Company Capital Structure
3 sources of funds: 1. Capital contributed by people who form the company or become members of the company 2. Creditors who lend money, 3. Profits not distributed to its members
Once a person has paid money, they are given a share, which entitles them to either control rights (voting and information) or distribution rights (receive dividends or assets upon winding up od company).
Members: Any person that holds shares in a company is a member of the company. They have particular rights relating to administration. Any legal person can become a member of a company, this can mean that companies can become members of other companies.
Debt Capital: Money that is borrowed by a company whether through a bank, credit provider or supplier. This can be either secured) against the company’s assets or the business) or unsecured. These entities that lend money are NOT members of the company.
Managing companies involves decision-making, which is comprised of: * Appropriate capital structure * Nature and form of the company’s activities.
Officers: are persons (only humans) responsible for the company’s management. (In small companies, officers and members may be the same person).
Board of Directors: when there are more than one director in a company.
Directors of company are decided through a manner agreed between the members and reflected in a company’s internal governance rules. Their powers are decided by the law and on internal rules. The difference between whether they are executive or not is whether they are employed by the company.
Secretary: Responsible for administrative and reporting functions defined by the law, a person can be both director and secretary.
Chapter 2 – Company Law
Company Law covers 4 broad main aspects: 1. The formation and ultimately termination of companies 2. Relationships between participants in companies (members, directors, employees and officers) 3. Corporate Finance: how the raise capital – equity capital and debt finance 4. Implications of external party dealings
If company law is breached through either a person or the company, depending on the rule breach, one of or both may result: * The person is subject to a public law sanction, which is a fine or term of imprisonment as defined per state. * The person or company may be stopped from engaging in the wrongful conduct or may be required to do further acts or compensations. This is a private law remedy
Certain contraventions of the Corporations Act is a criminal offences while other provisions are civil penalty provisions.
Company Law is derived from: 1. The Corporations Act 2. Case Law 3. Other sources of law such as ASIC, ASX rulings, etc
The corporations Act is a statuary source of company law in Australia and contains many rules governing companies.
Chapter 2A-2N and Ch6A of the corporations act along with Ch 1 (which contains rules for interpreting and applying the Act) and Ch 9 (which includes some consequences of contravening the Act) make up the core of Aus company law.
Case Law (‘Precedent’)
Case Law can be used as a source for additional binding rules that are not in the Corporations Act or are binding statements governing interpretation of the provisions of the Corporations Act.