Discuss the "Constitution of EFR Pty Ltd".
A.C.N Number: 123456
1. General terms and Conditions:
The General terms and conditions as contained in this Act shall have the same meaning as mentioned in the constitution, unless specified otherwise.
The words whose meanings are given in bold, italics or in headings are only for understanding and the meaning of the words remain unchanged unless there is any specification about it in the Constitution.
2. Replaceable Rules:
The preference shares shall be subject to the provisions of replaceable rules.
3. Redeemable Preference Shares:
A k, l, m classes of shares are issued and the shares are subject to certain conditions. The conditions apply to the person who holds such class of share. The members who hold such class of shares have the right to attend meetings and have the right to issue notice for such meetings. For some given class of shares, the members also have the right to vote at each session. The members who hold a class of redeemable preference share are entitled to receive dividends depending on the shares that they hold. The rights of the members who hold redeemable preference shares shall be part of this constitution.
From the perspective of a company, it has similar powers and rules like that of individuals. A company may exercise should rules, both within or outside the jurisdiction. A company has legal powers and rights that are similar to that of individuals. This is contained in section 124 subsection 1 of the Corporations Act, 2001. This section contains in details the rights and powers of the company once it is registered (Brown and Sukys 2012). As per this section, the company has the power to issue shares and it has the power to cancel the shares it has issued. Additionally, the company also has the right to issue redeemable or irredeemable debentures of the company. The company has the freedom of revising the shares that are issued to their members. The shares may include the used shares as well the unused shares. A registered company has the authority to conduct a fair division of property. The division is conducted between the members of the company and the benefits of the company may be taken in cash or kind or in any other way. The company has the authority to grant a capital called “uncalled capital.” The company has the obligation to make proper arrangements for the registration and winding up of the company (Brown and Sukys 2012). Inclusion of such a section was very vital as it was seen in most of the cases that the rights and liberties of a company were often mixed with the rights or liberties of individuals. The main purpose for the inclusion for such rights was to make sure that a company is treated is like a separate legal entity as distinct from the members of the company (Levy 2015).
Section 129 (1):
Section 128 and section 129 of the Corporations Act, 2001 are interrelated and is part of Part 2B of the Corporations Act. As per section 128 of the Act, a person can make inferences under the authority of section 129 of the Act regarding the workings or dealings of an undertaking. A company has no authority to declare a given procedure as illegal based on assumptions. The authority to make assumptions is contained in section 129 of the Act. As per section 129 subsection 1 of the Act, a person can make assumptions that a company is bind by the replaceable rules and the constitution of the company (Latimer 2012).
Section 588M (3):
It is an obligation on the directors to prevent a company from insolvent trading. This is contained in section 588G of the Corporations Act, 2001. A company is declared as insolvent when a company is not able to or a company cannot pay its debts that it is entitled to pay to its debtors. In such circumstances, a company can be declared as insolvent. Section 588M of the Corporations Act, 2001 gives authority to the creditor, to obtain their debts from the directors who have violated any of their responsibilities because of which the company is declared as insolvent. The burden of proof lies on the creditor to prove that he suffered a loss because of the director of the company.
According to section 588M, subsection 1 (d) of the Corporations Act, 2001, a creditor is entitled to receive compensation from the directors, if they have suffered a loss due to the breach of the duty of the director (Godwin 2014). People are not aware that in such situations the rule regarding lifting the corporate veil is also applicable. As per the doctrine of corporate veil, the shareholders of may ask the directors to lift the corporate veil of the company showing how the company has become insolvent. In case of insolvent trading, the doctrine of corporate veil can also be applied. In such scenarios, the shareholders may hold the directors liable and may ask them to pay compensation in such situations (Cavitch 2015).
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