BULAW 5915 Corporate Law Assignment Sample
Assignment Brief
Purpose
The purpose of the assignment is to enable you to explore and communicate your understanding of relevant aspects of corporation law.
You must answer all of the questions below in a single word document. Please note that question 1, question 2 and question 3 are all separate questions.
The assignment requires you to do independent research. In this regard, you will find the library’s databases useful. You should appropriately reference your assignment and provide a reference list at the end.
This is not a group assessment task. This is an individual assignment and your assignment must be your own work.
Word limit
The length of the assignment is to be approximately 1,500 words. Given the differing weighting of marks between questions, students should use their discretion in allocating the number of words when answering each question. Please do not repeat the questions verbatim at the start of your response.
All written answers should be presented as complete sentences. Please only refer to Australian laws where relevant.
Question 1:
Emma and Sarah are interested in starting a business together, focussing on the production of eco-friendly household cleaning products. They have different strengths and resources to contribute to this business. Emma has a background in chemistry and has developed a unique formula for the cleaning products, while Sarah has extensive experience in marketing and sales.
Emma has substantial savings and can invest the necessary funds for her share of the business costs, but Sarah will need to seek external financing. Sarah plans to use her home as security for the loan. Both Emma and Sarah are concerned about the potential risks and challenges of the business, as well as the need to protect their assets.
Emma and Sarah intend to hire Sarah’s sister, Lisa, as a part-time employee in the business. They aspire to involve more siblings in the business in the future. They hope the business will grow and expand into new product lines and markets.
Required: Emma and Sarah seek your advice on the possible business structures they could use. In your advice you should reflect on the characteristics of the possible business structures, their benefits and shortcomings and explain the suitability of these structures for Emma and Sarah. You should tailor this advice to reflect on the circumstances of Emma and Sarah .
Question 2
Hardeep is a new director of ABC Pty. Ltd., a company which is newly incorporated in Australia. ABC is a property development company. It expects that its main activities will involve acquiring land and developing it into housing estates, and then selling the homes. The company is subject to environmental regulation with respect to its land development activities. Hardeep comes to you for advice about corporate social responsibility.
Required: Please advise Hardeep about both of the following:
(a) What are his duties as a director to act in a socially responsible way under the common law, Corporations Act and ASX Corporate Governance Principles
(b) How might his company develop strategies and approaches to address social, environmental, economic and political expectations
Question 3
According to page 1 of the ASX “Corporate Governance Principles and Recommendations” (4 th edition), “These Principles and Recommendations set out recommended corporate governance practices for entities listed on the ASX that, in the Council’s view, are likely to achieve good corporate governance outcomes”. Discuss whether it would be a good idea to make these principles and recommendations legally binding.
Solution
Question 1
Emma and Sarah are looking forward to starting a business together to make environmentally friendly household cleaning products. One of the key benefits of Emma and Sarah teaming up is that they each bring unique skills and resources to the table. However, they are equally worried about securing their assets in the face of the business's risks and challenges.
Structures for Corporate Governance and The Implications for Law and Accounting
Emma and Sarah have plenty of company structure choices accessible to them. The structure of the business will be determined by several factors, including personal and financial circumstances, risk tolerance, and future business objectives. The possible business structures Emma and Sarah can use for their business are-
• Partnership- considering Emma and Sarah’s business scenario, they must consider this corporate governance structure. Corporate governance in a partnership involves shared decision-making, which can be both a strength and a challenge. Partners owe each other an ethical duty and must deal with each other fairly (Chen, 2023). Benefits include collaborative decision-making, the use of Emma's resources, and Sarah's marketing ability, as well as tax savings. The drawbacks include the partners' shared unlimited personal responsibility, the possibility of tense decision-making, and the challenge of attracting outside investment for university assignment help.
• Sole partnership - this is the second option that Emma and Sarah must consider, there is no difference between the company and its owner in a sole proprietorship. The key benefits of full control, are flexibility, simplicity, and minimum regulatory compliance. The drawback of this structure is that it lacks legal separation, and the owner's assets are exposed to corporate obligations (JD Supra, 2023). Accounting is fairly straightforward, but it can become complicated with personal funds.
• Company private limited (pvt ltd) - Directors make decisions on behalf of shareholders in a proprietary limited company, while there are established tasks and responsibilities for each member of the board of directors. While having limited liability protects property as a structure’s benefit, it also requires an increased need for Emma and Sarah’s business to adhere to regulations which is a drawback. Accounting is a transparent process due to its adherence to legislation and reporting requirements (Clauss et al., 2019).
• Family Trust - The trustee(s) of a family trust decides how the trust is governed and uses the trust assets to provide for the beneficiaries, who can include Emma and Sarah. This setup could assist in keeping the assets safe and provide Emma and Sarah with more options when it comes to taxes, but it takes careful bookkeeping to keep track of their money (Dehimi, 2022). The key advantage of this structure is that Emma and Sarah will have Securing assets, minimising tax liability, allocating profits as desired, and inviting future participation from extended family members, and many more. The drawbacks could be complex administration setup, family rejecting their proposal, limited access and compliance requirements.
Considering the situation of Emma and Sarah, they must opt for Family Trust corporate structures. The limited liability they give allows for flexibility in matters of management, ownership, and asset security. To make a well-informed decision based on their unique circumstances and the probable participation of family members in the firm, Emma and Sarah should seek the advice of legal and financial experts. The success of their eco-friendly cleaning products company depends on anticipating and meeting both immediate and future requirements.
Application of Legal Principles in A Business Context
Businesses are subjected to a wide range of legal principles, these legal principles govern the structure and operations of the business including customer interaction, employee well-being, and other competitions. Below are mentioned the key legal principles that Emma and Sarah must consider and apply in their business for legal safety (Competition, 2022).
• Consumer law - The Australian Consumer Law (ACL) requires that Emma and Sarah not provide any misleading or inaccurate data on the labels or in the marketing materials for their products. They must also comply with ACL regulations while offering warranties and responding to consumer concerns (Durovic, 2020).
• Business registration - Depending on their requirements and objectives, Emma and Sarah should form a partnership, a corporation, or a trust, or operate as sole proprietors before registering their firm with the Australian Firm Register (ABR).
• Finance and Securities - If Sarah uses her house as security for a loan, she and the lender need to be familiar with the mortgage agreement's legal ramifications and duties. Banking and financial regulations must be followed (Competition, 2022).
• Privacy and Data Protection - If they do gather consumer data, their eco-friendly product business must follow privacy rules and regulations like the Privacy Act of 1988 to keep that data secure (Martin et al., 2020).
Analysing Legal Problems and Their Solutions Based on The Law
• Intellectual Property Protection
o Problem- The issue at hand is keeping Emma's secret cleaning formula safe from theft or misuse.
o Solution- Protect the formula by filing for a patent, trademark, or copyright. Create NDAs to prevent unauthorised exposure of sensitive information by workers and vendors (Australia, 2019).
• Liability for Business Structure
o Problem- Concerns regarding personal responsibility pose a problem.
o Solution- To reduce personal responsibility, use a business (Pty Ltd) structure. Ensure that all corporate governance and reporting standards are met (Turnbull, 2019).
• Agreements and contracts
o Problem- Inconsistencies or disagreements in contracts and agreements pose a problem.
o Solution- Have a legal expert evaluate all contracts and agreements to ensure clarity and enforceability. Include dispute resolution provisions that stipulate mediation or arbitration to promptly settle problems.
• Compliance with the Environment
o Problem- Ensuring that environmentally friendly products comply with environmental rules (Gerged, 2021).
o Solution- Stay up to date on changing environmental legislation and certifications. Improve product sustainability on a continuous basis in order to meet or surpass regulatory criteria (Naciti et al., 2021).
Question 2
Director's Duties for Corporate Social Responsibility (CSR)
Hardeep being the director of ABC Pty. Ltd., has a number of legal and ethical responsibilities in order to act in a socially responsible manner.
Common Law
Hardeep as a director of ABC Pty. Ltd. have many responsibilities to the corporation he serves under common law.
• Duty of care and diligence - Directors have a duty of care and diligence to act with the level of care and diligence that a reasonable individual serving in the director's role would use under similar circumstances. The company's effects on society and the environment must be considered.
• Duty of good faith - Directors have a fiduciary duty to make decisions that are both legal and, in the company’s, best interests. The interests of the company's stakeholders, as well as its social and environmental repercussions, must be considered.
• Duty to avoid conflicts of interest - Directors have a responsibility to prevent situations where their own interests might compete with those of the firm. The company's effects on society and the environment must be considered.
Duty Under Corporations Act
Hardeep is required to use reasonable care and diligence in carrying out their duties under Section 181 of the Corporations Act of 2001. Hardeep is responsible for ensuring that ABC Pty. Ltd. abides by all of its duties, including environmental requirements. Directors have a duty to refrain from insolvent trading, which is defined as any commercial activity undertaken by a business while it is insolvent or when there are reasonable reasons to believe it is about to become insolvent (Gadinis and Miazad, 2020).
Duty Under ASX Corporate Governance Principles
If ABC Pty. Ltd. is traded on the Australian Stock Exchange, it can be subject to the guidelines established by the ASX Corporate Governance Principles. CSR practises are encouraged, along with openness, accountability, and ethics, by these guidelines. Hardeep is responsible for ensuring the organisation follows these guidelines and is transparent about its CSR activities.
Developing CSR Strategies and Approaches
Hardeep's company can develop strategies and approaches to address social, environmental, economic, and political expectations in several ways.
• Developing a corporate social responsibility (CSR) policy - Creating a CSR policy means outlining the company's dedication to social responsibility and its particular aims and objectives in this area (Popovich, 2023).
• Establishing a CSR committee - Creating a CSR committee gives employees a voice in shaping and executing the company's CSR strategy (Elalfy et al., 2020).
• Engaging with stakeholders - Employees, customers, suppliers, and members of the community are all examples of stakeholders that should be consulted in order to get insight into their needs and priorities.
• Measuring and reporting on CSR performance - It will allow the organisation to monitor its development and pinpoint problem areas.
Approaches to address social, environmental, economic and political expectations are-
• Social - As a socially responsible business, the firm might donate to deserving local organisations. It might also launch initiatives to promote workplace equality and acceptance of differences (Uncw.edu, 2023).
• Economically - the company's employment of locals and use of local suppliers would benefit the community at large. It might put money into R&D to provide innovative services and goods.
• Environmental - Reduce negative effects on the environment via the use of environmentally responsible land development methods. Energy efficiency, decreased water use, and the use of green materials in construction all fall under this category. Compliance with environmental rules may be ensured by regular audits (Fedele et al., 2019).
• Political - Advocate for responsible development policies by interacting with lawmakers and business groups. ABC Pty. Ltd. may help shape rules that are consistent with its CSR objectives by providing input.
Question 3
Making the ASX Corporate Governance Principles and Recommendations legally binding is a subject of debate and consideration. There are both advantages and disadvantages to this proposal.
Potential Benefits
• The ASX Corporate Governance Principles and Recommendations have the potential to enhance corporate governance practises among listed firms if they were made legally obligatory. As a result, there would be less potential for corporate scandals and fraud, which would be good for shareholders, workers, and other stakeholders.
• The trust of investors in the Australian stock market could increase if corporate governance standards are improved. This has the potential to increase investment in Australia, which in turn would benefit the economy (Council, 2007).
• The regulatory burden on traded companies could be reduced if the ASX Corporate Governance Principles and Recommendations were made legally obligatory. This is because listed companies wouldn't be subject to a excess of conflicting corporate governance standards (Popovich, 2023).
Potential Drawbacks
• Limiting the ability of listed firms to choose corporate governance practises that best suit their circumstances by making the ASX Corporate Governance Principles and Recommendations legally compulsory. This might be especially troublesome for less robust, smaller listed organisations (Council, 2007).
• Listed firms may face higher compliance expenses if the ASX Corporate Governance Principles and Recommendations have become legally obligatory. This is because public companies must observe appropriate corporate governance practises and follow all applicable laws in order to maintain their listing.
• Suppressing innovation in corporate governance, as may result from making the ASX Corporate Governance Principles and Recommendations legally obligatory (Council, 2007). This is because public companies are less willing to try out novel approaches to corporate governance if they fear being in violation of existing regulations.
References
Australia, I. P. (2019). Australian intellectual property report 2019. IP Australia.
Chen, J. (2023). Corporate Governance Definition: How It Works, Principles, and Examples. Investopedia. https://www.investopedia.com/terms/c/corporategovernance.asp
Clauss, T., Abebe, M., Tangpong, C., & Hock, M. (2019). Strategic agility, business model innovation, and firm performance: an empirical investigation. IEEE transactions on engineering management, 68(3), 767-784.
Competition, A. (2022). Australian Competition and Consumer Commission. Recommends Reserve Banks Using Powers To Reform Credit Card Schemes’(Press Release, 21 March 2001).
Council, A. C. G. (2007). Corporate governance principles and recommendations with 2010 amendments. Accessed online www. asx. com. au. Viewed June, 10, 2014.
Dehimi, Y. (2022, September 22). Family Investment Companies vs Trusts – Which Solution is Right For You? - Lawrence Stephens. Lawrence Stephens. https://www.lawrencestephens.com/family-investment-companies-vs-trusts-which-solution-is-right-for-you/#:~:text=Do%20trusts%20provide%20any%20benefits,HMRC%2C%20the%20arrangements%20remain%20private.
Durovic, M. (2020). International consumer law: what is it all about?. Journal of Consumer Policy, 43(1), 125-143.
ElAlfy, A., Palaschuk, N., El-Bassiouny, D., Wilson, J., & Weber, O. (2020). Scoping the evolution of corporate social responsibility (CSR) research in the sustainable development goals (SDGs) era. Sustainability, 12(14), 5544.
Fedele, G., Donatti, C. I., Harvey, C. A., Hannah, L., & Hole, D. G. (2019). Transformative adaptation to climate change for sustainable social-ecological systems. Environmental Science & Policy, 101, 116-125.
Gadinis, S., & Miazad, A. (2020). Corporate law and social risk. Vand. L. Rev., 73, 1401.
Gerged, A.M., 2021. Factors affecting corporate environmental disclosure in emerging markets: The role of corporate governance structures. Business Strategy and the Environment, 30(1), pp.609-629.
InstaFiling. (2023, February 18). List of Designations in a Private Limited Company (2023). https://instafiling.com/list-of-designations-in-a-private-limited-company/#:~:text=The%20organizational%20structure%20of%20a,company's%20strategy%2C%20and%20overseeing%20management.
JD Supra. (2023). Sole Proprietorship, Corporate Governance | JD Supra. JD Supra. https://www.jdsupra.com/topics/sole-proprietorship/corporate-governance/
Martin, K. D., Kim, J. J., Palmatier, R. W., Steinhoff, L., Stewart, D. W., Walker, B. A., ... & Weaven, S. K. (2020). Data privacy in retail. Journal of Retailing, 96(4), 474-489.
Naciti, V., Cesaroni, F., & Pulejo, L. (2021). Corporate governance and sustainability: A review of the existing literature. Journal of Management and Governance, 1-20.
Popovich, S. (2023, June 26). How to Develop an Effective CSR Strategy for 2023 | EVERFI. EVERFI. https://everfi.com/blog/community-engagement/how-to-develop-an-effective-csr-strategy/
Turnbull, S. (2019). Corporate governance: Its scope, concerns and theories. In Corporate governance (pp. 415-440). Gower.
Uncw.edu. (2023). Social Change Strategies. Uncw.edu. http://people.uncw.edu/pricej/teaching/socialchange/Social%20Change%20Strategies.htm
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