Bus200 Law Of Business Organisation- Assessment Answers

Question 

Research the maintenance of capital doctrine- You must research the history of the doctrine ( support your research with case analysis) explain the benefits of the doctrine and finally research and explain the exceptions to the doctrine. note sections 256b, 257b, 260a and 259a

Answer 

The decision making process of the company is determined by the power that has invested in the directors of the company.

Section 256B of the Corporations Act specifies the provisions of the company to make reduction that is not otherwise authorised. The directors have the right to reduce the share capital in such a manner that is not otherwise authorised by law under two conditions. Firstly, the reduction is reasonable as well as fair to the company’s shareholders as a whole. Secondly, this act of reduction does not affect the company's ability to make the payment owed to its creditors. (Austii, Austii.edu.au, 2017)

Section 257B of the Corporations Act specifies share buy-back provisions to make that share buy backs more accessible to Australian companies. This can be made possible by replacing compulsory processes involving auditors and experts. This implies that provisions can be made under section 257B of the Corporations Act which will provide new protection mechanisms for people like creditors and shareholders. This will help the company by laying down emphasis on ensuring better company practices like provisions for solvency continually, providing transparency to the shareholders and full disclosure of all important as well as relevant information deemed fit by the shareholders. (Austii, 2017)

Section 260A of the Corporations Act specifies the Financial assistance by a company for the purpose of acquiring shares in the company or a holding company under the conditions that a company may assist a person to acquire shares in the company or a holding company provided the assistance is not prejudiced and the interests of the company and shareholders are met. The Australian courts earlier maintained that financial assistance have no technical relevance what so ever and that the commercial realities of the transactions must be taken into account in order to determine whether these transactions under consideration can be categorised as a part of financial assistance under section 260A of the Corporations Act or not. (Austii, Austii.edu.au, 2017)

Section 259A of the Corporations Act, specifies that a company must not acquire the shares with exemption under the conditions such as:  

• As per Section 257A shares should be bought back
• Acquiring a legal or similar interest in fully-paid shares in the company if there is any consideration whatsoever in regard to acquisition by the company.

Bibliography

austlii.edu.au. (2016). Corporations Act 2001 - SECT 250R. Retrieved September 12th, 2016, from https://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s250r.html

austlii.edu.au. (2016). Corporations Act 2001 - SECT 198A. Retrieved September September, 2016, from https://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s198a.html

austlii.edu.au. (2016). Corporations Act 2001 - SECT 191. Retrieved September 12th, 2016, from https://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s191.html

Austii. (2017, May 19th). Austii.edu.au. Retrieved May19th 2017, from Austii.edu.au: https://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s260a.html

Austii. (2017, May 19th). Austii.edu.au. Retrieved May 19th, 2017, from Austii.edu.au: https://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s260b.html

Austii. (2017, May 19th). Austii.edu.au. Retrieved May 19th, May, from Austii.edu.au: https://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s257b.html