Corporate Mobility and Company Law

Question: Discuss about the Corporate Mobility and Company Law. Answer: Introduction: Section 117 and section 112 (a) both sections used to register the non-liability company in Australia. According to Corporations Act 2001, a no-liability company is a corporation that should have a solely mining purpose and it should not be incorporated to calls on the unpaid issue of share. According to the section 112 (a), a company is registered as the no liability company. but, it should involve the following condition: The company should have its own share capital and constitution of the company defines that its sole purpose should be based on mining purposes. Moreover, the company has no contractual obligation under its formation to make progress to call made on its distribution from the shareholder who unable to pay them. In this way, section 9 states the mining and mineral purposes. As per the section 117 (2), the application form should be contained a number of the element named the type of company, name, and address of each individual, place of birth, the address of director, secretary and company, the number of share allotmen. Following are the application form of corporation registration in Australia: Lodgement details Further detail of company Appointed officeholders detail Another officeholders detail Identify ultimate holding company Share Structure Table Details of members Declaration by Applicant Doctrine of Capital Maintenance The doctrine of capital maintenance was coined in the 19th century in United Kingdom. This doctrine underlines the statutory rules in context of distribution of dividends and other distributions to the shareholders, diminution of a companys share capital and a companys redemption or buyback of its shares. The CO contains the provisions regarding capital maintenance and distribution rules in Part II16 and Part IIA17. The maintenance of capital doctrine has caused a significant debate in the corporate law since its zenith in the late 19th century. In Australia, this doctrine forms an important part of its corporate law. The aim of the doctrine is to provide creditors protection in the following ways: Dividends are allowed to be rewarded only out of available profits. Court sanction is must for the reduction of capital. A company is allowed to buy-back its shares only out of distributable profits or the proceeds of a new issue. Financial aid by a company for purchasing its own shares is not allowed, except for some circumstances. By providing for above provisions, Australian law ensures that creditors grant credit on the basis of an expressed or implied depiction that consideration received for the shares are allowed to be utilized only for the business purposes. Also, the law states that such consideration shall not be returned to the shareholders, except in the case of liquidation of the company. Also, the principle of capital maintenance in Australia, attempts to safeguard the interests and rights of shareholders, minority in particular, from unfair treatment in selective distributions of benefits. Recently, Australia has restructured its capital maintenance rules and regulations with some necessary changes which can suit their specific situations. However, it has been seemed that business transactions in Australia have continued to experienced evolution, which has made the protection provided by the conditions of doctrine of capital maintenance inadequate to meet modern needs. Although, the Company Act 2006 has modernized the doctrine to some extent, still it remains unsuitable for fulfilling its objectives. In this view, just like other countries, US and New Zealand, Australia should also shift from the regime of capital maintenance to a general solvency approach. A number of modifications regarding the capital maintenance regime have been brought by the Australian law, resulting in the de-regulation and reduction of a number of rules. The changes were due to the fact that this extensive and deep-rooted doctrine in current years had come to be challenged, questioned and severely criticised from numerous routes. Moreover, the capital maintenance principle has become less important in todays scenario. This is mainly because of the reason that the rules of the doctrine are more complex, and ill-targeted for its objectives and often overtaken by its exceptions. The theory supporting the solvency test approach is that the law should emphasize on the core risk at stake, that is, bankruptcy of the company. This is because it is the only condition in which creditors will remain unpaid. In general solvency approach, all types of distribution to shareholders are permitted along with ensuring that the relevant solvency tests are met, without differentiating between payment from capital or profits. References Atkinson, S.R. and Tolhurst, G.J., (2015) Certainty in joint venture negotiations: a case study,Commercial Law Quarterly: The Journal of the Commercial Law Association of Australia,29(1), p.3. Ferran, E., (2016) Corporate Mobility and Company Law,The Modern Law Review,79(5), pp.813-839. Koh, A.K., (2016) Reconstructing the reflective loss principle,Journal of Corporate Law Studies,16(2), pp.373-401. Scheuch, A., (2016) Konzernrecht: An Overview of the German Regulation of Corporate Groups and Resulting Liability Issues, European Company Law, 13(5), pp.191-198. Latimer, P. (2012)Australian Business Law 2012. CCH Australia Limited.