Understanding the Difference between a Company Limited by Shares and a Company Limited by Guarantee

The Difference: Company Limited by Shares vs Company Limited by Guarantee

(a)  Name one difference between a company limited by shares and a company limited by  guarantee

(b) Illustrate by reference to a case that a company cannot be used by a person to shelter from a criminal act

(c) Contrast the principles arising from the judgements in each of the following two cases

1. Salomon v Salomon & Co Ltd 

2.Green v Bestobell Industries

QUESTION TWO- chapters 3 and 4. The best practice question to use from workshops is the question from workshop One Question Six about “Digger”

Only write maximum ¾ page to answer this question

Billy Bob and Angeline decide to set up a tattoo parlour called “Tatts r Us”. They wish to run their business under a company structure and be the only directors and members of the company. They would like to keep the affairs of the company as private and as confidential as possible. Their friend Brad suggests setting up a company with the name “Tatts r Us Ltd”.

The company has a constitution that provides that Antonio Gonzales is appointed master tattooist for life.  Several customers have complained to the directors that they have been suffering from severe rashes and skin infections after having their tattoos drawn at Tatts r Us Ltd by Antonio. The directors discover that Antonio has been using the same dirty needle since he commenced work for the company. The directors decide to remove Antonio as master tattooist and replace him with Fabio. Antonio writes to Tatts r Us Ltd demanding his job back. The company tells Antonio that he has no contract. Antonio buys some shares and writes again stating he now has a contract and wants his job back. The company refuses.

REQUIRED:

(a) Do you agree with Brad’s advice underlined above? Explain

(b) Discuss whether the company has to reinstate Antonio. Use the Corporations Act and case law in support

QUESTION THREE

Jack is the managing director of Beanstalk Ltd. The company has a constitution which states that the company may only sell agricultural products grown in Queensland. The board of directors have implemented a company policy that all transactions over $100,000 require board approval.  

Jack attends a trade fair in Victoria and is so impressed with the quality of the beans grown on a Victorian farm by Giant Ltd that he signs a $150,000 purchase agreement.

The board of directors of Beanstalk Ltd decide that this purchase will undermine the company’s marketing campaign promoting Queensland products. They advise Giant Ltd that the company will not make payment under the purchase agreement as:

a) Jack did not have authority to sign the contract and in any event it is above $100,000;

b) Beanstalk Ltd had no legal capacity under its constitution to buy any produce from outside Queensland so the agreement cannot be enforced against it

c) The constitution of Beanstalk Ltd was available in the public record and Giant Ltd had a responsibility to know its contents and comply with it.

REQUIRED:

Advise Giant Ltd on the issues above. To support your answers, you must not only reference your textbook but you must also refer to the Corporations Act and cases where appropriate.

QUESTION FOUR-

Simon has decided he will register a company Cosec Pty Ltd and offer company secretarial services. Before he is ready to register the company he searches for a suitable office and finds a perfect location.  Simon signs on behalf of the proposed company, a 2 year lease on the office and a 2 year rental agreement with a telephone company.

Before Cosec Pty Ltd is registered, Simon gets offered an attractive sum of money to assign the office lease over to another party.  Simon takes the money and transfers the lease.

Cosec Pty Ltd is finally registered and at the first directors’ meeting the ratification of Simon’s telephone agreement is considered.  The directors opt for another telephone system that they consider better suited to the company’s needs.

REQUIRED:

(a) Discuss whether Simon breached any obligations by transferring the office lease.

(b) Will the telephone company have any right of action against Simon?