Company Law New Edition Pty Ltd

Question: Discuss about theCompany Lawfor New Edition Pty Ltd. Answer: In the present case scenario there are two public limited companies namely Lipton-Herzberg Ltd and Welsh Ltd. The directors of the present company intend to start a business in the form of a new company namely New Edition Pty Ltd. The question arising in this case is whether the new company should be dependent on simply the replaceable rules or whether the company should have its own constitution (Hill, 2010). Hence it is necessary to understand the importance of the both the aspects and determine their usefulness for the company. Thus it is necessary that both are differentiated and their characteristics and importance with respect to a new company should be determined. The governing legislation that deals with aspects of constitution and replaceable rules is the Corporations Act 2001 (Cth). The purpose of replaceable rules is to facilitate companies with dynamism and freedom to follow an existing set of rules compared to engaging itself in preparing their new constitution. Thus it is completely dependent on the two companies mentioned in the case scenario whether the internal governance of the company will be based on the replaceable rules, the general constitution which is available during the incorporation of the company or a new constitution (Martynova and Renneboog, 2010). In the present case the replaceable rules will be automatically applicable if the two companies intend to keep the constitution setting to be a part of their internal management. Again if the new company is to have their own constitution but certain sections of the constitution are not included, the replaceable rules will be effective on those aspects unless the constitution have modified or changed them. Section 141 of the Corporations Act 2001 (Cth) deals with certain provisions applied as replaceable rules. These rules are concerned with operation and management of the company. Section 198 C defines a managing director (Martynova and Renneboog, 2011). From the present case a nominated person of the Lipton-Herzberg Ltd has to be appointed as the managing director of the new company. The managing director cannot be removed unless agreed upon by the company. The replaceable rules also mentions about the voting rights of the directors in directors meetings. In the case of ordinary shares there could be six votes per share and in case of preference shares there would be one vote per share. Thus replaceable rules also mention details of way to call directors meeting and the required quorum for the meeting. Thus the list of provisions mentioned in the replaceable rules suggests their importance for the management of a company (Heenetigala et al., 2011). Thus for a constitution to be valid all the provisions of replaceable rules must be present and fulfil the requirements. However in the present case the new company is a proprietary company. The replaceable rules mentioned in the case study will not be effective unless a constitution is made with respect to the new proprietary company (Boros, 2010). This is because the company will have no formal internal governance. Thus for the replaceable rules to be applicable on the directors and shareho lders of the new company it is important that a new constitution is adopted for the new company. A constitution of a company refers to a document which contains rules governing the relationship between the director and the company secretary or the company and each of its shareholders. Hence there is no particular prescribed method to be followed. A constitution is formally adopted by a company when they decide to govern the business through a special resolution. However initially the company can follow an existing constitution or replaceable rules and can create the constitution at a later date. Thus a special resolution needs to be passed which requires 21 days notice (Adams et al., 2011). This is applicable with respect to the present proprietary company. However in case the company is a publicly listed company 28 days notice is to be provided. The agreement will be concluded if 75% of the votes casted are in favour of the forming of the constitution. Thus aspects like objects of the business and modus operandi are important facets and if they are changed will require special resolution and modification of the constitution. Thus for the governance of a company it is important that regular replaceable rules may not suit with the business requirements of the newly formed business. Thus both the companies in this case should take reference to the Corporations Act 2001 and the basic constitution they received on the incorporation of the new company (Godwin, 2015). The rules should match the needs of the company. Otherwise they have to modify the document. This can be done by adopting a new constitution if the company is to be based on the existing replaceable rules. References Adams, M. A., Armstrong, A., Clarke, A., Clarke, T., Eddie, I., Heenetigala, K., ... Richardson, A. (2011). Developing a responsive regulatory system for Australia's small corporations: governance for small business. Boros, E. (2010). How Does the Division of Power Between the Board and the General Meeting Operate.Adel. L. Rev.,31, 169. Godwin, A. (2015). Teaching corporations law from a transactional perspective and through the use of experiential techniques.Legal Educ. Rev.,25, 221. Heenetigala, K., Armstrong, A., Clarke, A. (2011). Corporate regulation and corporate governance of small businesses in Australia.Journal of Business Systems, Governance and Ethics,6(3), 43-52. Hill, J. G. (2010). The Architecture of Corporate Governance in Australia-Corporate Governance-National Report: Australia. Martynova, M., Renneboog, L. (2010). A corporate governance index: convergence and diversity of national corporate governance regulations. Martynova, M., Renneboog, L. (2011). Evidence on the international evolution and convergence of corporate governance regulations.Journal of Corporate Finance,17(5), 1531-1557.