HA3021 | Corporations Law Group Assignment
[presentation speech script]
Hello everyone,
This is our Group reporting on the presentation we prepared with the HA3021 Corporations Law group assignment. Our group comprises of [name 1], [name 2] and [name 3]. We worked on our project together and divided jobs on each requirement of the task as shown in this slide. We understood that each requirement primarily required three tasks for the completing of task, that is:
- Research relating to legislation and case laws applicable
- Collating and compiling of materials and drafting of answer
- Reviewing the answer to make necessary changes / updation
So we divided the tasks requirements such that each member of the group is involved at least in one stage of preparing the answer to each requirement and the final answer is reviewed by at least two different members of the group. The final copy of assignment was shared with everyone and released after agreement to it.
The task had three main requirements and our presentation will briefly discuss each of them, one-by-one.
“Members” and “Shareholders” in connection with a company
In this requirement, since direct advice was sought assuming the role of a Company Secretary, our group formed consensus that the answer should be drafted as a first person addressing to the second person i.e. James. Since 5 questions were asked by James to the Company Secretary, we divided the answer into 5 parts.
Firstly we needed to distinguish between a member and shareholder so we made references from the legislation – the Corporations Act 2001 and defined member, whereas no definition of shareholder is given in CA2001.
The main difference is that a person can become a member by inclusion of his name in the “register of Members” which is a statutory register required to be maintained and reported to ASIC by corporations. Whereas, a shareholder is general market term and anyone who holds a share in a company can be called a shareholder. Like if I purchase a share of Qantas Airways on ASX I will be its shareholder, but I will only become a member upon insertion of my name in the register of members.
Different ways of becoming a member are specified in section 231 of CA2001, namely: consent as a sponsor, inclusion in register of members, conversion of companies.
Then we stated our opinion based on research of CA2001 that there are no particular restrictions in becoming a member of a company. However, these can be specified in Articles of Association of a company. We also concluded that different types of shares or memberships may, however, carry different voting rights in meetings of members. Unless other specified, each member has a single vote in ‘a show of hands’ and each member has voting rights proportionate to his / her number of shares if a ‘poll’ is taken on a matter.
Then we elaborated on the limits of maximum number of members for companies. Each company shall have at least one member. If the minimum membership requirement is not met, then ASIC may apply to a court to have a company wound up (i.e. cease to exist). A proprietary / private company can have a maximum number of 50 members, whereas a public company like ours Saturday Night Live (SNL) is permitted to have as many members as needed / necessary / possible. Hence, there is no restriction of membership on a public company.
Finally we deliberated on the modes of cessations of membership as: when the person transfers his shares to another person. Another reason is when a person dies / expires or his shares are redeemed by the company under any provisions in the Articles of Association, or when the shares of a person are forfeited under the law.
Procedural irregularities in convening of annual general meeting
In this case scenario the Annual General Meeting or AGM of SNL was started 10 minutes late due to chairperson of the meeting being stuck in a severe traffic jam. The central question in this case was – Does delay in starting annual general meeting (AGM) tantamount to procedural irregularity?
Since advice was sought in a partiular situation at a meeting venue, we again formed consensus that it would be most relevant to answer this question int he form of a conversation at the meeting venue. This added flavour of reality and informal conversation and allowed us to better understand the situations at corporate events.
In order to conclude our understanding we needed to know what constitutes a procedural irregularity under CA2001. So we resorted to Section 1322 of CA2001 for guidance and it included only two ways in which this happens, i.e.:
- Absence of quorum at the meeting (section 252R, Part 2G.4 of CA2001); and
- Any defect, deficiency or irregularity pertaining to notice of the meeting.
There is no other way specified under legislation which can invalidate the proceedings already conducted. In addition to above, sub-section (2) of section 1322 specifically provides that:
“A proceeding under this Act is not invalidated because of any procedural irregularity unless the Court is of the opinion that the irregularity has caused or may cause substantial injustice that cannot be remedied by any order of the Court and by order declares the proceeding to be invalid.”
Consequently, proceedings of a meeting are not invalidated solely because of a delay in start of the proceedings because of a natural phenomenon i.e. being stuck in the traffic. Since none of the procedural lapses as described above are present in the instant scenario, the proceedings conducted are not invalidated because of the absence of two essential elements required under sub-section (2) i.e., meeting has not caused substantial injustice to anyone rather resulted in accidental delayed start due to naturally occurring phenomenon of traffic; and in such case Courts would not be interested in declaring the proceedings null and void since none of the members were intentionally denied their rights or prevented from exercising their legal rights during the proceedings.
That’s how we concluded the answer to requirement no. 2.
Disclosure of interest by Chief Financial Officer (CFO)
The final requirement of the group task pertained to determining whether CFO of SNL has done anything wrong by not disclosing that his cousin / relative is going to bid in a transaction. For this purpose he also disclosed some inside information to the relative and may also somehow have influenced the BOD decision by participating in that meeting.
First part was to determine whether requirements of disclosure as applicable on Directors of a company are also applicable on a CFO. For this purpose we resorted to the definition of a Director, which defines three ways in which a person can be a director of a company:
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