Ayn412 Tut 1 Essay

Submitted By tidus9586
Words: 617
Pages: 3

TUTORIAL 1 – SUGGESTED ANSWERS

Introduction to Corporate Governance; Corporate Personality and the Corporate Veil;
Types of Companies;
The Incorporation Process; Company Constitutions

SUGGESTED TASKS:

Obtain a copy of the Corporations Act
Revise lecture notes and read the relevant Corporations Act provisions and text references.
Attempt tutorial.
Attend Lecture

These suggested solutions should be taken as a guide only. They are neither comprehensive, nor held out in any way as “perfect”. They are to be used only as a guide for facilitating discussion in class.

Briefly answer the following questions. (Dot point answers are sufficient in this case, given the number of questions).

Question 1

(a) What is corporate governance? Specify within the context of agency theory, and stakeholder theory. Corporate governance is the set of rules governing the internal management and administration of the company, the primary purpose of which is to ensure that those who finance the company's ventures (eg. shareholders and secured creditors) receive a return on their investment.
(b) Identify three important issues in the corporate governance debate. Why are they important in the context of agency theory? Executive remuneration, conflict of interest, and information disclosure. All are important, because changes in any one of them result in wealth transfers between the key agency stakeholders (ie between shareholders, debtholders and management).

Question 2

(a) What is the principle in Salomon's case? A company is a separate legal entity, separate and distinct from its shareholders. Why is it useful in the context of limited liability and asset protection? If the company is an entity separate and distinct from its shareholders, its shareholders can escape liability by using the veil of incorporation as a buffer between themselves and creditors.
(b) What are the ways that the law has devised to lift the corporate veil:
(i) at common law; and
(ii) under statute? Insolvent trading (s 588G, holding companies); debts by trustee companies (s 197); improper dividends (s 254T); other legislation (eg. income-tax, WHS, environment legislation).

Question 3

(a) Identify the various types of companies. Limited by shares; limited by guarantee; limited by shares and guarantee (now no longer possible, but those registered remain); unlimited; no liability.
(b) Why do different types of companies exist? Different risks to investors (and returns); different purposes (eg. NL companies encourage exploration; private…