Chapter 8: Company Incorporation and its effects

Revision questions in textbook - Questions 1-5:

1) What is the significance of Salomon v A Salomon & Co Ltd [1897] AC 22? What is the 'corporate veil' and when is it permitted to be lifted under the Corporations Act?

2) Describe the functions and powers of ASIC.

3) Compare the key features of a public and proprietary company.

4) What is the principle upon which a company limited by shares is based, and why is it significant?

5) With reference to the Corporations Act, what steps need to be taken to register a company? What immediate post-registration obligations need to be met? What are the consequences of registering a company?

Problem question in textbook:

You have discovered a low-cost way in which people can brew espresso coffee drinks on their stoves at home, without the need for expensive coffee-making machines. You want to form a company as a vehicle to market your discovery and for your company to consist only of your family members. You want the words 'Anzac Coffee' to be part of the company's name, to identify it as having a truly Australian flavour. You envisage that by the end of its first financial year your company will have gross assets of at least $5 million, employ 20 people full-time and have gross revenue of $10 million. Your five-year plan shows that by the end of that period your company's assets will have increased to $13 million and have estimated revenue of $26 million. By that time however the company will only need to employ five people full-time, with another 66 employed for half the time of a full-time equivalent. Explain what type of company you would apply for registration with ASIC, how that company would be categorised at the end of its first financial year, and whether it would remain in that same category in five years' time?