Question 1 Advise to Ruby and Manny
Issue: 1. choosing the type of company structure that would be useful for their business 2. Explanation of the ‘company seal’, whether it is necessary for a company to have one. 3. Explain the role of a director, board, and whether a company secretary is needed. 4. Explain concept of a ‘discretionary trust’, and how that might be used in any reframing of their business structure.
Facts and Applications:
1. choosing the type of company structure that would be useful for their business
In this case, Ruby and Manny operated from their house, building up their business clientele by word of mouth. Ruby’s parents were helping them with their business, however Ezra and Golda are not employees in this case. So according their situation, their suitable business structure is sole trader. A sole trader is an individual person who runs their own business and retains all the profits and suffers all the losses. Sole traders operate their business from home, they gain total control over the operation of the business, making decision without other member’s agreement.1 from assignment about reframing their business structure to protect their financial investment, and they can consider to develop a proprietary company. ‘A Proprietary company is a company that is registered as, or converts to, a proprietary company under Corporations Act.’2 (SEACT 45A). If their proprietary company sets up, they must obey the follow feature: ‘A company must have no more than 50 none—employee shareholders if it is to: (a) be registered as a proprietary company; or (b) change to a proprietary company; or (c) remain registered as a proprietary company’3(SECT 113). ‘A proprietary company must have at least 1 director.)4(SECT 201A). ‘Only an individual who is at least 18 may be appointed as a director of a company.’5(SECT201B).
2. Explanation of the ‘company seal’, whether it is necessary for a company to have one.
The company usually circular seal stamps using the company’s name and the number of Australian companies. Ruby and Manny needs to know that in their case of set up a company, they must have a company seal according to corporation act.6 (SECT 123). It’s also important to know that agent exercising a company’s power to make contract, if ‘A company’s power to make, vary, ratify or discharge a contract may be exercised by an individual acting with the company’s express or implied authority and on behalf of the company. The power may be exercised without using a common seal.7
1 Business and corporations law pg.356 (sole trader)
2 Corporations Act s 45 (A)
3 Corporations Act s 113 (1)
4 Corporations Act s 201 (A)
5 Corporations Act s 201 (B)
6 Corporations Act s 123 (1)
7 Corporations ACT ss 126 (1)
3. Explain the role of a director, board, and whether a company secretary is needed.
The role of director is oversee the business and compliance performance of company, that director must in place systems and processes to control and monitor the company. A good director needs to be aware of risk management, risk appetite of their company, and stands up for their organisation’s responsibility. ‘The directors of a company may appoint a person as a director. A person can be appointed as a director in order to make up a quorum for a directors meeting even if the total number of directors of the company is not enough to make up the quorum.8(SECT 201H). The board is one type of meeting of director from the companies. It’s a general or ordinary member’s meeting happened once of each year is called an annual general meeting (AGM). When director made a decision they will gather a meeting called as ‘board’. Ruby and Manny needs to know that directors must not set board limit unless proposed limit has been approved by general meeting.9 (SECT 201p).
The company secretary is a person who does administrative work, such as setting appointments sending letters,…