview/g etDocForCuiReq?lni=4BG7-GJW0-TWGM-
X0XN&csi=267688&oc=00240&perma=true (NOTE: to access this link you must first login to Sirius on the UNSW Library Website, and access CaseBase or Lexus Nexus AU).

How important are the formalities? See Corporations Act s 1322, and consider
Redmond [5.140]-[5.190] Especially Re Express Engineering Works, Re
Duomatic, Kinsella v Russell Kinsella and Re Compaction Systems.
Class 6: Theories of the corporation
17/18 March
In this class we reflect on theoretical conceptions of the corporation. These reflections will enable a critical examination of the fundamental purposes of corporations law. In whose interests are corporations to be regulated? And to what ends? These perspectives will be revisited throughout the course.
Reading:

Redmond [2.200]-[2.235].

Extracts in Reading Materials: o Parkinson, J E Corporate Power and Responsibility: Issues in the o
Theory of Company Law (1994) at 3, 21-25, pp 6:1-3.
Allen, W “Our Schizophrenic Conception of the Business Corporation”
(1992) Cardozo Law Review 261 at 262-272, pp 7:1-6.
o Allen, W “Contracts and Communities in Corporation Law” (1993) 50
Washington & Lee Law Review 1395, pp 8:1-3. o Bottomley, S The Constitutional Corporation: Rethinking Corporate
Governance (Ashgate 2007) Ch 2, pp 9:1-17. o Testy, K “Capitalism and Freedom – For Whom?: Feminist Legal
Theory and the Progressive Corporate Law” (2004) 67 Law and
Contemporary Problems 87, 87-89 and 93-108, pp 10:1-10.
Recommended Reading:
 Stout, L A “Bad and Not-So-Bad Arguments For Shareholder Primacy” (2002)
78 S Cal L Rev 1189.
Class 7: Contracts with outsiders
21/22 March
How do corporations effectively contract with outsiders? When can outsiders trust transactions purportedly made on behalf of a corporation?
Reading:

Corporations Act ss 124-130.

Redmond [5.310]-[5.380]. Especially Freeman & Lockyer v Buckhurst Park
Properties, Hely-Hutchison v Brayhead, CrabTree-Vickers v Australian Direct
Mail Advertising, Brick & Pipe v Occidental Life Nominees.

ASIC v Adler [2002] NSWSC 171 and Adler v ASIC [2003] NSWCA 131
(Reading Materials Volume 2 pp 29-39 [paras 199-271] a contemporary example of how authority can be lacking in a corporate agent. Could PEE rely on s129 CA?
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
Austin, R P and Ramsay I M
Ford’s Principles of Corporations Law
13 th ed,
2007, Chapter 13 (in Reading Materials pp 11:1-20).
(Note: This material will be examined in the final examination.)
Class 8 Introduction to Corporate Governance
24/25 March
Extracts in Reading Materials:
 Stokes M “Company Law and Legal Theory” in W Twining (ed) Legal Theory and Common Law (Blackwell 1986), pp 12:1-16.
 Millon, D “Communitarianism in Corporate Law: Foundations and Law Reform
Strategies” in Mitchell, L (ed) Progressive Corporate Law (1995) 1, 1-13, pp
13:1-7.
 Blair, M and Stout, L “A Team Production Theory of Corporate Law” (1999) 85
Virginia Law Review 247 (extracts), pp14:1-16.
 Millon D “New Game Plan or Business as Usual? A Critique of the Team
Production Model of Corporate Law” (2000) 86 Virginia Law Review 1001
(extracts), pp 15:1-13.
 Stephen M Bainbridge ‘Director Primacy’ UCLA School of Law Research
Paper Series (2010) (extracts), 16:1-6.
 Hayden G and Bodie M “Shareholder Democracy and the Curious Turn
Toward Board Primacy” (2009-2010) 51 William and Mary Law Review 2071
(extracts) pp 17:1-17.
Class 9: Further Consideration of Theoretical Readings (Classes 6 & 8) and
Discussion of Essay Topics and Problem Questions.
28/29 March
This class is your opportunity to get early in semester feed-back (or perhaps more accurately ‘feed-forward’) for the quiz and your essay.
Reading: Complete your reading of the materials from Classes 6 & 8. We will complete our theoretical discussion by applying the theoretical ideas to some of the legal doctrines you have already learned and some you will encounter in the rest of the course (approx 1 hour).
Come to this class with a synopsis of your essay complete. We will discuss likely lines of argument and approaches to the essay topics to help you perfect your synopsis.
A practical structure for the synopsis might be:
(i) The question;
(ii) 100 word abstract/summary of the central argument;
(iii) a discussion of background showing what makes the question significant;
(iv) discussion of about 2-3 issues or aspects which elaborate the answer to the question and possible conclusions;
16

(v) a list of a dozen or so books, articles, policy papers etc which have been consulted and which are likely to be relied on in the essay, and your reasons for adopting these works.
This should all fit on 2 sides of an A4 page
– and remember, you only have 2,000 words so keep it focused on the question (approx 30 mins).
You should also consider the following problem question for the class and attend with roughly sketched out answer (approx 30 mins):
1. Lasar Pty Ltd (Lasar) is a company incorporated in 2007. The share capital of the company is $75,000 divided into 60,000 $1 ordinary shares and 15,000 preference shares. All shares have one vote. The constitution provides that no allotment of shares may be made without the consent of Cassandra, the managing director. The other directors are Betta, Katie, Winsome, Rohan and
Lochie. The constitution is otherwise identical to the replaceable rules.
In 2009 a meeting of directors is held. At the meeting it is proposed that the company allot a further 10,000 preference shares to ordinary shareholders. Four of the directors agree with this proposal; however, Cassandra will not give her consent.
The board also considers whether to begin proceedings against two of its directors,
Betta and Katy. Winsome who owns the majority of the shares in the company claims that Betta and Katy have debts outstanding to the company totaling $500,000.
Five of the directors, including Betta and Katy, vote against the company commencing such proceedings.
Winsome says that both the issues should be considered by the general meeting and decides to convene a general meeting to pass ordinary resolutions authorizing the company to allot 10,000 preference shares to ordinary shareholders and to commence proceedings for the recovery of the debts owing to the company be Betta and Katy.
Fourteen days notice of the general meeting was given and the notice was given to all shareholders. At the general meeting the resolutions were passed.
Leila, a preference shareholder with 10,000 shares, and Betta and Katy wish to challenge the resolutions and seek your advice. Advise them on their rights and what practical corporate steps they may take to deal with the general meeting resolutions.
You need not consider shareholder actions and other shareholder remedies at this stage.
Class 10: Directors’ duty of care
31 March or 1 April
Reading:

Corporations Act s 180, 189-190, 198D.

Redmond [7.70]-[7.130].

Duties of Directors at General Law – Background and Basic Concepts and excerpts on general law and statutory directors from Austin, Ford and
Ramsay, Company Directors: Principles of Law and Corporate Governance
(Butterworths, 2005) (in Reading Materials pp 18:1-31)

Cases:
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o Daniels v Anderson (1995) 37 NSWLR 438 (Extracted in Redmond
[7.85]). o Permanent Building Society (in liq) v Wheeler (1994) 11 WAR 187
(extracted in Redmond [7.90]). o ASIC v Adler [2002] NSWSC 171 and Adler v ASIC [2003] NSWCA
131 (Reading Materials Volume 2 pp 1-24 [paras 1-141], pp 39-54
[paras 370-453] and pp 57-62 [paras 462-512]. This is an edited version of the judgments covering negligence, and the BJR. It also contains important material on the statutory meaning of corporate
‘officer’ (s9 CA) the director’s duty to act honestly in the best interests of the company (s181 CA) and the no conflicts rules (S182 & 183 CA).
Both judgments also contain elaboration of the operation of the
Corporations Act civil penalty regime, and in particular the calculation of loss under the compensation provision, s1317H. They also discuss the statutory prohibitions on related party transactions (S208 CA) and corporate authority and dealings, and directors having accessorial liability for involvement in breaches by the company or other corporate officers. You will need to refer back to these judgments several times over the next few weeks. o ASIC v Rich [2003] NSWSC 85 (Extracted in Redmond [7.95] and excerpt in Reading Materials pp19:1-12). o ASIC v McDonald [2009] NSWSC 287 Appeal heard, awaiting judgment which should be before semester ends. (Reading Materials pp 20:1-7).
Class 11: Directors’ duty of care (Continued)
4/5 April
Reading: As above.
Class 12 Directors’ duty to act in good faith and for proper purposes
7/8 April
Reading:

Corporations Act ss 181, 184.

Redmond [7.215]-[7.305].

Cases: o Re Smith and Fawcett Ltd [1942] Ch 304, Redmond [7.255]. o Harlowe’s Nominees Pty Ltd v Woodside (Lakes Entrance) Oil
Company NL (1968) 121 CLR 483 (Redmond [7.265]). o Hogg v Cramphorn Ltd [1967] Ch 254 (Redmond [7.275]). o Teck Corp Ltd v Millar (1973) 33 DLR (3d) 288 (Redmond [7.280] and
[7.305]). o Howard Smith Ltd v Ampol Petroleum Ltd [1974] AC 821 (Redmond
[7.285]). o Cayne v Global Natural Resources Plc (12 August 1982; Chancery UK, unrep) (Redmond [7.290]. o Whitehouse v Carlton Hotel Pty Ltd (1987) 162 CLR 285 (Redmond
[7.295]).
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o Equiticorp Finance Ltd (in liq) v Bank of New Zealand (1993) 32
NSWLR 50 (Redmond [7.325]). o ASIC v Adler [2002] NSWSC 171 and Adler v ASIC [2003] NSWCA
131(Reading Materials Vol 2 p 48 [paras 389-394], pp 54-55 [paras
454-457] and p 64 [paras 738-740]). o Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9) [2008]
WASC 239 (Reading Materials pp 21:1-8).
Class 13
Directors’ duty to avoid conflicts
11/12 April
Reading:

Corporations Act ss 182, 183.

Redmond [7.340]-[7.380].

Cases: o Aberdeen Railway Co v Blaikie Bros (1854) 1 Macq 461 (Redmond
[7.360]). o Liquidators of Imperial Mercantile Credit Assoc v Coleman (1873) LR 6
HL 189 (Redmond [7.370]). o Transvaal Lands Co v New Belgium (Transvaal) Land and
Development Co [1914] 2 Ch 488 (Redmond [7.375]). o Thorby v Goldberg ( 1964) 112 CLR 597(Redmond [7.515]). o London and Mashonaland Exploration Co Ltd v new Mashonaland
Exploration Co Ltd [1891] WN 165 (Redmond [7.525]). o Chan v Zacharia (1984) 53 ALR 417 (Reading Materials pp 22:1-14) o ASIC v Adler [2002] NSWSC 171 and Adler v ASIC [2003] NSWCA
131 p 48 [paras 388-394], pp 55-56 [paras 458-461], and pp 62-64
[paras 735-737].
Date
COMPULSORY CLASS QUIZ FOR ALL STUDENTS
Time Venue
Wednesday 13 April 2011 1-2 PM Online quiz
Class 14
Directors’ duty not to make secret profits
14/15 April
Reading:

Corporations Act ss 182, 183.

Redmond [7.455]-[7.495].

Cases: o Furs Ltd v Tomkies (1936) 54 CLR 583 (Redmond [7.460]). o Cook v Deeks [1916] 1 AC 554 (Redmond [7.465]). o Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134n (Redmond [7.470]). o Peso Silver Mines Ltd (NPL) v Cropper (1966) 58 DLR (2d) 1
(Redmond [7.475]).
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o Phipps v Boardman [1967] 2 AC 46 (Redmond [7.480]). o Industrial Development Consultant Ltd v Cooley [1972] 1 WLR 443
(Redmond [7.485]). o Canadian Aero Services Ltd v O’Malley
(1973) 40 DLR (3d) 371
(Redmond [7.490]). o Queensland Mines Ltd v Hudson (1978) 52 ALJR 399 (Redmond
[7.495]). o ASIC v Adler [2002] NSWSC 171 and Adler v ASIC [2003] NSWCA
131(Reading Materials Vol 2 as for class 13).
Class 15 Statutory disclosure obligations; related party transactions
2/3 May
Reading:

Corporations Act: o ss 191-195 (disclosure obligations). o ss 199A-199C (restrictions on indemnities). o Chapter 2E (related party transactions).

Cases: o McGellin v Mount King Mining NL [1998] WASC 96 available at: http://www.austlii.edu.au/au/cases/wa/WASC/1998/96.html
o Camelot Resources v McDonald (1994) 14 ACSR 437 available at: http://www.lexisnexis.com/au/legal/docview/getDocForCuiReq?lni=4B1
2-HCM0-TWGM-C1HH&csi=267706&oc=00240&perma=true (NOTE: to access this link you must first login to Sirius on the UNSW Library
Website, and access CaseBase or LexusNexus AU).

Redmond o [7.415]-[7.450] explains (in outline) the related party transactions provisions. o [7.545]-[7.560] explains the statutory prohibitions on corporations indemnifying directors for breaches of duty.

ASIC v Adler [2002] NSWSC 171 and Adler v ASIC [2003] NSWCA 131
(Reading Materials Vol 2 pp 25-30 [paras 171-217]).
Class 16 Directors’ statutory duty to prevent insolvent trading
5/6 May
Reading:

Corporations Act ss 588G-588U. Note: Definition of insolvency in s 95A; definition of director in s 9.

Redmond [7.135]-7-210].

Case: DCT v Clark [2003] NSWCA 91 Extracted in Redmond [7.210].
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Class 17
Shareholders’ remedies
9/10 May
Reading:

Review (ie read again) Duties of Directors at General Law
– Background and
Basic Concepts and excerpts on general law and statutory directors from
Austin, Ford and Ramsay, Company Directors: Principles of Law and
Corporate Governance (Butterworths, 2005) Reading Materials pp 18:1-31.

Redmond [8.05]-[8.15]; [8.45]; [8.55]-[8.135].

Corporations Act ss 236-242.
 Shareholder’s Remedies on the Contract of the Company Constitution:
Corporations Act s140 and Hickman v Kent or Romney Marsh Sheep-Breeders
Assoc [1915] 1 Ch 881 (Redmond [8.120]).

Shareholders Statutory Rights: Corporations Act s140, 1324, s1041H and
ASIC Act s12DA and Sons of Gwalia Ltd v Margaretic [2007] HCA 1 (31
January 2007) (Hayne J judgment in Reading Materials pp 23:1-13). See also classes 18, 19 and 20.
 Shareholder’s Rights in Equitable Doctrine: o Coleman v Myers [1977] NZLR 225 (extracted in Redmond [7.540]) and o Brunninghausen v Glavanics (1999) 32 ACSR 294 (noted in Redmond at p 496). o Residues Treatment and Trading Co Ltd v Southern Resources Ltd
(1988) 51 SASR 177 (Redmond [8.130]). o Greenhalgh v Aderne Cinemas Ltd [1951] Ch 286 (Redmond [8.55]). o Australian Fixed Trusts Pty Ltd v Clyde Industries Ltd (1959) 59 SR
(NSW) 33 (Redmond [8.60]). o Gambotto v WCP Ltd (1995) 182 CLR 432 (Redmond [8.65]). o Swansson v Pratt (2002) 42 ACSR 313 (Redmond [8.105]. o Chapman v E-Sports Club Worldwide Ltd (2000) 35 ACSR 462
(Reading Materials pp24:1-3). o Charlton v Baber [2003] NSWSC 745 (Reading Materials pp 25:1-16). o Oates v Consolidated Capital Services Ltd (Redmond [8.107])
Class 18 Shareholders’ remedies: Oppression
12/13 May
Reading:

Corporations Act ss 232-235.

Redmond [8.180]-[8.230].

Cases: o Wayde v New South Wales Rugby League Ltd (1985) 59 ALJR 798
(Redmond [8.200]). o Re G Jeffrey (Mens Store) Pty Ltd (1984) 9ACLR 193 (Redmond
[8.205]). o Thomas v H W Thomas Ltd ( 1984) 2 ACLC 610 (Redmond [8.210]). o Re Spargos Mining NL (1990) 3 ACSR 1 (Redmond [8.220]). o Jenkins v Enterprise Gold Mines NL (1992) 6 ACSR 539 (Redmond
[8.225]).
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o Morgan v 45 Flers Ave Pty Ltd (1986) 10 ACLR 692 at 704 per Young
J (Reading Materials pp 26:1). o Coombes v Dynasty Pty Ltd (1994) 14 ACSR 60 (Headnote in Reading
Materials pp 27:1-2).
Class 19 Winding up
16/17 May
Reading:

Redmond [3.185]-[3.215] (for an explanation of winding up on insolvency).

Corporations Act ss 461-462 (for specific winding up remedies for members and others).

Redmond [8.140]-[8.175].
 Cases (on winding up on the ‘just and equitable ground’): o Re Tivoli Freeholds Ltd [1972] VR 445 (Redmond [8.150]). o Ebrahimi v Westbourne Galleries Ltd [1973] AC 360 (Redmond
[8.155]).
Class 20 Corporate regulation: the role of ASIC
19/20 May
Reading:

Corporations Act ss 184; 1311; Part 9.4B; s 1318; s 206C, s1317H

ASIC v Adler [2002] NSWSC 171 and Adler v ASIC [2003] NSWCA
131(Reading Materials Vol 2 pp 64-71 [paras 741-777] and compensation issues reversed by NSWCA pp 73-79 [paras 695-723]).
 Gilligan G, Bird H and Ramsay I “Civil Penalties and the Enforcement of
Directors’ Duties” (1999) 22 UNSWLJ 417 (Extract in Reading Materials pp
28:1-5).

Fisse, B and Braithewaite, J, Corporations, Crime and Accountability (1993) at
1-16 (Reading Materials 29:1-7).

Refer to Class 1: The role of ASIC (Redmond [21.110] – [2.125]).

Redmond [4.130]-[4.175] (explains corporate criminal liability).
Class 21 Review by an examination of corporate groups
23/4 May
Reading:

Corporations Act ss 46-50; 50AA, 187, 259E; s 588V-588X.
22


Separate personality and limited liability: Redmond [4.75]-[4.95]; [4.120]-
[4.125].
 Directors’ duties and corporate groups: [7.35]-[7.50]; [7.195]-[7.205]; [7.315]-
[7.335].

Cases: Walker v Wimborne Redmond [7.320] and Equiticorp Finance Ltd (in liq) v Bank of New Zealand Redmond [7.325]

ASIC v Adler [2002] NSWSC 171 and Adler v ASIC [2003] NSWCA 131
(Reading Materials Vol 2 – many of the issues in the case derive from group circumstances, parti cularly the question of whether Adler was an ‘officer’ of
HIHC and the decisions of the investment committee which applied to the investments of the entire group).

CASAC Corporate Groups Final Report (May 2000) (Extracts in Reading
Materials pp 30:1-30).
Class 22 Problem Solving in Corporate Law and Revision
26/27 May
This will be the first of two revision classes that deal with problem solving in corporate law. You should carefully read Appendix 4 to this Course Guide and come to class having revised the course as best you can, and attempted the problems set out at the end of that Appendix. These problems focus on particular questions/topics in the course, and they are designed to build up slowly to the more ambitious problem solving exercise in Class 24.
Class 23 Problem Solving in Corporate Law and Revision
30/31 May
In this class we will consider an examination paper (reproduced as appendix 2 to this
Course Outline.) This represents a model of what students can expect in the final examination.
4.
If you are finding difficulty with any part of the course or would like to read further, you might find the following references useful:
 Baxt, Fletcher & Fridman, Corporations and Associations – Cases and Materials

(2008 10th Ed, Lexis Nexis) - this book is an alternative to the Redmond cases and materials text which is prescribed. If you do not find cases you want in one, you may find it in the other.
E Boros and J Duns Corporate Law , Oxford University Press, Melbourne, 2010 (2 nd


Ed). A good concise and accessible discussion of many of the issues covered in the course. Sometimes clearer than more comprehensive texts.
H A J Ford and R P Austin, Ford’s Principles of Corporations Law (Butterworths, 14th ed, 2009) — the most thorough reference on Australian corporate law. It is also available online (although a more detailed version) through the UNSW Library, via the Sirius database access point.
M Quilter The Company Law Notes (Lawbook, 4 th Ed, 2009) — a succinct and straightforward overview of major areas of corporate law with case summaries, sample problems, flowcharts and other visual aids. Useful as an overview of topics but not for an in-depth understanding of the subject.
23




David Wishart Corporations Law Guidebook (OUP 2009) also succinct and easy to follow.
Phillip Lipton and Abe Herzberg, Understanding Company Law (Lawbook Co, 15 th ed, 2010)
Roman Tomasic, Stephen Bottomley and Rob McQueen, Corporations Law in
Australia (The Federation Press, 2nd ed, 2002 – good at putting the subject into context.


Pamela Hanrahan, Ian Ramsay and Geof Stapledon, Commercial Applications of
Company Law (CCH, 10th ed, 2009) – this book is also a useful overview.
If you are looking for a quick take on law in an area in the UK or the US you might the following useful: D Kershaw, Company Law in Context: Cases and Materials (Oxford
2009).
These references are available in the Law Library. You may also purchase them by contacting the publishers directly.
You can also obtain assistance from the UNSW Library. One starting point for assistance is: info.library.unsw.edu.au/web/services/services.html.
SOME BASIC CORPORATE LAW TERMS AND ABBREVIATIONS
The following are brief explanations of some of the most common terms and abbreviations that you will come across during the course. They are largely derived from
Farrar’s
Company Law (3 rd ed, 1991) and Gower’s Principles of Modern Company Law (5 th ed, 1992) and, of course, from the Corporations Act itself.
‘AASB’ The Australian Accounting Standards Board
‘Articles of association’ Traditionally, the constitution of a company consisted of two documents, the Articles of Association and the ‘Memorandum of association’ . Model sets of articles were to be found in Tables A and B of a Schedule to the companies legislation.
The Company Law Review Act 1998 replaced these model articles with Replaceable Rules set out in the body of the Corporations Act . A company which was incorporated before 1
July 1998 may still have ‘Articles’ and a ‘:Memorandum’, in which case these documents will together comprise the company’s constitution.
‘ASIC ’ The Australian Securities and Investments Commission (formerly the Australian
Securities Commission ‘ASC’)
‘ASX ’ The Australian Stock Exchange Ltd
‘Board of Directors’ The directors of a company as a collective body ( Farrar xvi).
Normally, the Constitution (cf) of a company will confer powers of management on the
Board..
‘ Bonus share’ A share given by the company to a member usually proportionate to their existing shareholding and requiring no fresh consideration to be provided. Such shares usually result from a capitalisation of net profits ( Farrar xvi)
‘Books ’ of a company include a register, any other record of information, Financial reports or financial records, however complied, recorded or stored, and a document ( CA , s 9)
‘Call’ (noun) A demand made on a member by the company to pay up the amount remaining or part of the amount remaining unpaid on shares which were not fully paid when issued (cf Farrar xvi); (verb) To arrange the holding of a meeting.
24

‘CASAC ’ The Companies and Securities Advisory Committee, replacing the CSLRC
(Companies and Securities Law Reform Committee)
‘CLERP’ The ‘Corporate Law Economic Reform Program’, established by Treasurer Peter
Costello in March 1997 to replace the ‘Corporations Law Simplifications Task Force’ of the former government.
‘Company’ An association of persons with a common object. This is a very wide concept, but for the purposes of this course we are speaking only about incorporated companies.
Note that the terms ‘ company ’ and ‘ corporation ’ are often used interchangeably.
‘Company limited by guarantee’ means a company formed on the principle of having the liability of its members limited by the memorandum to the respective amounts that the members undertake to contribute to the property of the company if it is wound up ( CA, s 9)
‘Company limited by shares’ means a company formed on the principle of having the liability of its members limited by the memorandum to the amount (if any) unpaid on the shares held respectively by them ( CA , s 9)
‘Compulsory winding up’ A winding up by the court ( Farrar xvii )
‘Constitution’ A document that determines the structure and internal operation of a company. At one time every company’s constitution consisted of two documents – Articles of Association and a Memorandum of Association.
However it is no longer mandatory to have a constitution since a company may choose to rely solely on the Replaceable rules in the Corporations Act instead .
‘Contributory’ A person liable to contribute to the assets of a company in the event of its being wound up. It usually refers to a shareholder ( Farrar xvii). See also the more detailed definition in CA , s 9.
‘Corporation’ A separate legal entity; an artificial legal person with legal rights, duties, and powers. Despite its title, the Corporations Act (the legislation central to this subject) does not apply to all corporations – eg corporations may be formed by special statute (Monash
University). A ‘ company ’ is a corporation formed under Part 2A.2 of the Corporations Act or its predecessors. Although this course is called ‘Corporations Law’, we will spend most of our time talking about these companies.
‘ Debenture’ A written acknowledgment of indebtedness by a company ( Farrar xvii). See also the detailed definition in CA , s 9.
‘ Director’ A person who is a member of the Board of Directors. Defined in CA , s 9, and includes a person acting in the position of director (whether or not validly appointed) and a person in accordance with whose instructions or wishes the directors are accustomed to act.
A director will often also be a ‘member’ (cf) of the company, but not always.
‘Dissolution of a company’ The corporate equivalent of death. It usually follows winding up ( Farrar xvii)
‘Executive director’ A director who is full-time or is under an obligation to devote a substantial part of their time to the management of her company. Not all executives are directors and not all directors are executive directors ( Farrar xvii)
‘Floating charge’
A species of equitable charge created by a company which only becomes a fixed equitable charge on crystallisation (Farrar xviii)
‘Gearing’ The relationship of debt to equity in a company’s capital structure. The more long term debt there is the higher the gearing. Shareholders benefit to the extent that the return
25

on the borrowed money exceeds the interest costs. Also known as leverage in the USA
( Farrar xviii)
‘General meeting’ Meeting of the members of the company entitled to attend and vote.
The constitution may permit proxies to attend and vote in their stead. The general meeting and Board of Directors are the two principal decision-making organs of the company ( Farrar xviii)
‘Holding Company’ Where X Ltd is a ‘subsidiary’ (cf) of Y Ltd under CA , ss 9, 46-50, then
Y Ltd is the holding company of X Ltd (sometimes also referred to as the ‘parent company’).
‘Liquidator’ Statutory officer charged with responsibility of winding up a company ( Farrar xiii)
‘ Listed secur ities’ Securitie s (eg shares or debentures) which are listed on a stock exchange (in Australia, the ASX) (see Farrar xix). More accurately called ‘quoted’ securities.
A company which issues such securities will be a ‘listed company’ (see also the definition of
‘listed corporation’ in CA s9).
‘Loan capital’ Debt capital, ie borrowings, of a company as opposed to its share capital.
‘ Managing director’ Director of company appointed to deal with daily management of company.
‘Members’ For the purposes of this course, the definition in s 231 will generally apply, which defines member as a person who is a member of the company on its registration or who subsequently agrees to become one and whose name is registered on the register of members (but see the more detailed definition in CA s 9). In the case of a company limited by shares the terms ‘member’ and ‘shareholder’ are usually interchangeable. The members collectively are, in effect, the ‘owners’ of the company.
‘Memorandum of association’ Formerly, one of the two constitutional documents of a company. See: ‘ Articles of association’. Since enactment of the Company Law Review
Act 1998, the Corporations Act no longer uses this concept.
‘NCSC ’ The National Companies and Securities Commission, the predecessor to the ASC and ASIC .
‘Ordinary resolution’ Resolution passed by simple majority of votes cast at a meeting.
‘Ordinary share’ A share which is not a ‘preference share’ (cf) but rather confers ordinary rights (eg with respect to voting and dividends and entitlement to share in the surplus on winding up).
‘Preference shares’ A share giving its holder preferential rights in respect of various heads of entitlements listed under CA , s 254A(2), such as repayment of capital, participation in surplus assets and payment of dividends. The voting rights of such shares are usually limited, or can only be invoked in certain circumstances.
‘Promoter’ Person who procures the formation of a company or flotation of a public company ( Gower xc)
‘Proprietary and public companies’ All companies incorporated under the CA are either
‘proprietary companies’ (sometimes called ‘private companies’ in ordinary usage) or ‘public companies’. Proprietary companies are generally not permitted to do anything that would require the lodgement of a Prospectus (such as offer their securities to the public). Differing regulatory requirements apply according to whether a proprietary company is ‘small’ or
26

‘large’ (defined in s 45A). Public companies are subject to certain further regulatory requirements. See the definitions of ‘proprietary company’ and ‘public company’ in s 9.
‘Prospectus’ (In ordinary usage) a formal written document issued in connection with an offer of securities by a public company for subscription or purchase in order to comply with the requirements of CA Part 7.12 Div 2. See also the technical definition in CA s9.
‘Quorum’ The minimum number of persons necessary to constitute a valid meeting ( Farrar , xx)
‘Receiver’ Person appointed by a debenture holder to take over the whole or part of the property of a company on default by the company ( Farrar xx)
‘ Redeemable shares’ Shares of a company which can be redeemed by the company
( Farrar xxi)
‘Replaceable Rules ’ Rules governing the internal structure of a company, which apply to companies registered after 1 July 1998 (other than companies which have the same person as both sole director and sole shareholder) unless displaced or modified by the company’s constitution.
‘Share’ A unit of the share capital of a company ( Gower xciii)
‘Shareholder’ See ‘member’ .
‘Special resolution’ Resolution passed by at least 75% of the votes cast by members entitled to vote on the resolution at a general meeting of which notice as set out in s
249L(c) has been given ( CA , s 9)
‘Subsidiary’ A company will be a subsidiary of another body corporate (the ‘ Holding
Company’ ) if the relationship between the two satisfies any of the tests specified in CA s46
(interpreted in accordance with ss 47-49).
‘Winding up’ The process of liquidation of a company. This can either be compulsory, ie winding up by the court, or voluntary. Voluntary winding up can either be a members’ voluntary winding up in the case of solvency, or a creditors’ winding up in the case of insolvency.
Session 1, 2009 Examination Paper
PRACTICE EXAMINATION - Session 1 2009
Time allowed:
Examination condition:
2 hours , plus 10 minutes reading time
THIS IS AN OPEN BOOK EXAMINATION.
You are permitted to bring any printed or handwritten materials into the examination room.
27

Total number of questions: There IS ONE part, Part A. Part A has three questions.
Questions to be answered: You should answer all questions
Value of questions:
OTHER INSTRUCTIONS:
Part A is worth 60% of the marks for this course.
Your NAME and STUDENT ID should be written on the front of each exam booklet you use.
Your TEACHER’S NAME and your CLASS DAYS AND TIME should be written at the top right hand corner of each exam booklet you use.
Answers must be written in ink, not pencil.
If you think that more information is needed for final resolution of any issue raised by the question, identify that information and its legal significance for the advice you give in your answer.
You must show as completely as possible the process of reasoning you have used to reach your answer. This means you must cite relevant statutory provisions and case law.
Assume that, unless expressly indicated, no company has displaced or modified the replaceable rules contained in the Corporations Act 2001 .
You may retain the examination paper.
FACTS:
Green Pty Ltd (Green) was established by Abe and Zeke in 2002 as a company dedicated to the provision of environmentally friendly tourism services. (Green has not adopted a constitution, and so has not expressly re stricted the company’s exercise of any of its powers, according to the Corporations Act 2001 (Cth), s 125.)
Abe and Zeke each own 30% of the shares in Green, and each of them are directors of the company. The remaining 40% of shares are spread between a number of family, friends and employees. Zeke’s brother Steve owns 5 per cent of the shares, and only invested in the company because he is a committed environmentalist.
Among other investments, Green owns a piece of natural bushland in northern NSW which it keeps as a wildlife sanctuary. Abe and Zeke had authorised the purchase of this land by
Green with the intention of developing an eco-tourist resort on the land. The development of an eco-tourist resort in a wilderness area had been one of the reasons that Abe and Zeke had formed Green in 2002. It had been their hope to use the development as a way of creating a wildlife sanctuary.
In 2006 Abe persuaded Zeke to invite Chris to join Green’s board as a director, with special responsibility for investments. Chris is a stockbroker with extensive experience in investment. Chris runs a company, Shark Investments Pty Ltd (SI). Chris owns 20% of the shares in SI and his wife Pixie owns the remaining 80%. Chris is the sole director of SI.
Pixie takes no part whatsoever in management and is barely aware of the existence of the company.
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With Abe’s approval, Chris arranged for Green to make several share investments which proved very profitable. He arranged these share transactions through SI, and SI made commissions of $100,000 on the transactions.
Chris also arranged for Green to buy a parcel of shares in Blue Sky Mines NL (Blue Sky).
While acting in his capacity as Green’s investment portfolio manager, Chris read a report which Blue Sky provided to all of its shareholders. This report revealed that Blue Sky had discovered new nickel deposits on its land.
Chris engaged in some research about the area in which Blue Sky had discovered nickel, and made some enquiries of local real estate agents and had consulted a number of geologists. This led to his discovery that some rural land very near Blue Sky Mines may contain nickel deposits and that the land was for sale. He negotiated to buy this land and the mining rights to the minerals on the land, on behalf of SI for $5 million. Nickel has now been discovered on the land. SI’s investment in the land and mining rights has increased in value. The total value of the nickel deposit over the expected life of the mine is $2 billion.
Chris also persuaded Abe that Green should sell its landholdings – including the wildlife sanctuary – to a developer. Chris discovered that the wildlife sanctuary would be worth $2 million as a residential development site, and this money could be used to invest in more shares.
Abe called a general meeting of Green at which he proposed a resolution that Green should appoint SI to act as its agent in finding a purchaser for the wildlife sanctuary. Abe promised the shareholders that if this resolution was passed, Abe and Chris would ensure that directors declared a bumper cash dividend to shareholders. Zeke and Steve voted against the motion, but it was carried by a vote of 65%.
Zeke decided that the only way to save the wildlife sanctuary from development was to sell it to Wilderness Protection Ltd (WP) for $500,000. So without Abe or Chris knowing, Zeke and
Steve attended a meeting with WP, and signed a contract of sale. The lawyer acting for WP said, “Hang on, Steve doesn’t appear to be a director of Green, according to our info rmation.” Zeke said: “He is the newly appointed company secretary. We just haven’t filed the appropriate notice with ASIC yet.” The contract was signed, and WP paid a
$50,000 deposit.
QUESTIONS
YOU MUST ANSWER ALL QUESTIONS IN PART A
PART A
1. Is Green bound to complete the sale of the wildlife sanctuary to WP? Explain your answer.
(15 marks)
2. Assume that Zeke wants to pursue legal action against Chris for breach of directors’ duties. Explain the arguments Zeke would make, the steps he would have to take, the remedies he may seek, and the likelihood of his success.
(30 marks)
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3. Assume that Steve is unhappy with the way Green is now being run. Advise Steve on any legal action he can take, and any remedies he is likely to obtain. (Do not duplicate any of the arguments you addressed in your answer to 2.)
(15 marks)
He lp With Legal Writing in Essays (and Opinions in Practice!) in Corporate Law
The leading purpose of essay writing is to read for knowledge, and write with the goal of exploring ideas. Like problem solving dealt with below, the ability to gather knowledge, craft an argument and present it persuasively, is a central lawyering skill.
A good essay should show evidence of critical analysis or evaluation rather than merely attempt to describe an area of corporate law, theory, policy or practice. In particular the essay (and any synopsis) must demonstrate familiarity with material in the course reading list, particularly the theoretical material.
Purpose of a research essay
A research essay gives you the opportunity to show your research skills on your selected topic. You should display your ability to find, read, consider and analyse the researched materials, and express your reasoned views.
A research essay is more than a mere narrative of the materials. Marks are awarded on the process of legal reasoning rather than the conclusion reached, although obvious errors in reasoning to that conclusion will lose marks. In other words, your arguments/views/ analysis are important provided they are properly argued and supported.
Fundamental to success is a properly organised and structured essay. A cogent structure can take several forms, but a suggested structure is set out below.
Organisation and structure
A research essay has five broad parts:
1.
2.
3.
Introduction: An introduction should be a succinct summary of the essay.
Introductions should be 300-600 words in length. The marker should, after reading the introduction, have a clear understanding of the topic and a broad overview of the problems/issues and the student’s methodology used to address those problems/ issues.
Background: Depending on the topic, setting out relevant background may be necessary, for example, defining key terms or concepts, identifying and briefly discussing relevant law or industry practice or government policy, identifying and summarizing published materials in the area, etc. Discuss what is significant, necessary and relevant to your analysis. Avoid irrelevancies.
Identify the problems/issues: Clearly set out and discuss the problems and issues identified. The use of subheadings for each distinct problem is useful.
4. Resolving the problems/issues: Having identified the problems/issues you should analyse/discuss/consider/resolve the problems/issues. In Parts 3 and
4 (the key components of any essay) an examiner will look for various features including: your arguments; identifying and critically discussing other published works in the area; identifying the significant and important problems/issues; consistency and logical development of argument; consideration of the concepts applicable to solving the problem; original
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research/ideas; how you use existing knowledge and relate that to new knowledge; the application of theoretical ideas to industry practice; critical evaluation of existing case law (where relevant); etc.
5. Conclusion: A conclusion should restate the main theme and conclusions of the essay and close-off any issues eloquently.
Approach and Process
After researching and reading the materials, sketch out a structure for your essay along the lines suggested. The synopsis described on page 19 of the Guide might help here. When writing the essay be prepared to modify and develop the structure after you start writing.
After the first completed draft, recheck the organisation and structure. Often difficulties in drafting an introduction or conclusion may suggest a problem with the basic structure of the essay. Working on linkages between the various parts of the essay during this process is important; the aim is for a cogent whole.
It is not always easy to organise and structure an essay because it forces you to confront the hard issues early in the process; it also highlights areas needing further reading, thinking and revisions to the text. In short, it is normal for good essay writing to be iterative to obtain improvement. Although sometimes difficult, the overall product will be to a higher standard if this process is taken seriously. Above all leave lots of time for thinking and refining your work.
Copyright 1996 Michael G Hains
There is a wonderfully readable article by Professor Pamela Samuelson of the Berkeley Law
School on good legal writing. It is more detailed than the above remarks, though it has a lot in common with Michael Hains approach. The article has the following cite and web address:
Pamela Samuelson, ‘Good Legal Writing: of Orwell and Window Panes’ 46 Univ of
Pittsburgh Law Review 149 (Fall 1984) at: http://people.ischool.berkeley.edu/~pam/papers/goodwriting.html
It is a ‘must read’ for those wanting to write a persuasive response to the essay questions!
The leading deficiency in student essays is not leaving enough time for all the steps: reading, reflection, drafting a structure, writing, checking cites and presentation – and then revisions. In short a last ditch effort the few days before due date will never cut it!
Help With Legal Problem Solving for Exams (and Later Legal Life!)
The examination in this subject will test your problem solving ability in corporate law and practice. The test will be a problem question. There will be no direct examination of theory or policy. We are using the compulsory essay as the main vehicle for testing your thoughtfulness on that aspect of the course. However, student answers to the problem question in the exam may be enriched by brief, relevant reference to theory or policy if that is appropriate.
Here are some basic pointers to answering problem questions in corporations law (which will likely be relevant in other areas too).
1. What type of help is your imaginary client asking for?
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
Advice on liability (eg breach of duty, transaction invalidity for procedural defect)?

Advice on which remedy applies (damages, injunction, civil penalty order)?
 Are they plaintiff’s remedies or regulator’s remedies?
Be sure you know exactly what is being asked for. They may inter-mingle a little, but point that out or cross-refer.
2. Is it the plaintiff or the defendant you are asked to advise?
 What are the strengths of your client’s position?

What are the weaknesses?
3. What are the applicable rules?
 Is the company’s constitution/replaceable rules relevant?

Does general law (cases) apply?

Does statutory law apply?

Do these rules inter-mingle – what is the effect of that?
Are you sure? Perhaps the law is uncertain – say so. This is where policy and theory might be relevant for indicating future direction.
4. What are the relevant facts?

Those that are given in the problem question (eg shareholdings, directorships, specific constitutional rules)

Those you must deduce or infer from the given facts (eg can your client pass or resist the passage of a resolution, either alone or with others? Appoint or dismiss directors?
Declare dividends? Does a specific transaction invalidate a resolution because your client is conflicted?)

Are the combined given and deduced facts the same as, or slightly different from those in the cases you have studied? If different, what is the likely effect of the difference?

How do the given, inferred and different facts combine with the applicable rules? If there is no answer according to precedent or by analogy with existing rules/decisions, what (in your opinion) should the answer be? THIS IS THE HEART
OF YOUR ANSWER.
5. What is your conclusion?
 What is your conclusion, whether or not conditional, about your client’s position
(liability, remedies etc) that you have been asked to advise on?

Show how you are working towards your conclusion as you take the analytical steps above, and then briefly sum up at the end of each major question.
6. Presentation

Get to the point fast, and stick to it

Answer all compulsory questions (the first 50% is the easiest to get)

Allocate your time according to the marks per question

Be clear, concise and effective (ie short sentences, legible writing, use headings, numbering and precise language)
7. Practice, Practice, Practice!!

Do problem questions for revision
– learning the rules is not enough. You need to practice identifying the facts and applying the rules.

Do problem questions against the clock

Read your answers over the next day. Think about what might make it a more accurate and attractive answer.

Consider, we remember
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20% of what we read;
30% of what we hear;
40% of what we see;
50% of what we say;
60% of what we do;
90% of what we read, hear, see, say and do! Flanagan, 1997 .
In conclusion, problem solving is not easy. It requires practice. It is a staple skill of lawyering.
The leading deficiency of student answers is that they present the rules and forget the facts and any analysis of the interaction of the facts and rules. They are also too timid to draw conclusions. Be bold – identify the question, know the rules, find the facts, analyse how they combine, and say what you think. And do it in a clear and persuasive manner!
Now you have the first 5 moves, give these a try:
1.Limited liability and powers of corporate organs - revise the questions that you attempted in class 9;
2. Corporate Contracts
Electra, Cassandra and Iphigenia are shareholders in Goddess Hair Pty Ltd (Goddess) which conducts a hair and beauty business in East Sydney. The Return of Directors under s205B Corporations Act names Electra and Cassandra as directors, but due to a typographical error, names Cassandra as chairperson of the company. In fact there has been no formal appointment of Cassandra either to the Board or as chairperson.
There is provision in the Goddess constitution permitting the directors to delegate their powers to a committee made up of any number of them as they shall agree. There is also a provision inserted at Iphigenia’s request prohibiting the company from entering any contracts for amounts over $100,000 with out a resolution of the General Meeting.
Goddess and its shareholders are committed to running an environmentally sustainable business. They decide to purchase equipment to recycle the water used in hair washing, and other beauty treatments. On 9 March 2009 Cassandra places an order on Goddess’s behalf for the purchase of a water recycling plant from Water Mining Ltd (WMining) at a cost of
$125,000. Electra is aware of the purchase, but Iphigenia is not, as no General Meeting is called to consider the matter. WMining is represented by Paris the company’s managing director. He is Cassandra’s brother. Paris had notice of the S205B return, but has not seen the constitution of Goddess.
Before the water recycling plant is delivered, Iphigenia discovers the order placed with
WMining, and wishes to prevent the purchase.
Advise Iphigenia as to whether WMining could enforce the contract against Goddess.
3. Director’s Duties and Shareholder Remedies
Classic Renovators Pty Ltd (Classic) is a company specialising in the renovation of inner city apartment buildings. It buys old blocks of units (both in and close to the Melbourne central business district), renovates them and then sells the individual renovated apartments to the public. It has been very successful in recent years.
Classic has about 30 individuals as its shareholders. Ten of these shareholders are directors of the company. There are no other directors.
In recent months, the following series of transactions has occurred:
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(i) In March Classic purchased an apartment building in Carlton from a company called
Atlantis Pty Ltd (Atlantic). Classic intends to renovate the building. Another company, Tasman Pty Ltd (Tasman), holds 49 per cent of the issued shares of
Atlantis. Allison, who is a director of Classic, is also a director of Tasman. However, she does not disclose the fact that she is a director of Tasman to the other directors of Classic when this matter is considered by the Board of Classic.
(ii) Barry is also one of the directors of Classic. His spouse, Elizabeth, is a director of
Tasman. However, this information is not disclosed to the other directors of Classic.
Barry believes that it is unimportant given that Tasman does not actually own the property being sold to Classic and, moreover, Tasman is not a majority shareholder in Atlantis.
(iii) At a meeting of the board of directors of Classic in June, there is discussion about the forthcoming local council elections. The Board discusses the fact that it appears as though a newly established political party might hold the balance of power in the local council as a result of the forthcoming elections. The Board of Classic has always been conscious of the need to keep on good terms with the local council. At this meeting of the Board, the Board resolves to make a donation of $1,000 to the newly established political party. One of the directors of Classic, Craig, does not disclose at this meeting that he is a member of the newly established political party.
Fiona, who is also a director of Classic, does not disclose that she is the Treasurer of the newly established political party.
Recently, the directors of Classic discussed the actions of one of the company's shareholders, Deborah. It appears as though Deborah has borrowed money from another company which is in the same business as Classic. This company is called Speedy
Renovators Pty Ltd (Speedy). The two companies are competitors. Deborah has directed
Classic to pay the dividends on her shares in Classic to Speedy. In other words, the dividends are used to repay the loan Deborah has from Speedy. Although there is nothing illegal about this, the directors of Classic are concerned that Deborah has borrowed money from a competitor.
The directors resolve to address this matter by amending the constitution of Classic.
Consequently, at the most recent annual general meeting of Classic, a special resolution is passed which inserts a new regulation in the constitution. The regulation (regulation 20A) provides as follows:
"The directors may at any time require a shareholder to furnish satisfactory evidence that no other person has any interest in the shares held by the shareholder (including evidence that dividends are not paid to that other person) and, in the absence of such evidence, the shareholder is not entitled to vote in respect of the shares held by him or her."
The Board of Classic asks you for advice as to the a. legal position; and b. consequent practical action it should take on the relevant company law issues which arise from the above facts.
5. CONTINUAL COURSE IMPROVEMENT
5.
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In order to develop critical thinking in relation to the course objectives, students are expected to read the texts and other resources closely, and are encouraged to look at a range of other material recommended by lecturers. Students are expected to attend lectures and to prepare for, and participate in discussion, and to complete satisfactorily all components of assessment. Student feedback is very important to continual course improvement. This is demonstrated within the School of Law by the implementation of the UNSW Course and
Teaching Evaluation and Improvement (CATEI) Process, which allows students to evaluate their learning experiences in an anonymous way. The resulting evaluations are ultimately returned to the course Convenor, who will use the feedback to make ongoing improvements to the course.
The surveys administered last year as part of the UNSW Course and Teaching Evaluation and Improvement process ('CATEI') revealed that overall students were generally satisfied with Business Associations 1 - 60% agreed or strongly agreed that they were satisfied with the course. Some however noted the perennial complaints about law courses: the reading requirements are very heavy, and feedback on assessment tends to come late in semester, and be unrelated to the requirements for the final examination. In Question 2 of the CATEI survey, 10% of students were unhappy with feedback. Over the past two semesters, to address these concerns, we have introduced the following changes.

Added a class quiz in week 5 to give early feed-back;

Provided examples of the quiz questions before-hand;

Provided additional problem solving classes;
 Provided ‘feed-forward’ for the essay and exam with classes dedicated to preparing students for these assessments;

Provided extra reading specifically on equitable relations in company law, and area of student misunderstanding;

Separated the assessment of the theoretical (essay) and problem solving (exam) components of the course, and made expectations about these components clearer;

Simplified the reading list, and provided greater specificity about materials to be prepared for class.
ADMINISTRATIVE MATTERS AND STUDENT SUPPORT SERVICES
Notice on Distressing Course Material
Occupation Health and Safety
School of Law Office
See Course Outline Appendix 4 at https://www.law.unsw.edu.au/secureweb/docs/2009/law_school_course_outline_ appendices.pdf
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