Definition of Corporation and Sources of Law Governing Its Structure - Assignment Example

Business Law Name: University: Course Title: Instructor: Date: 1.0 Introduction Business enterprises plays integral role in economic growth and development of a given nation. These entities offer employment, offer reward to the owners in terms of income, contributes to taxation base, contributes to innovation and so on. The concept of free enterprise in any given nation and within her industrial fabric accepts the fact that both public and private owned institutions can own and operate enterprises in any form so long as they are within the approved legal framework (Drucker, 2009, p.4). There are numerous business organisations that can be used when doing business in Australia. Such business organisations include trusts, partnerships, corporations, sole traders, joint venture agreements, franchises and associations (Osterwalder, Pigneur, & Tucci, 2005). Using the case example of corporation as a one of the different business organisation format, the discourse seeks to answer four critical questions. The first is to definite what is meant by corporation; how corporation is brought into existence; legal rules regulating the internal relations; and the legal rules regulating external relations with other parties wishing to enter into contractual relationship with them. 2.0 Definition of Corporation and Sources of Law Governing its Structure The concept of corporation and how it is incorporated has significantly changed over a period of time and thus, impacting on how it is defined (Folk, 1966, p.878-879). Dillion (1990, p.201) observes that the various definition of what corporation is heavily relies on the framing approach that a given work uses to contextualise the term. According to Dillion (1990, p.201-202), there are three main framing theoretical models that guide the definition of a corporation. The first definition is guided by the paradigm that corporation is a distinct organisation detached from shareholders or an organisation that is constituted as result of agglomeration of people without independent existence. The second framework conceptualises corporation as an entity that is created by the state law and on the opposite as an entity created as result of private endeavours. The last one is anchored on the extreme views of public/private distinctions. For the purposes of this discourse, the paper adopts Dillion (1990) definition. In his definition, he posits that “a corporation is an entity existing separately from its shareholders and other participants” (p.206). Nevertheless, in his conceptualisation, he goes ahead and observes that a corporation can be perceived as a legal individual operating separately from the aggregation of shareholders who owns and control it. As such a corporation can be defined as a large company or agglomeration of companies which are permitted by law to engage in joint or single undertakings (Folk, 1966, p.881) Weiner (1964, p.1458) observes that the concept of corporation is premised on a given charter or a statute in a given country. Folk (1966, 880) corroborates the same by observing that statutes “empower corporations to into partnerships and joint ventures”. Thus, the sources of laws for its structure are the statutes enacted by the legislative body in a given country. Within the legal context, the operations of corporations in Australia is principally guided by the Corporations Act 2001 (Cth).Section 57A subsection 1 and 2 defines what a corporation is and what it is not within the Australian context. According to section 57 A (1) a, b & c, a corporation can be “a company, anybody corporate (whether incorporated in this jurisdiction or elsewhere) and an unincorporated body that under law of its place or origin, may sue or be sued, or may hold property in the name of its secretary or of an office holder of the body duly appointed for that purpose”. On the other hand, section 57 A (2) outlines the parameters that define what cannot be referred to au as corporation. The section indicates that “an exempt public authority, a corporation sole” is not considered as corporations. 3.0 Bringing a Corporation into Existence Incorporation of a corporation in Australia is chiefly dictated by the Corporations Act 2001 (Cth) with the major custodian of the whole process being Australian Securities & Investment Commission (ASIC). ASIC (2013) outlines 7 key steps in starting and registering a company. The first step is to decide on a company structure. In this case the structure is a corporation. The second step would be to a choose company name and the name must show the legal status. For instance a proprietary corporation must incorporate the word ‘proprietary’ also abbreviated ‘Pty’. Equally the name has to indicate the liability of members. Additionally, in using certain names such as trust and building society one has to seek approval from relevant parent ministry. In registering a name one can exploit the IP Australia website. The third is to establish how to operate the corporation. These relates to the replaceable rules, constitution and share structure. In regard to this article of association comes into lime light. In the process of establishing a corporation, articles association, outlines the purpose for which the corporation is being initiated for or the extent that the corporation will engage in certain activity that is legally permitted (Folk, 1966, p.880). In a nutshell, this document stipulates internal regulation procedures and mechanisms as will be expounded on in the next chapter. The fourth is to understand legal obligations. This is mostly governed by memorandum of association. Memorandum of Association regulates corporation’s relationship with external actors. This document contains the organisation’s constitution and it is not easily changed. Equally this is expounded on in the second last section (Sharma, 2011, p.67). The fifth stage entails getting consent of shareholder. In this regard, the shareholders should have attained the legal age. The sixth step is to register the name. It is in this stage that corporation is provided with Australian Company Number (ACN) or corporate key and certificate of registration. It is critical to re-confirm with IP Australia whether the chosen name exists or not. The last is for the owners to understand legal obligations in relation to ACN and ABN. in this regard, the firm has to display its name in any area of operation and it has to use the ACN and ABN number appropriately (ASIC, 2013). 4.0 Legal Rules Regulating the Internal Relationship Management of internal relationship between the participants within the organisation is critical for the success of a corporation. Within this context, the ultimate document that stipulates role, position and so on is the Article of Association. Article of Association stipulates how the corporation is to be organised in relation to all aspects of management, operations, shareholding, dissolution, sharing of benefits and loses among others. It equally outlines what the firm will engage in once it comes into operation (Folk, 1966, p.880). The key aspects in regulating internal relations are the replaceable rules of the corporation (Tomasic, Bottomley & McQueen, 2002, p.193). Nevertheless, all these internal regulation have to be synchronised as far as possible to be in line with Corporations Act 2001 (Cth) since any piece of regulation within corporation’s changeable regulations is null and void to the extent that it contravenes the Act. 5.0 Legal Rules Regulating the External Relationships A company as a separate entity can sue or be sued. Moreover, a company engages in numerous contractual obligations either as the contracting party or as the contracted party. Further, the company has obligations to the public that are regulated and guaranteed by the state. In this regard they have to act responsibly while interacting with the public, other corporate, government, and customers. The document that outlines how such relationships should be conducted so as to avoid constant litigations is the Memorandum of Association. This is a living document that offers information about the company (Sharma, 2011, p.67). 6.0 Conclusion From the discourse it out rightly emerges that businesses have significant position in the economy of any given country such as Australia. However, how business individuals engage in this process differs depending on what one wants to attains and the prevailing conditions. In this regard, there are numerous business structures that entrepreneurs use to attain the goals. These include corporations, sole proprietorship and partnership among others. The aim of this expose was to answer four critical aspects within the context of business law using a case example of corporation. The first was to define the term where it emerged that corporation can be conceptualised differently owing to diverse legal regulations however, it can be seen as companies or group of firms operating to attain certain goals. The second was to establish how corporation is brought to existence and the paper established that the process undergoes seven steps. The third was to outline the legal rules that regulate internal relations. It was established that Article of Association is the key elements in defining all internal relations. The last was to establish the legal rules regulating external relationship where it was established that the principal document is the Memorandum of Association. References Australian Securities & Investment Commission – ASIC. (22 April, 2013). Starting a company. Retrieved on 13 December, 2013 from: http://www.asic.gov.au/asic/asic.nsf/byheadline/Starting+a+company+or+business?open Document#step6. Drucker, P. F. (2009). Concept of the corporation. New Jersey: Transaction Publishers. Folk, E. L. (1966). Corporation Statutes: 1959-1966. Duke Law Journal, 1966(4), 875-958. Millon, D. (1990). Theories of the Corporation. Duke Law Journal, 1990(2), 201-262. Osterwalder, A., Pigneur, Y., & Tucci, C. L. (2005). Clarifying business models: Origins, present, and future of the concept. Communications of the association for Information Systems, 16(1), 1-25. Sharma, A. (2011). Company law and secretarial practice. New Delhi: Neekunj Printers. Tomasic, R., Bottomley,S. & McQueen, R. (2002). Corporations law in Australia. Sydney: The Federation Press. Weiner, J. L. (1964). The Berle-Dodd dialogue on the concept of the corporation. Columbia Law Review, 64(8), 1458-1467. Read More