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1. Prepare a constitution - refer to sections 134 and 135.your company's internal management is to be governed by a combination of replaceable rules and a constitution. the constitution must only make provision for a class of redeemable preference shares- nb sections 254a(2) and (3) of the corp act.
2. Research then explain the reason and justification for the following sections of the corp act :- section 129(1) and section 588m(3). your analysis of each section is worth 5% .word limit -aprox 200 words per.
The said constitution belongs and applies to the company named PQR Private Limited.
The primary objective of PQR Private Limited is manufacture, advertise and sell high quality clothing products at reasonable rates and build a brad which is consumer friendly and affordable.
The internal management of the company is said to be governed by the rules and regulations of the Corporation Act 2001 in Australia and is incorporated in the replaceable rules of the said company. Along with the replaceable rules, the said constitution is an internal and an important document on behalf of the company which will determine its internal management along with the replaceable rules. Thus, the internal management of PQR Private Limited is to be governed by the combination of both the replaceable rules and the Constitution of the company. Section 134 of the Corporation Act 2001, allows both, the replaceable rules along with the constitution to govern any company’s internal management in Australia. Thus, both constitution and replaceable rules collectively can govern a company in Australia. However, the said Constitution states that it has the authority and power to change and alter the replaceable rules in a company and any non-compliance or violation of the replaceable rules does not constitute a violation of the Corporation Act 2001.
The company is permitted to appoint a director in a general meeting by a simple resolution. After the appointment it is the director who looks after the internal affairs of the company and is obliged to comply with rules and regulations in replaceable rules and the constitution. The said director has the power to appoint other directors to assist and help him manage the company. However, if any director is appointed in an emergence basis, his appointment needs to be approved by a resolution within two months of appointment.
Any company operative in Australia is permitted with power and authority to issue bonus shares, preference shares and party paid shares under the section 124 of the Corporation Act 2001. The Constitution of PQR Private Limited states that it has the authority and power under section 254A of the Corporation Act 2001 to issue preference shares which can be redeemed. The Constitution thus states all the rights which are required to be mentioned for issuing redeemable preference shares in Australia. These rights include repayment of the capital which was invested by a shareholder, participation of the shareholder in excess profit and assets, cumulative and non-cumulative dividends, voting rights and priority in payment of capital and dividend to other classes of preference shares. Thus, every holder of a redeemable preference share is granted the said rights with the issue of preference shares which can be redeemed at a later stage or whenever the shareholder wishes to get his preference shares redeemed. The Constitution additionally states that while making dividend payments, priority will be given to preference share holders. However, preference share which are redeemable can also be issues however, the said preference shares can be redeemed in either one of the following events as below:-
Signed: …………………………….. Signed: ……………………………
Signature of the Director: …………………………….. Dated: …………………………….
Section 129 of the Corporation Act 2001 in Australia is interlinked with the previous section of the same Act which is section 128 of the Corporation Act 2001. Section 128 of the Corporation Act 2001 states that when an individual or an outsider is dealing with any company which is operative in Australia, he is permitted to assume certain things, which are mentioned in section 129 of the Corporation Act 2001. Therefore, section 129 of the Corporation Act states the assumptions which are permitted to be made while dealing with a company in Australia. The first assumption states that any individual dealing with any company in Australia can assume that the said company has complied with the company’s constitution along with the rules and regulations in the Corporation Act 2001 which are applicable in any company in Australia in the form of replaceable rules. Thus, section 129(1) of the Corporation Act 2001 was introduced to protect every individual who as an outside deals with a company in Australia. Thus, an outsider is assumed to not be aware of the internal management of a company and therefore if such an outsider suffers any harm, loss or damage due to any non-compliance in the internal management of the company, the individual is protected for the said loss and damage by the assumption that the company had complied with all the rules and regulations including the constitution and replaceable rules in its internal management.
Section 588M of the Corporation Act 2001 talks about the recovery of compensation for loss resulting from insolvent trading. Section 588G of the Corporation Act states director's duty to prevent insolvent trading by company, therefore section 588M acts like a liability or the consequence of section 588G of the Corporation Act 2001. The 588M(3) of the Corporation Act 2001 states that if a director has contravened section 588G resulting into a loss or a damage to the creditors of the company, the said loss or damage can be recovered from the director as a debt. Thus, the said action was introduced to keep the directors of every company in Australia under check and make them liable for any breach of director duty committed by them as mentioned under the Corporation Act 2001. Thus, other than duties of directors mentioned in the Corporation Act 2001, section 588G acts as an additional duty on a director of an Australian company, and section 588M states the liability which the director has to bear in case he breached the said duty as mentioned under 588G of the Corporation Act 2001 which is director's duty to prevent insolvent trading by company.
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