Law VRS Pty Ltd.

Question: Discuss about the Law for VRS Pty Ltd. Answer: Name and Purpose of the Company The name of the company to which this Constitution applies is a proprietary company named VRS Pty Limited. The basic purpose of starting this company is to make the dealing in the selling of retail objects in the market of Australia. Internal Management of the VRS Pty Ltd Company Like the other companies, the internal management of the VRS Pty Ltd is to be administered by the rules that are provided in the Corporations Act of 2001. The provisions of the Corporations Act are incorporated in the Constitution as the replaceable rules. The provisions of the Corporations Act of 2001 apply to the VRS Company through the instrument of this Constitution and the replaceable rules. Therefore, both the Constitution and the replaceable rules will together act in administering the internal management of the Company. The rules regarding the internal management of any Company is stated in Section 135 of the Corporations Act of 2001. This Constitution through the application of the said section makes it express and clear that it has the authority and the powers to make the alterations and changes in the replaceable rules that follow a procedure that is stipulated and fixed. The Section also makes it clear that in case the replaceable rules are violated in some form, that sha ll not be deemed as the violation of the provisions of the Corporations Act of 2001. Directors The Company in accordance with prescribed rules in the Corporations Act of 2001 regarding the appointment of directors shall make the appointment of the director. Till then the director is an appointment of the director of the Company, Mr. X shall act as the director and shall maintain and administer the internal management of the Company. Shares The Company has made the resolution through this Constitution to make the issue of the shares and that too in accordance to the rules of the issue of shares that is stated in the Corporations Act of 2001. The authority of the Company to make the issue of the shares is provided in Section 124 of the Corporations Act of 2001. The said authority makes the inclusion of the right of the Company to make the issue of the bonus shares, partly paid shares and the preference shares. The term bonus shares refer to those shares, for the issue of which there is no amount of consideration amount that is charged by the Company. The company gives the holders of the bonus shares the incentive. However, the rule that is incorporated in the Corporations Act of 2001 states that any company is permitted to make the issue of the preference shares only at that time when the rights of the preference share holders are stated in clear terms in the Constitution and the same is approved by any special resolutio n. But, if any company makes the wish to issue preference shares that are redeemable, then the rights of the shareholders of the same type of shares are to be mentioned in the Constitution of any company. The rights of the redeemable preference shares are as follows: The right to get the repayment of the capital The participation in the extra assets and profits The right to the non-cumulative and cumulative dividends The rights to get the priority in the payment of the dividends that are related with the other shares or the other class of preference shares. Signed: .. Signed: Signature of the Director: .. Dated: . 1. The Corporation Act 2001 in Australia makes rules and regulations, which every company operative in Australia has to comply with, and is the primary statute to govern the business law in Australia. Section 124 of the Corporation Act 2001 discusses the legal capacity and the powers, which the Corporation Act 2001 gives a company in Australia. The section states that a company has a legal capacity of an individual in and outside jurisdiction. Thus, the section was introduced to give a company in Australia the rights, freedoms and liberties which a living person enjoys and makes the company separate and distinct from its directors, managers and employees. The primary objective of entrusting a separate legal entity to a company was to permit the company to perform individual tasks, which every person is allowed to perform like entering into contracts, being sued, or suing. Another advantage of the said feature is that it minimizes the risks from the top management of the company for b eing sued as giving an individual legal capacity to a company; a company can be sued itself (Cummings 2012). Additionally, a company has powers, which a body cooperate possess which includes powers like:- Grant and cancel company shares Issue debentures and issue options for unissued shares Grant security interest in shares which are uncalled Arrange company to be registered as a body corporate and perform other legal tasks The section 124 of the Corporation Act 2001 also states that a company which is limited with guarantee cannot ever issue shares. Thus, with the grant of separate legal capacity to a company, the Corporation Act 2001 makes a company in Australia like an artificial person who has most of the rights, liberties and freedom of a natural person along with the entrusting it the powers of a body corporate (Lowry 2012). However, the section clearly states that the said section does not allow the company to engage in any activity which is illegal or prohibited by the statute and law in Australia. Section 129 of the Corporation Act 2001 is related to section 128 of the Corporation Act 2001. Thus, to understand section 129 of the Corporation Act, it is first important to discuss section 128 of the Corporation Act 2001. The section 128 of the Corporation Act 2001 states that an individual is permitted or entitled to make certain assumptions when hes dealing with a company in Australia (Graw 2012). Section 129 of the Corporation Act 2001 gives the list of all such assumptions which an individual is allowed to make while he deals with a company in Australia. Thus, under section 129 of the Corporation Act 2001, a person dealing with a company can assume that the company has followed its constitution along with the rules in the Corporation Act 2001 which are applicable to a company in form of replaceable rules in their internal management. The said section was created to protect an outsider who is dealing with a company and may not have any way to find out about the internal managem ent of the company, thus he is allowed to assume that the company has complied with all the regulations in its internal management (Latimer 2012). These assumptions include compliance with constitution and the replaceable rules are always followed by a company and in accordance with section 129(1) of the Corporation Act 2001. The said section was adopted to introduce the doctrine of indoor management in the Corporation Act 2001. Section 588 M of the Corporation Act 2001 talks about recovery of compensation for loss resulting from insolvent trading by the company. The said section is a punishment or consequences of section 588G which makes it a duty of a director to prevent a company from engaging in insolvent trading. Apart from the director duties mentioned under section 180-184 of the Corporation Act, section 588G puts an additional duty on director of a company to refrain from trading if the company is insolvent (Lowry 2012). Thus, if a director breaches the said duty under section 588G, he is liable for the same and the liability is mentioned in section 588M. Thus, section 588M of the Corporation Act 2001 states that if a director engages in insolvent trading he is liable to pay creditors of the company, if they have suffered any loss due to insolvent trading. The recovery of this amount can be collected in the form of debt from the directors. The objective of this section was to refrain the directors of a company from engaging into trading if the company is insolvent and be personally liable if they breach the said duty (Vasudev and Watson 2012). Reference List Cummings, B., 2012. Benefit corporations: How to enforce a mandate to promote the public interest.Columbia Law Review, pp.578-627. Graw, S., 2012. An introduction to the law of contract. Latimer, P., 2012.Australian Business Law 2012. CCH Australia Limited. Lowry, J., 2012. The Irreducible Core of the Duty of Care, Skill and Diligence of Company Directors: Australian Securities and Investments Commission v Healey.The Modern Law Review,75(2), pp.249-260. Lowry, J., 2012. The Irreducible Core of the Duty of Care, Skill and Diligence of Company Directors: Australian Securities and Investments Commission v Healey.The Modern Law Review,75(2), pp.249-260. Vasudev, P.M. and Watson, S. eds., 2012.Corporate governance after the financial crisis. Edward Elgar Publishing.