Question 1

A company secretary works for a small company, and is also the financial officer for the company and generally advises the directors on the day-to-day operations of the company. The company has a constitution which limits the ability of the secretary from borrowing any amounts over $5,000 without the matter being referred to a meeting of the board of directors. The company specifically created a constitution because the shares are all held by family members, and the company secretary is not a family member.

The company secretary does in fact organize a line of credit for the company for some $50,000, which is directly in breach of the company constitution. When the directors discover the company has a liability to a bank for nearly the full amount of $50,000 they take action to suspend the company secretary, and inform the bank that due to the secretary exceeding his authority the company is not responsible for inappropriate lending by the bank, and that the bank needs to seek some solution against the secretary personally.

REQUIRED

What is the liability of the company for the actions of the secretary?

Question 2

Kellie has gathered a few friends together in order to start up a new business which will import goods from various parts of the world, which will be placed into baskets for the purpose of gift giving. The companyGift Baskets Cois proposed, Kellie is to organise the registration of the company and to ensure all the appropriate formalities are complied with. Each friend has promised to put up $10,000 individually, with a proposed capital sum of $40,000 to be established for the new company.

Kellie instructs a local solicitor to establish the necessary documents for the new company. She orders 1,000 wicker baskets to be delivered to her home address, which is to be the headquarters of the new company. Kellie has also contracted a local designer to establish a logo for the company's products.

After two weeks, none of the friends have been able to contribute any money to the venture, due to individual problems such as school fee payments, car accidents and payments for care of parents; none of the participants except Kellie have done anything in regard to the proposed company.

The solicitor informs Kellie that the company is ready for registration and presents a bill for her work. The baskets are due to arrive and they need to be paid for, and the local designer wants to be paid for their work.

No company has been registered, and the likelihood of any future registration is very doubtful.

REQUIRED

Who is liable for the various amounts that Kellie has contracted for on behalf of the company that is (or was) to be formed?

If Kellie does register a company, will that mean she is no longer liable for the various contracts she entered into on behalf of the company?

Question 3

Explain to a client why the rules governing the internal administration and management of their company are 'replaceable'.

Question 4

What are the three effects of the statutory contract?

Question 5

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 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 $10 million, employ 40 people full time and have gross revenue of $20 million.

Your five-year plan shows that, by the end of that period, your company's assets will have increased to $26 million and have estimated revenue of $52million. 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.

REQUIRED

Explain what type of company you would apply to register 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 fiveyears' time.

Also, could the company name include 'Anzac Coffee'?