Principles of Corporate Finance Law

Question: Disucss about the Principles of Corporate Finance Law. Answer: No liability company registration A company that is public company in nature and is limited by shares called to be the no liability company. The main business activities of the no liability company are concerned to mining and oil or gas extraction. These types of the companies are very different and unique in comparison to other types of companies in terms of structure (CC, 2017). Moreover, a public company limited by shares is called to no liability company in Australia. This company may issue its shares to public. The no liability companies may be registered according to corporation act, 2001 if the company meets all the terms and condition defined in section 112 and 117 of the corporation act (CCA, 2010). The section 112 describes that Proprietary companies limited by share and unlimited with share capital can be registered in corporation act, 2001. Along with this, public company limited by share and guarantee, unlimited with shares, and no liability can be registered according to this act. There is a provision of registration for the no liability companies if the companies have share capital, the companies are engaged in the mining activities, and the companies does not have any contractual rights to recover the calls on shares (CCA, 2010). The below give table provides the insights into the provision for no liability company in corporation act, 2001. Name of the topic Provisions Names of company Section 148, Section 162, and Section 156 Terms for issuance of shares Section 254B Liability on the shares partially paid Section 254M Calls on shares Section 254P and 254R Winding up of the company Section 477, 478,483, and 514 Registration of the company 601BA Source: CCA, (2010) The company to be registered as no liability company, must not be engaged in the business activities not relevant to the mining purpose. Similarly, section 117 describes the application provisions and process of the registration of different types of companies including no liability company. For getting the company registered, a person must have to fill an application form with ASIC (OPC, 2013). As explained in section 112 that what kinds of the companies are deemed eligible for the registration in corporation act, 2001. The application form must be filled up with the contents given in below points: Name of the company Type of the company, which has to be registered Names and confirmed address of the voluntary member of the company Names, address, date and place of birth of the directors of the company Name and address of the company secretary of the company Address of the companys registered office has to be located According to section 118, the ASIC provides the company with Can, register the company and issue registration certificate that includes the name of the company, ACN of the company, the type and nature of the company, Act of the registration, date of registration, and states in which the company is registered(ASIC, 2016). According to section 119, the company becomes the legal corporate body to do business from the beginning day of the registration. According to section 148, the name of the no liability company ends with the word No Liability. According to section 121, the address written in the application form of registration becomes the registered companys office after registration (OPC, 2013). Therefore, no liability company can be registered with fulfilling some condition described in different section of corporation act, 2001. Doctrine of the capital maintenance: The doctrine of the capital is the fundamental principle incorporated in the business law, which restricts the company to maintain the portion of their share capital with them rather returning to the shareholders without permission of the court or following specific procedure (Tomasic, 2015). There is two main reasons behind the origination of the doctrine. One is to protect the keen interest of the creditors in the company, and second is to ensure the dematerialization of the assets of the company lawfully (Islam, 2013). The doctrine of capital supports the rules for payment of dividend to the shareholders, reduction in the share capital of the company, and restriction on the financial assistance by the company to purchase its own shares. The doctrine of the principle was developed to restrain the companies from buying their own shares. According to this principle, a company cannot buy its own share until it goes through the specific procedure prescribed in act. Along with this, the subsidiary also cannot buy the shares of holding or parenting company. The company must pay dividends to its shareholders from out of the distributable profit. The principle of the capital maintenance was created in mid-nineteenth century. The main premising element of the doctrine was that the shareholders should be returned their capital after the payment of the creditors of the company (Gullifer and Payne, 2015). The doctrine of the capital maintenance was altered in 1980 and new principle statutory procedure was established in place of that. In 1998, the principle of capital maintenance was boiled down to the significant limit to some specific kind of capital transaction. According to this new principle, the shares can be redeemed or bought back based on the provisions in section 684-723 under the company act, 2006. Furthermore, in Australia, the provision for share buyback was included in corporation act, 2001 (Islam, 2013). Therefore, it can be said that the doctrine of the capital maintenance still exists in the company law with some basic elements, which gives the foundation for amendments. After the amendments, companies got entitled to reduce their share capital, if need to be so. The Corporation Act, 2001 requires the companies for preserving their share capital to protect the interest of the creditors of the company. The maintenance of the capital is necessary to meet the requirements of investors and lenders or creditors of the company. Under this act, the company can reduce its share capital but complying with the strict legal procedure and having a solid and justifiable reason prescribed in the act (Ferran and Ho, 2014). The doctrine of capital maintenance in Australia is inspired form the oversea jurisdiction with the same kind of economic and legal framework such as UK and US. But UK and US has given up the principle of capital maintenance but it is still the part of Australian legal framework with some amendments. The principle is the necessary part of the Corporation Law in Australia governing the share capital maintenance, payment of dividend, and reduction in share capital by the companies (Berk et al, 2013). There is provision for reduction in shar e capital, buyback of shares, financial assistance, and payment of dividend out of distributable profit with some specific terms and conditions in Corporation Act, 2001. References: ASIC, (2016) Using 'Limited', 'No Liability' or 'Proprietary' in a name [Online] Available at: https://asic.gov.au/about-asic/contact-us/how-to-complain/using-limited-no-liability-or-proprietary-in-a-name/ (Accessed: 17 January 2017). Berk, J., DeMarzo, P., Harford, J., Ford, G., Mollica, V., Finch, N. (2013)Fundamentals of corporate finance. AU: Pearson Higher Education. CCA, (2010) CORPORATIONS ACT 2001 - SECT 112[Online] Available at: https://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s112.html (Accessed: 17 January 2017). CCA, (2010) CORPORATIONS ACT 2001 SECT 117 [Online] Available at: https://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s117.html (Accessed: 17 January 2017). Ferran, E., Ho, L. C. (2014)Principles of corporate finance law. UK: Oxford University Press. Gullifer, L., Payne, J. (2015)Corporate finance law: principles and policy. UK: Bloomsbury Publishing. Islam, S., (2013) the Doctrine of Capital Maintenance and its Statutory Developments: An Analysis: The Northern University Journal of Law, Volume IV. Pp, 47-50. OPC, (2013) Corporation Act, 2001 [Online] Available at: https://www.wipo.int/edocs/lexdocs/laws/en/au/au196en.pdf (Accessed: 17 January 2017). Tomasic, R., (2015) the Rise and fall of the Capital Maintenance Doctrine in Australian Corporate Law. International Company and Commercial Law Review, 26(5), pp.174-187. CC, (2017) No Liability company [Online] Available at: https://www.castlecorp.com.au/products/no-liability-companies/ (Accessed: 17 January 2017).