company law
QUESTION 1
Issue: the issue about company’s constitution and whether the loan contract between ABC bank and Sambal Pty Ltd is invalid.
State the law:
Section 140 of the corporations act states that:
“A company’s constitution (if any) and any replaceable rules that apple to the company have effect as a contract:
(a) Between the company and each member; and
(b) Between the company and each director and company secretary; and
(c) Between a member and each other member;
Apply the law:
According to section 140, a company’s constitution is only an internal governance rule, it cannot be enforced by outsider and also cannot be used and act between a company member and an outsider (Corporation Act, 2001).
In this case, Sambal Pty Ltd has a constitution, which restricts the amount of money the company can borrow at any one time to $10m. So, as a director of Sambal Pty Ltd, both Jim and Peter require compliance with this internal governance rules (maximum borrow $10m at one time), however, the directors who had been authorised by the board had borrowed an extra $2m loan from ABC Bank this time. Well, at the same time, section 140 is important in determine that the consequences of a failure, by some person who is bound by them, to comply with the internal governance rules. This means the liability should be undertook by the directors.
State the law:
Section 125(1): if a company has a constitution, it may contain an express restriction on, or a prohibition of, the company’s exercise of any of its powers. The exercise of any of its powers, the exercise of a power by the company is not invalid. 125 (2): if a company has a constitution, it may set out the company’s object. An act of the company is not invalid merely because it is contrary to or beyond any objects in the company’s constitution.
Section 126(1): 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
Issue: the issue about company’s constitution and whether the loan contract between ABC bank and Sambal Pty Ltd is invalid.
State the law:
Section 140 of the corporations act states that:
“A company’s constitution (if any) and any replaceable rules that apple to the company have effect as a contract:
(a) Between the company and each member; and
(b) Between the company and each director and company secretary; and
(c) Between a member and each other member;
Apply the law:
According to section 140, a company’s constitution is only an internal governance rule, it cannot be enforced by outsider and also cannot be used and act between a company member and an outsider (Corporation Act, 2001).
In this case, Sambal Pty Ltd has a constitution, which restricts the amount of money the company can borrow at any one time to $10m. So, as a director of Sambal Pty Ltd, both Jim and Peter require compliance with this internal governance rules (maximum borrow $10m at one time), however, the directors who had been authorised by the board had borrowed an extra $2m loan from ABC Bank this time. Well, at the same time, section 140 is important in determine that the consequences of a failure, by some person who is bound by them, to comply with the internal governance rules. This means the liability should be undertook by the directors.
State the law:
Section 125(1): if a company has a constitution, it may contain an express restriction on, or a prohibition of, the company’s exercise of any of its powers. The exercise of any of its powers, the exercise of a power by the company is not invalid. 125 (2): if a company has a constitution, it may set out the company’s object. An act of the company is not invalid merely because it is contrary to or beyond any objects in the company’s constitution.
Section 126(1): 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