Question 15

Within Section 141 of theCorporations Actis a table of 'replaceable rules'.These 'replaceable rules':

a.Apply only when a company does not have a constitution

b.Are a set of rules that can be modified or 'replaced' by a constitution of a company

c.Do not apply to companies formed before 1 July 1998

d.Both (a) and (b) are correct

Question 16

Whiteshoe Developments Pty Ltd (Whiteshoe), a company formed under the Corporations Act has operated since 2002 as a property developer in South East Queensland. The company's constitution requires all contracts over $10,000 to be agreed to by the entire Board of Directors. The major shareholder and dominant force within the company is Don. Don is also one of four directors of Whiteshoe. Don has never been appointed as managing director but has always acted as if he was without any complaint by the other three directors. In fact, the other directors have always followed his instructions. Don entered into an agreement to purchase goods from R Ltd for $50,000. The other directors were not aware of this transaction. R Ltd has supplied the goods but Whiteshoe refuses to pay.It is most likely that:

a.Whiteshoe could not be liable for the contract because the constitution requires all contracts over $10,000 to be approved by the entire board

b.Whiteshoe would be liable because R Ltd can assume that Don was properly performing his duties to Whiteshoe at the timehe enteredthe contract

c.As Whiteshoe is incorporated it is able to enter into contracts and therefore must be liable on all contracts in its name

d.As Don was not formally appointed as managing director Whiteshoe could not be bound by his actions in relation to the contract

Question 18

Walter was the sole shareholder and director of Westfield Pty Ltd (Westfield).Westfield purchased vacant land adjacent to the Pacific Highway.Walter thenset upa new company called Shopaholics Ltd (Shopaholics). Shopaholics was set up for the purpose of purchasing the land, at a substantial overvalue from Westfield, with funds raised from the public issue of its shares. The shareholders were not aware of Walter's connection to Westfield. Westfield sold the land to Shopaholics at a substantial profit.Shopaholics then sought to redevelop the land and construct a large shopping complex on the land.The profit on sale of the land made by Westfield was distributed to Walter in the form of a dividend. Unfortunately, the development plans for the land were rejected by the Gold Coast City Council.Shopaholics failed and the liquidator seeks advice as to what action can be taken to recover the profit made on the sale of the land to Shopaholics.

Select the most appropriate response.

a.The liquidator cannot recover the secret profit made on the sale of the land as it has already been paid to Walter in the form of a dividend

b.The liquidator cannot recover the secret profit because Walter and Westfield are recognised as separate legal persons under theCorporations Act 2001(Cth)

c.The Court would lift Westfield's corporate veil and require Walter to pay back the profit to Shopaholics because Westfield was used by Walter to commit a fraud

d.Both (a) and (b) are correct