When you first met Julian, he was a sole trader with a recycling and second-hand business, which he has now registered as a company, Retrofit Pty Ltd. The company does not have a constitution. The company’s owners are family members including Julian, his wife Samantha, his mother Bev, and Samantha’s parents have a small shareholding. The company’s directors are Julian and Bev.

Retrofit operates out of a small, leased shopfront. The landlord Bobby Dazzler has a shed in the back car park and has offered it to Retrofit Pty Ltd. Samantha has expressed interest in expanding the family business to selling upcycled products of a more artistic nature and sees the shed as an ideal art studio to create products as well as conduct art classes and workshops. Bev has misgivings as to the viability of this business expansion and insists on a new business plan being produced. She suggests that Julian prepare the business plan while Bev is away on a camping vacation for 2 weeks. Unable to quickly resolve the matter with Bev, Julian informs Bobby that his family will sign the new lease in the name of Chalky Cheese Pty Ltd. Although that company doesn’t yet exist, Julian is confident that, based on everything he has learned from you in the Retrofit startup, he will assist Samantha in registering a new family company in that name, without Bev’s direct involvement.

Julian signs the new lease as Managing director of Chalky Cheese Pty Ltd.

It is actually more difficult to do all the registration paperwork than Julian expected, and when the landlord went looking for the company’s Australian Business Number, could not find any relevant details. The landlord is angry, claiming the Julian deceived her. Bev is angry, claiming that Julian deceived her and the other members of Retrofit Pty Ltd.

Now Julian comes to you for help to register Chalky Cheese Pty Ltd and your advice as to the consequences of his hasty actions.

Question:

Once Chalky Cheese Pty Ltd is properly registered, (with Retrofit Pty Ltd as half owner) does the company have the power to enter into a lease contract? Who exercises this power – the company’s members or directors, or both?