Company law Essay Example for Free

Company law EssayApplying this doctrine to the case moot, Alicia croup be regarded as one of the promoters of Batco Ltd, since she had involved in the stockation of the club and ranked as one of the three directors after the registration. Its also broad that the other two directors, Adam and Robin, were former employees of Alicia. Thus, even though Alicia didnt play an active role in the formation of the companion, the connection between her and Batco to begin with and after the registration was solid. According to Aequilas v AEFC (2011) 19T ACLC 1006, the legal consequence of a soulfulness being identified as a promoter is that such person owes stringent fiduciary duties to the company and its sh arholders. They argon required to act in good faith and place the companys benefits over their own (Harris, Hargovan and Adams 2011). more than specifically, in Erlanger v New Sombero Phosphate Co (1878) 3 CA 1218, the House of Lords held that promoters have the duty of fully di sclosure to a board of case-by-case directors of the material facts when they enter into contract relations with the company Or, as stated in the in Aequilas v AEFC (2011) 19T ACLC 1006, the court also accepts an explicit disclosure do to shareholders. Taking these judgments into mark, Alicia, as a director of Batco Ltd, as well as a promoter, breached her fiduciary duties.Because Alicia, as a party to the contract with Batco, didnt read known the notification she received from a government clerk to the company before they entered into the contract. Although without official announcement, the rezoning of the area was only a speculation, the unveiling of this information could hold open Batco from buying the site at that price, as the reassigned area could have a change in value. What more, a secret profit was obtained by Alicia in the marketing of property.Despite that she made a disclosure of the actual profit she earned to Adam and Robin, these two directors could not fall i nto the group of independent directors. Additionally, even after Alicia had informed them to the highest degree her real gain, in the prospectus Batco Ltd made to its shareholders, the profit number was falsely presented. Thus, Alicia also contravened the promoters duty of disclosure to the companys shareholders. Once the breach of fiduciaries is established, Batco Ltd and its shareholders asshole sue Alicia, Adam and Robin for remedies.Under s 729(1) in Corporation Act 2011(Cth), the damaged party has ripe to recover the amount of the loss or damage resulting from contravention of duty of disclosure. And infra s 729(3), the time for taking a legal action under s 729(1) is limited to in 6 years after the go bying of the breach of disclosure duty. In Erlanger v New Sombeoro Phosphate Co (1878) 3 CA 1218, the judgment rescinded the initial contract and the damaged party was allowed to recover the leveraging price.Similarly, in Glukstein v Barnes (1900) AC 240, a promoter was req uired to account to the company on the secret profit he realized from the breach of fiduciary duties without voiding the contract. Therefore, one likely outcome in this case study is Batco and its shareholders suing Alicia to rescind the purchase contract at bottom 6 years after the happening of the breach of disclosure duty. As a result, Batco idler recover the purchase price and return the site to the vendor, Alicia.Another possibility is Batco suing Alicia for breach of fiduciary duties and only require her account to the company for the secret gain. However, considering the unpredict open effect of rezoning on the purchased site, the former one would be a better option for Batco. According to Frino and Segara (2012), there are two elements of transaction cost, being the explicit and implied be. Explicit costs include brokerage fees, exchange fees and government taxes which will not be discussed in this report as the trading exercise was performed without incurring such costs. Implied costs emerge when share prices become unfavourable due to effect of the share trades. These unfavourable expenses are difficult to estimate and deduce as they usually happen in a random manner (Frino and Segara, 2012). There are three types of implied costs which will be discussed below. Firstly, every trader will be receptive to bid-ask spreads (Frino and Segara, 2012). Bid-ask spreads are the gaps between the highest purchase price and the lowest selling price at which the head teachers are keen to trade upon. Thus, the median of the bid-ask spread is deemed as the middling price.According to Frino and Segara (2012), when a dealer needs to complete a particular transaction urgently, the deemed reasonable price mentioned above will be forgone as the dealer will require immediate liquidity by purchasing or selling the shares at the stated bid or ask price. There are many delegacys and choices for a company of fundraising their commercial scheme and activities. One of the choices is through corporate fundraising to put forward securities to attract public and outside investors. The statutory viands in related to the process is located under Ch 6D.Under the Corporate Law Economic Reform Program Act 1999, the required standard full-disclosure memorandum while public companies undertaking fundraising is as prospectus (zuozhe 267). In the case, Jaan Company wants to expand its market and decides raising funds through offering securities and has two options to get the first one is raising 10 million and keeps domestic another one is raising 20 million and expand international. They decide to use offer securities to raise fund which means they will need to face a standard required prospectus to the public. According to Section 709, there are iv types of disclosure documents.First is prospectus, which is the most common form of disclosure document and under Ch 6D s709 (1), it essential generally be prepared for an offer of securities. However, if the raising expectant fund is not exceeding 10 million, the prospectus is not compulsory to be prepared. The second type is short form prospectus. This type is permitted to reduce the duration and complication of prospectus that are distributed to potential investors. The third type is an offer information statement. Under an offer information statement, the amount to be raised from the incommode of securities is 10 million or less. The last one is profile statements.This type is prepared as an addition to a prospectus and a reform to alter policy objective and reduce the volume of disclosure objects. Under the circumstance, for the option 1, an offer information statement is appropriate. The offer information statement is comparative simplified and according to the Corporations Acts, it is intended to facilitate more efficient capital raising, especially for start-up and small and medium sized enterprises(zuozhe, 268).The disclosure requirements are lower level than for a prospect us. Under offer information statements, the company is required to state the information about the company (including xplain the companys business and the nature of securities, the financial audited statements within the previous 6 months), explain why the company needs to fundraising, disclose details about risks involved and all amount payable. In addition, it also must state to investors that its different and lower level compare with prospectus, remind the investors should acquire professional advice. Furthermore, the copy has been lodged with ASIC who takes no responsibility for its contents is required. For option 2, a detailed, full-disclosure prospectus is required.The obligations are concluded as following (zuozhe, 266) firstly, all the information, which is also guaranteed reliable and available at the same time, need to be provided in a prospectus to all investors that they might realistically need to know in order to make a decision about the companys enthronisation pro posal secondly, the documents must enclose all the risks associated with the concerned industry in which the company operates thirdly, it is necessary that the disclosure of material information is in an effective way for fundraiser to undertake inquiries as well as disclose details which can enable investors to make a more accurate assessments about securities in a cost-effective way.I will recommend option 1in this case. Jaan is a small manufacturing business and not a mature company it has not enough throw and comparative low capital base as well less able to meet the costs of raising capital. Compare with mature company, Jaan is less able to meet the risks to challenge the market changes and adapt quickly. Offer information is particularly suitable for the small and mid-sized enterprises it has lower requirements than prospectus and also more flexible for the company. spot 2According to S 728, if a disclosure document has following characteristics, then it would contravene mis leading or deceptive conduct o failion form a circumstance that is required to disclose in the document but the company has not and the circumstance is raised as a problem. In this case, Jaan has a very positive cipher in the sales and profit in the following years however, it has not happened. The company said the market needs of snowboarding are huge and the company has confidence to forecast that they have made a right choice. Unfortunately, the company is circulated these forecast without reasonable basis and inadequate marketing research. Furthermore, in order to attract investors, the company is using New Zealands snowboarding popularity diagram rather than world-wide or Australia.Under this circumstance, the company has misled the investors and make them have a wrong perception of the companys vision. In addition, the company also comes out a new circumstance abnormal defy patterns caused by global warming will make the company to face a huge loss. This is unexpected but this circumstance should have been disclosed in the document. Under the Ch 6D, the company should disclose all the relevant risks to enable the investors to make a cautious decision. Nevertheless, the company only focus on the bright side of the future and miss to present the potential external factors that may influence the sales of the company. All these would be the facts that the companys disclose document has contravened and will face a remedy for the investors.Similar case for Jaans investors can look at is Cadence Asset Management Pty Ltd v Concept Sports Ltd (2005) the defendant were misleading the investors about the companys outlook, the court decision is disagree the defendants defence and upheld the plaintiff to recover the loss suffered. Defendants may avoid their liability if they can satisfy the defences set out in ss 731-733. In this case, according to section 731, Jaan may avoid liability if they can provide evidence that their sales forecast is based on reasonable grounds, there is no misleading for the investors. And in order to defend successfully, the company also needs to show that they undertake that they can confirm their information is based on reasonable basis and the accuracy is creditable in the prospectus (zuozhe, 288). Furthermore, Jaan should also to prove that they were unaware of the changing weather to make the company to bear the loss.These can be potential defences for the company. However, the case Cadence Asset Management Pty Ltd v Concept Sports Ltd (2005) has shown that if the company has a deportment of misleading the investors in breach of s 728 (zuozhe, 287), Jaan may not be succeed in the defences based on the following facts they use the wrong popularity diagram to forecast the sales (besides, the company also know this fact), this is misleading to the investors in addition, the changing weather should be a relevant risk which must be disclosed to the investors. Investors have rights to know the risks associated wi th the operation. Base on those facts, the company may fail to defence.