LA3106 Company And Partnership Law

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LA3106 Company And Partnership Law

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LA3106 Company And Partnership Law

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Course Code: LA3106
University: James Cook University

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Country: Australia

Question:
Discuss about the Companies and Partnership Law for Royal Charter.
 
Answer:

According to section 5 of the Partnership Act 1958, persons conducting business with a view to earn profits shall be deemed to be in a partnership relation with each other. However, the relation between two members of a company that is registered under any Act or is formed in accordance to any Act or Royal charter or any patent letter, shall not be considered as partnership within the meaning of this Act. The following conduct of the parties give rise to partnership:

there must be a valid agreement between the parties intending to enter into partnership relation;
the partners must be equally empowered to monitor the transactions of the company and participate in the decision-making process of the partnership firm;
the partners are empowered to bind the firm;
the partners are bound by the acts on behalf of the firm;
the partners are jointly liable for all the obligations and the debts of the firm incurred while the partner continues to be then partner of the firm;
the partners cannot expel any other partner unless there is an agreement between the partners for the same;
the partners provide complete information and render true accounts of the firm;
the partners are accountable for making any profit without the consent of other partners;
the partnership may dissolve by death or on bankruptcy; or when the partnership becomes unlawful or when the court dissolves the partnership;

Therefore, as per the Partnership Act, the partners of a partnership firm aims at carrying on the business activities with a common objective to earn profits (Coffee et al. 2015). The partners of a partnership firm must have mutual trusts among them and act in a manner that is not detrimental to the partnership. They are under statutory obligations to carry on the transactions of the firm in lawful manner and render true accounts to the other partners of the partnership firm.
If any partner is involved in any form of misconduct o illegal activities, the remaining partners may initiate legal action against such partner or in case, any unlawful event takes place, the partners may dissolve the partnership or approach the court to dissolve the partnership firm. One of the significant advantage of a partnership firm is that every partner is responsible for conducting the transaction of the business and a sole individual is not responsible for every transaction as in sole proprietorship form of business. 
Legal principles
There is no difference between a trading name and a business name and can be used interchangeably.  The legal name of a business shall appear on every official documents and legal documents such as legal contracts, employment contracts, etc. the legal name of a sole trader is the very name of the trader himself. The other forms of legal names include name of an incorporated association or a proprietary limited company (Hoye et al. 2015).
While starting a business, if a person wishes to operate a partnership firm or a sole trader or a trust, except a company, it is important to register the business name of under the Australian Securities and Investments Commission (ASIC). In case the name of the business includes the name and surname of the person operating the business or that of his partner, it need not be registered under the ASIC. A business name is required to be registered under the ASIC only if the name is different from the legal name of the person starting up the business.
However, the business name cannot be updated once it is registered under the ASIC even if updating the name signifies a minute change in it. In order to carry out the trade activities under a different name, it must be registered as a new business. The person wishing to update or change the business name may either cancel then existing name or keep the name prevailing for using it later for a different purpose (Lo 2017).
 
Examples
Shirley Price has a jeweler business named ‘Shirley Price’. Since the trading name includes her own name. it need not be registered.
Joey Tribbiani operates a stationery business named ‘Tribbs stationeries’. Since the trading name does not include his own name, he must register the business name ‘Tribbs stationeries’.
In the given scenario, Earl wishes to attach a business name to the Spectacular Pty Ltd and as a the name suggests, he is a sole trader, therefore, the name of the business has already been registered under the ASIC. In order to change the name from Spectacular Pty ltd to Spekkie Events, Eral would have to register the existing business as a new one and cancel the existing name ‘Spectacular Pty Ltd’.
Evidence of research
All the business registration is conducted under the ASIC through its website where Earl can obtain the Australian Business Number (ABN) and register the name online. The name of the business is decided and checks its availability on the ASIC website and register the business.
Legal principles
Every business organizations must follow standard procedures for the former employees. It is often observed that former employees tend to misuse the confidential information that they possessed while they were the employees of the former organization, which includes the list of the clients dealt with by the former organization (McQueen 2016). Under such circumstances, the employer of t former organization may either terminate the employee or bring a legal action against the wrongdoer and obtain reliefs by way of damages or obtain injunction order against the wrongdoer.
The ASIC forbids any former employee to misuse any confidential information that the employee had access to while he was an employee of the former organization. It is contrary to the business code of conduct to misuse the confidential information of former organization for the benefit of the former employee.
Relevant cases
In Gilford Motor Company Ltd v Horne, Mr. Horne was a former employee of the motor company and was prohibited from soliciting the customers of the Gilford Company. However, he initiated a new company and solicited the customers of the company. The court considered it as a sham under the cloak of corporate veil and was liable for his misconduct.
Evidence of Research
In the given scenario, Earl left the Golden Lights Pty Ltd on 11 Dec, hence he was not supposed to steal eh customers list for his own benefits and is liable to legal action that may be brought against him by the employer of the Golden Lights Pty Ltd. This was further held in SAI Global Property Division Pty Ltd v Johnstone [2016] FCA 1333.
Legal principles
A company is said to have a separate legal identity, which is distinct from that of its members. In case of any breach arising out of the contracts, the company would be held liable for the same and not its members and this principle is known as the ‘Veil of the Corporation’. The principle states that there is a fictional veil between the company and its members (Wilson 2016). However, the court under certain circumstances may not consider this principle and hold the members of the company liable for any act conducted for misusing the corporation behind the veil. This is known as the ‘lifting or piercing the corporate veil’.
Relevant cases
In Salomon v Salomon and Co. Ltd [1897] AC 22, the principle of corporate veil was introduced where the company is said to have a separate legal entity, different from its members. 
In Littlewoods Mail Order Stores Ltd v Inland Revenue Commissioners, the court held that the principle of corporate veil must be applied cautiously. In case, the defendant had conducted inappropriately or exhibited any misconduct using the legal entity of the corporation, the court shall pierce the corporate veil and hold the individual personally liable for such misconduct.
Research Evidence
Therefore, in the given scenario, Earl stole the client’s list from the Golden Lights Private Limited for its own benefit. He cannot hide behind the corporate veil. The court shall pierce the corporate veil as Earl has used the legal entity for improper purpose, which amounts to a sham and is liable to pay damages.
ASIC regulates the markets, finance and corporate sectors of the country ensures that the financial markets are acting in compliance with the legal obligations to operate in a fair an orderly manner and maintain transparency in the markets (Wilson 2016). In case it receives reports relating to misconduct within the market it would conduct an initial assessment of such report to ensure whether there has been violation of the laws related to financial services. ASIC would respond within 28 days from the receipt of such report.
In the given case, the ASIC would investigate about the sham caused by Earl by stealing the confidential client’s lists from Golden Lights Pty Ltd for his own benefits. If the ASIC is of the opinion that there has been a clear misconduct and action should be taken, it would initiate any administrative, criminal or civil action against Earl in case of violation of the laws regulated by the ASIC.
 
Reference List
Asic.gov.au. (2017). How ASIC deals with reports of misconduct | ASIC – Australian Securities and Investments Commission. [online] Available at: https://asic.gov.au/about-asic/contact-us/how-to-complain/how-asic-deals-with-reports-of-misconduct/ [Accessed 25 Aug. 2017].
Coffee Jr, J.C., Sale, H. and Henderson, M.T., 2015. Securities regulation: Cases and materials.
Gilford Motor Company Ltd v Horne
Hoye, R., Smith, A.C., Nicholson, M. and Stewart, B., 2015. Sport management: principles and applications. Routledge.
Littlewoods Mail Order Stores Ltd v Inland revenue Commissioners
Lo, S.H., 2017. Piercing of the corporate veil for evasion of tort obligations. Common Law World Review, 46(1), pp.42-60.
McQueen, R., 2016. A Social History of Company Law: Great Britain and the Australian Colonies 1854–1920. Routledge.
Partnership Act 1958.
SAI Global Property Division Pty Ltd v Johnstone [2016] FCA 1333.
Salomon v Salomon and Co. Ltd [1897] AC 22
Wilson, G., 2016. The search for a principled approach to lifting the corporate veil: a Polanyian perspective to a Quixotic quest.

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