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LEGT2741 Lecture 1 – Structure of Australian Company Law and Administration Purpose: Describe the development of company law in England. Understand the current structure of Australian company law.
Identify the process of and current law reforms.
Explain how company law is administered through ASIC.
English Company Law:
Incorporation Monasteries, local government boroughs and trade guilds were the earliest examples of bodies to be incorporated by Royal Charter (prior to parliamentary democracy). Commercial Development The 17th and 18th Centuries led to the formation of large, partnership-like structures known as joint-stock companies, so that pooled investments could be made. At this point, partnership and corporate law were fused. The Bubble Act of 1720 attempted to stop the rampant growth to joint stock companies (excessive speculation), particularly in the Dutch tulip industry.
Such activity is similar to that before the dot.com collapse.
Bubble Act of 1720 An early form of securities regulation directed at ‘persons who contrive such dangerous and mischievous undertakings, under dales pretences of public good, and draw in many unwary persons to subscribe’.
It sought to limit those who could raise capital through the issue of securities by requiring royal charter (merit regulation, where a minimum standard or approval is required). It was repealed in 1825 as it did not meet the aims).
Joint Stock Companies Registration and Regulation Act 1844 (UK) Set out a procedure for incorporation of companies without the need for a Royal Charter (i.e. Incorporation was no longer a privilege.
Limited Liability Act 1855 (UK) enhanced this developed by allowing people to take commercial risks without concern that creditors might seek access to their personal wealth.
Modern Practice Can now be traced back to the 1844 Act, which assisted the formation of companies – to form a company, one only need to fill out a form and pay a fee of $400 to ASIC (administered process and approval).
Limited Liability remains the biggest advantage in choosing a company as a business structure.
Australian Company Law:
State Regulation Prior to and after Federation, the colonies/states passed their own company legislation that often lacked uniformity. However, uniformity in laws is desirable for investor and business certainty as it reduced the transaction cost of interstate operations. Division of Power Constitutional constraints under s51(xx) meant that the Commonwealth’s company law-making powers were restricted to ‘foreign corporations and trading and financial corporations formed within the limits of the Commonwealth’
Huddart Packer case (1909) adopted a narrow/literal interpretation of statutory provisions, and denied that the Commonwealth had the power to make laws regarding company creation.
Early Attempts Uniform Companies Act 1961 was the first attempt whereby the states copied each other’s laws, and was largely a failure. In 1974, three states formed the Interstate Corporate Affairs Commission, which only lasted until 1981.
The Companies Code 1981 was also applied nationally, but introduced a law enforcement body to administer the cooperative scheme (National Companies and Securities Commission).
Corporations Act 1989 (Cth) Deficiencies in the administrative structure of the cooperative scheme led to the passing of the first Commonwealth Corporations Act. However, the constitutional validity was again challenged in the High Court. NSW v Cth (1990) 8 ACLC 120 reaffirmed earlier precedent rather than shift views of interpretation, meaning that Commonwealth power was still restricted.
Political Compromise In June 1990, the states and territories passed complementary application legislation, which applied Commonwealth company law as if it were their own in return for revenue. The amended Corporations Law came into effect 1 January 1991. Constitutional Crisis Re...
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