Tutorial Guide

This document contains the tutorial exercises and learning objectives for each week of
semester. The exercises contain a mixture of short answer questions, problem solving exercises
and some essay questions. The scope of coverage of the exercises should serve as a useful
checklist for the issues you should understand in order to confidently complete the
assessment in this subject.
The material for some weeks is more than can be reasonably covered in a one hour tutorial.
Accordingly, your tutor will advise you of the questions he or she intends to deal with in detail
in the following weeks tutorial. At a minimum you should be prepared to discuss the answers
to the questions nominated by your tutor as being the focus of each tutorial. Your tutorial
participation marks in this subject (10% of the total mark for the subject) will hinge on you
doing this.
This does not mean you should ignore the other questions and exercises. It is strongly
advisable that you complete all the allocated exercises for each topic.
Written answers to the tutorial questions covered in the tutorials will generally not be made
available as the expectation is that you prepare for, attend and actively participate in the
tutorials in which answer guidelines are discussed. If you would like answer guidelines for
questions not covered in class, please ask your tutor.
Your tutor will more fully explain how he or she intends to run the tutorials and assess tutorial
participation.

Tutorial 1 - Week 2:
Topics:

Introduction
Legal forms of business and choosing between them

Learning Objectives:

Get to know my tutor.

Understand the way the Unit is administered and what I have to do to pass.
Become familiar with the textbook for this subject.
Become familiar with (or recall from BSL) the concept of legal form of business.
Work out a plan for your approach to studying this subject
Work out how to choose between legal forms of business, including types of company

Questions/Activities:
1. Do I understand the administrative and assessment arrangements for this unit? Do I
understand the expectations on me to prepare for and actively participate in tutorials?
2. What are the materials I should buy? What are materials which I should use but do not
need to buy?
3. What are the features of the prescribed textbook? What is the best way to use it?
4. Where do I find cases on-line?
5. Where do I find the Partnership Act?
6. What Corporations Law resources in the library can I easily access?
7. Write out a brief plan for your approach to study in this subject. Ensure your plan
addresses when and how much time you intend to commit to viewing lectures and access
the other materials posted on LMS for this subject. Ensure your plan also allocates time
for reading the materials, preparing adequately for tutorials and completing assessment
items. You will be asked in the final tutorial to assess the extent to which you stuck to your
plan.
8. What do I know about businesses? Have I ever worked for one? Have I ever belonged to
a club? Have I worked for or even given money to a charity? Have I made a contract
with a business, a charity or a club? What legal form did the business, club or charity
have?
9. If I was setting up a business/club/charity, how would I choose what legal form it should
have? On the other hand, if someone asked me what legal form of business they should
use (a common question for accountants), how would I help them to choose? What would
I write in an advice?

Tutorial 2 - Week 3:
Topic:

Partnership Law

Learning Objectives:

To ensure that I know how to write an answer applying rules of law to

facts
To know what the law is that solves the problem of whether a given
relationship is a partnership
To know when a partners actions will be contractually binding on the
partnership

Questions:
1. What do I do when I read material in a textbook? What should I do?
2. What are the rules I have to use to solve a question as to whether a particular relationship
is a partnership? What is the source of each aspect of the rules?
3. When and where should I put case and section references in my notes, in essays and in
problem answers?
4. Problem 1: Alfred and Beatrice operated a bookshop together, sharing profits equally.
They decided to expand. Their friend Coco offered them $50,000 to help finance the
expansion. Accordingly she agreed with Alfred and Beatrice that she would lend the
money in return for $5,000 a year payable from sales less outgoings. However, she was
concerned that she might lose her money. Hence Alfred and Beatrice also agreed that they
would consult her on any major decisions and that she could inspect the books whenever
she wanted to. What is the relationship between Alfred, Beatrice and Coco? Would your
answer be different if the $5,000 per annum was to be paid out of profits?
5.
Problem 2: Adrian and Brian intend to start a business selling second hand cars.
Adrian and Brian decided to use a partnership, as business structure to operate their
second hand car business. Consider the following scenarios.
Scenario 1
There is no agreement between Adrian and Brian as to their respective authority to
contractually bind the partnership with regards to third parties:
a. Brian tells Colin that he is contracting on behalf of the partnership and purchases a
second hand car from Colin for $10 000;
b. Brian contracts with Colin but does not disclose that he is acting on behalf of the
partnership, and purchases a second hand car from Colin for $10 000;
c. Brian tells Colin that he is contracting on behalf of the partnership and purchases a
leather jacket from Colin for $1 000;
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d. Brian contracts with Colin but does not disclose that he intends to act on behalf of
the partnership, and purchases a leather jacket from Colin for $1 000.
Scenario 2
There is an agreement between Adrian and Brian as to their respective authority to
contractually bind the partnership with regards to third parties. In terms of this
agreement, Brian may not purchase cars on behalf of the partnership if the price is in
excess of $10,000:
a. Brian tells Colin that he is contracting on behalf of the partnership and purchases a
second hand car from Colin for $20 000.
b. Brian contracts with Colin but does not disclose that he intends to act on behalf of
the partnership, and purchases a second hand car from Colin for $ 20 000.
c. Adrian informs Colin of the agreement between Brain and Adrian. Brian tells Colin
that he is contracting on behalf of the partnership and purchases a second hand car
from Colin for $20 000.
d. Brian contracts with Colin but does not disclose that he intends to act on behalf of
the partnership, and purchases a second hand car from Colin for $ 5 000.
Scenario 3
There is an agreement between Adrian and Brian as to their respective authority to
contractually bind the partnership with regards to third parties. In terms of this
agreement, Brian may purchase any item whatsoever on behalf of the partnership:
a. Brian tells Colin that he is contracting on behalf of the partnership and purchases a
leather jacket for himself from Colin for $1 000.
b. Brian contracts with Colin but does not disclose that he intends to act on behalf of
the partnership, and purchases a painting to put in the partnership office from Colin
for $1 000.
c. Brian contracts with Colin but does not disclose that he intends to act on behalf of
the partnership, and purchases a second hand car from Colin for $ 5 000.
Required:
Advise Adrian, Brian and Colin whether the partnership will or will not be bound and
give reasons for your answer.

Tutorial 3 - Week 4:
Topic:

Introduction to Corporations
Corporate Personality and Company Organs

Learning Objectives:

Understand the key elements of corporate legal personality

Understand the concept of the corporate veil and when the veil might be lifted

Know the organs of a company and the division of powers between those organs

Questions:
1.

What is ASIC and what does it do?

2.

What Parliament passed the Corporations Act 2001? Does it have the power to do
so? Where does the power come from?

3.

What are the legal attributes of a company?

4.

Distinguish between:
a. Public and Proprietary Companies
b. Large and Small Proprietary companies
c. Listed companies and companies that are not listed
d. Holding companies and subsidiary companies

5.

What is the corporate veil and under what circumstances is an Australian court
likely to lift it?

6.
7.

What are the specific powers of a body corporate and where are they located?
Name the two organs of a company. What determines the division of power
between these organs?
What will a companys internal governance rules typically deal with?
When will the replaceable rules apply to a company? When will they not apply?
What will the members in the general meeting be able to do where they disagree
with management decisions legitimately made by the board?
Scientists employed by a large agricultural company discover a new genetic
modification to rice. This modification would make the rice fungus and pest
resistant and as a result increase yields dramatically in areas of the world where
there are chronic food shortages. Commercial production of the strain of rice
would be very profitable. Unfortunately, however, if not carefully controlled, the
rice could cross-breed with various weeds resulting in a super weed, the spread of
which would wreak havoc on all sorts of crops. Substantial liability might fall on
any producer of the rice. In order to limit this risk to company forms a subsidiary
to produce and sell the rice. Is this an appropriate and lawful use of the principle of

8.
9.
10.
11.

limited liability? Discuss.

Tutorial 4 Week 5
Corporate Contracting and Pr-registration Contracts
Learning Objectives:

To know the principles of and to be able to apply the law as to

criminal and tortious liability of companies and as to contracting by
companies.
To know the potential liabilities of company promoters for preregistration contracts

Problems:
1.
2.
3.
4.
5.
6.

What is the indoor management rule?

How do the statutory assumptions assist an outsider who has contracted with a company?
How do the statutory assumptions operate if a document is forged?
How can a company be liable for wrongs?
Which crimes can companies commit?
The tort of deceit involves the knowing misrepresentation of some fact upon which the victim
relies to their disadvantage. Fred is the sales manager for a land development company. He
knows that a particular piece of land is flood-prone but tells a purchaser that it is not floodprone. He has committed the tort of deceit. However, he does not have much money and the
cost of rectification of the problem is large. Can the purchaser sue the land development
company? What techniques of tortious liability might make the company liable and which
might not make it liable?

7. Peter is bankrupt and therefore cannot act as a director of a company. Nevertheless he does so.
Bruce is the managing director of the same company. Bruce represents to an outsider that Peter
has authority to enter into a contract but privately confines Peters authority to negotiating the
contract. Peter purports to enter into the contract. Is the company bound?

8. John enters into a contract on behalf of a company he is yet to register. The company is
registered a month after the contract is executed. Will the contract be binding on the company?
What steps should John take to ensure that he will not be personally liable for the actions of the
company under the contact?

Tutorial 5 - Week 6
Topic:

Meetings and Directors

Learning Objectives:

To know how general meetings must be called and the procedures

associated with calling meetings and making decisions at meetings
To know the effect of a procedural irregularity
To be able to solve problems relating to the appointment and removal
of directors

Problems:
1.

2.
3.
4.
5.
6.
7.
8.

What type or resolution is required to:

(a)
adopt or modify or repeal a company constitution;
(b)
change the companys name or change the type of company?
Who may convene/call a general meeting?
What is a procedural irregularity? What is the effect of a procedural irregularity?
Who must receive notice of a meeting? What must be contained in a notice of
meetings of members? What extra requirements apply to listed companies?
What is the quorum for a meeting of the companys members?
What can a member do if he/she cant attend a meeting in person but still wants to
vote?
What is the difference between the definition of a director and an officer?
Kiewa Pty Ltd has 3 shareholders:
A. 10 shares
B. 20 shares
C. 70 shares
C wants to appoint his daughter, Anne, as the sole director of the company. Anne is
currently living in Israel. Anne was recently released from prison after serving a 6
month sentence for stealing money from her former employer to pay her gambling
debts.
C also wants to change the company constitution to provide for any directors to only
be able to be appointed with his consent.
B is unhappy about Cs plans and instead wants C removed as a director of the
company.
(a) How can Anne be appointed as a director?
(b) Are there any legal impediments to Anne being appointed as a director?
(c) How can C be removed as a director?
(d) How can C make the changes to the Constitution he proposes?
(e)
Would your answers to any of the previous questions be any different if
the company was a public company?

Tutorial 6 - Week 7:
Topic:

Directors Duties Part 1

Learning Objectives:
To gain an understanding of director duties of care and diligence
To gain an understanding of the duty to prevent insolvent trading

Problems:
1. What are the sources of the directors duty of care to his or her company?
2. Is there any difference between the statutory duty of care and the general law duty of care?
3. What is the standard of care expected of a company director? (give a case as authority for
your answer)
4. What happens if a person to whom a director has delegated responsibilities does not take
reasonable care, skill or diligence in fulfilling those responsibilities?
5. To what extent is it reasonable for a director to rely on information provided by others?
6. What is the business judgment rule?
7. Who owes the duty to prevent insolvent trading?
8. What are the elements of the duty to prevent insolvent trading?
9. What defences are available for breach of the duty to prevent insolvent trading?
10. What are the consequences of contravening the duty to prevent insolvent trading?
11. Problem: Fred was appointed as managing director of a wind-turbine manufacturing
company (WTM Ltd) in February 2011. It owns a factory that makes wind turbines. Fred
is in day-to-day control of the company. During the time Fred is managing director, the
Board of Directors comprises:

Fred, who is an engineer and experienced manager.

Gerald, Freds stay-at-home partner. Gerald seldom comes to meetings

because he is too busy cleaning their house. He did not go to any meetings in
2011.

Harriet, a well-qualified accountant.

Ian, a hairdresser who runs a successful chain of hair salons and who sits on
several large public company boards.

The boards function in WTM is to set the policies of the company for Fred to carry
out and to approve major transactions
At the time of Freds appointment WTM was in a strong financial position. But by
August 2011 it is insolvent. A liquidator is appointed. On investigation, the following
matters are discovered.
1. WTM purchased a new yacht worth $10 million in March. The yacht has
experimental sails. These sails prove to be inefficient and the yacht needs a $1
million refit with normal sails. As it is, it is only worth $1 million and even after
refitting it would be worth only $5 million.
2. WTM has loaned $1 million to a company which has now gone into liquidation.
The company was well known to be in trouble and perusal of its last set of
accountant would have revealed significant cash-flow problems. The Board of
WTM had approved the loan.
Advise the liquidator whether any of the directors has breached their duties of care and
diligence.

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Tutorial 7 - Week 8:
Topic:

Directors Duties Part 2

Learning Objectives:
To gain an understanding of director duties of loyalty and good faith
To gain and understanding of directors fiduciary duties and the
interplay between ethical behaviour and director duties of loyalty and
good faith
1.
2.
3.
4.

What is meant by good faith?

What are the companys interests?
What are proper purposes?
How does a court resolve the purpose for which a power has been exercised
where a director has more than one purpose?
5. Read the extract of the case Parke v Daily News Ltd on page 260 of the
textbook. Do you think the director duty to act for proper purposes and in the
best interests of the company promotes ethical behaviour by directors? Explain
your stance.
6. A tsunami hits the west coast of Java. The board of directors of a large mining
company decide that the company should donate $5 million to the relief appeal.
Has there been a breach of duty? Should this be a breach of duty?
7. Jack Black was the governing director of White Pty Ltd. He allotted shares in
the company to his two sons Grey and Beige. Blacks daughters, who are also
shareholders in White Pty Ltd have commenced proceedings against their
fathers conduct. They want the allotment set aside on the basis that it was
made by their father simply to ensure that they would not gain control of the
company.
Jack Black says that it was in the companys best interest to ensure that his
daughters never gained control.
Required: Advise the parties on the likely outcome of the legal proceedings.

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Tutorial 8 - Week 9:
Topic:

Director Duties Part III

Learning Objectives:
To gain an understanding of the duty of directors to avoid conflicts of
interest
To gain an understanding of the different consequences which flow
from breaches of both general law and statutory duties
1. When must a director of a company who has a material personal interest in a
matter that relates to the affairs of the company give the other directors notice
of the interest? What are the requirements of the notice?
2. May a director of a proprietary company that has a material personal interest in
a matter that relates to the affairs of a company vote on matters that relate to
the interest?
3. May a director of a proprietary company that has a material personal interest in
a matter that relates to the affairs of a company be present at the meeting of the
vote on matters that relate to the interest?
4. Which of the following actions will be considered as a breach of a directors
duty to avoid conflicts of interest?
(a)

A company is a construction company. B company is a railway company.

A company enters into negotiations with B company for a possible
contract. A company has three directors (X, Y and Z). X and Y form
company C. Company C takes the contract with company B. In the
general meeting of members of company A, X and Y use their majority
vote to declare that A company has no interest in the contract and to sell
As equipment to company C.

(b) Company A is a mining company. B makes an offer to sell mining rights

to company A. Company A rejects the offer. One director of company A
(X) forms a syndicate to buy the rights from B. X did not disclose this to
company A.
(c)

Company A owns a cinema and has 5 directors. The directors of company

A form company B. Company B obtains cinema leases from company C.
The directors of A buy shares in company C (either directly or via other
companies or persons).

(d) Company A is makes maps/ X is president and CEO of company A and Y

is executive vice president of company A. X and Y are involved in a
proposal of company A to work for B. X and Y resign and form company
C and obtain the contract relating to the proposal with B.
(e)

X is the managing director and CEO of company A and a director and

shareholder in company B. B loans money to company C (that holds
100% of the shares in company D). Company A buys all the shares in
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company D for more than their market value. Company C uses the
proceeds from the sale of company Ds shares to pay off its loan with
company B.
5. Martin is one of the directors of Betta-Tea Ltd. He is also a large shareholder
in AIC Packaging Pty Ltd, the sole supplier of tea packets to Betta-Tea. Martin
has been receiving secret commissions from AIC Packaging in return for
arranging the sale of tea packets at high prices and refusing to accept contracts
from AIC's competitors (on the grounds that the competitors' products are of
inferior quality).
Advise the other directors of Betta-Tea Ltd as to whether Martin is in
breach of any common law duties or statutory duties as a director.
If the Betta-Tea shareholders or directors found out about Martin's
dealings what action could they take?
6. When will a court grant a director or officer relief for breach of a statutory duty
and when wont a court do so?
7. Can a company permit or ratify a breach of a statutory duty?
8. When may a company permit or ratify a breach of a general law duty?
9. When will the court grant relief for breach of a general law duty?
10. What remedies are available to a company where are general law duty has been
breached?
11. When may a company not indemnify a director or other officer against liability?

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Tutorial 9 - Week 10:

Topic:

Member Remedies

Learning Objectives:
To gain an understanding of the rights of shareholders and how they
are enforced.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

List the statutory remedies of members.

When will the court grant a member a remedy against oppression?
List the persons who may apply for the oppression remedy?
List 5 examples of oppressive conduct.
List the orders a court can make for oppression of a minority shareholder.
Who can apply to a court to have a company wound up and when can they apply?
Give examples of just and equitable grounds
List the persons who can apply for a statutory injunction.
Who may bring a derivative action on behalf of a company? What are the criteria
for bringing a derivative action? What is the difference between a derivative action
and a personal action?
What are the principles to emerge from the Gambotto case?
Problem: Sticky Web Pty Ltd owns and rents out the apartments in an apartment
block. The company had been started by Mr Spider and Ms Fly when they got
married. Mr Spider and Ms Fly each owned one share and each was a director.
On the birth of their first child, Buzz, Ms Fly and Mr Spider changed the
constitution of the company so that each share had the right to occupy an
apartment. Mr Spider transferred his share to Buzz. A new share was issued to
another child, Tarantella, on her birth.
Many years have passed and Buzz and Tarantella have grown up and moved into
their apartments. Mr Spider has died. The apartment block has become decrepit.
Buzz and Tarantella want to redevelop the building.
At a general meeting Buzz and Tarantella vote themselves in as directors, denying
Ms Fly, their mother, a place on the board. Acting as the board of directors, they
then organize the renovation and redevelopment of all the apartments in the block.
Ms Flys furniture is taken out of her apartment and put into storage. The locks
are changed. No more dividends are paid as, according to Buzz and Tarantella, the
company has no income during the redevelopment, although it still has large
amounts of retained profits. Ms Fly is forced to find alternative accommodation
but she does not like it and thinks it is beyond her capacity to afford.
Consider each of the following set of events:
(a)
Ms Fly offers to sell her share to Buzz and Tarantella so she can herself
buy something much better, but they refuse to buy it saying they have
no money. They also refuse to allow her to transfer the share to anyone
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(b)

11.

else, saying they need to retain the company as family-owned. Now Ms

Fly has come to you for advice. Is there anything she can do to regain
occupation of her apartment and to force the company to pay her
dividends?
Buzz and Tarantella offer to buy Ms Flys shares and a fair valuation.
The fair valuation is more than enough to buy a much better apartment
than her old one. She is not interested. Buzz and Tarantella then alter
the constitution of the company to permit the compulsory purchase by
majority shareholders acting jointly of minority shares at a price
assessed by a qualified valuer plus 20%. They then send a cheque in the
appropriate amount and alter the share register accordingly. Ms Fly
wants to keep her shares. What should she do?

Jane and Bob had been running a boat-building business through a company
National Boat Builders Pty Ltd for over 25 years. Both Bob and Jane were
directors and shareholders with Bob holding 76 of the 100 issued ordinary shares
and Jane holding the remaining 24 issued shares. Last year Bob died, leaving his
shares to his son Michael.
Michael is not a hands on manager like his father and Jane is concerned that the
business is rapidly deteriorating through Michaels neglect. Jane also suspects that
the company is paying Michael a large management fee which the company cant
sustain. Jane cant verify either of these concerns as Michael refuses to give her
access to the company books.
Michael has indicated to Jane that he has negotiated the sale of the boat building
business of the company to another company. Michael is the majority shareholder
of the proposed purchaser. National Boat Builders will then switch its focus to
aircraft detailing (a hobby of Michaels, but an activity in which the company has
never been involved).
He says a resolution ratifying the sale and approving a modification of the objects
set out in the companys constitution to record the proposed change in business
activity has been passed. Jane did not receive any notice of any meeting of
members being held. Jane does not agree with either of the proposed changes.
Required:
Advise Jane of the remedies that might be available to her personally.

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Tutorial 10 - Week 11:

Topic: Capital Raising and Transactions as to Share Capital
Learning Objectives:
To learn what constitutes a reduction in share capital
To learn what constitutes a variation of share rights
To understand and critically analyse the policy behind the legal rules
concerning the treatment of reductions in share capital and variations
of share rights

Questions:
1.
2.
3.
4.
5.
6.
7.

What is a reduction of share capital? What is the general legal attitude to

reductions of share capital?
What is the difference between a share buy-back and a capital reduction?
What is the difference between a selective and equal share buy-back? Why is the
distinction important? What is the 10/12 limit?
When is a company allowed to give financial assistance for the purchase of its own
shares?
Summarise the situations where s246C deems there to be a variation of share rights
in relation to a company with a share capital.
Prepare a list of the types of legal action open to a shareholder to a challenge a
variation by a company of the rights attaching to his or her shares.
One of the objectives of corporations law is to protect creditors and shareholders
by requiring companies to maintain their capital Discuss the effectiveness of the
relevant provisions.

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Tutorial 11 - Week 12:

DIVIDENDS & LOAN CAPITAL
FUNDRAISING
Learning Objectives:
Understand basic concepts associated with loan capital
fundraising including concepts introduced by the Personal
Properties Securities Act 2009(Cth)
Understand the new rules relating to when a dividend can
be paid
Learn when disclosure documents are required and the
ramifications of defective disclosure
Questions:
1.
2.
3.

4.
5.
6.
7.

What is a debenture?
What is a fixed and floating charge?
Visit the Personal Properties Securities Register website (www.ppsr.gov.au) and
answer the following questions:
a. What are personal property securities?
b. What is a security interest in a circulating asset?
c. What is the priority in which security interests will be enforced?
When does a dividend become a debt?
Look at section 254T and advise when is a company will be prohibited from paying
a dividend?
When is a disclosure document required for the issue of securities and what are
excluded offers?
If a disclosure document contains defective information what type of liability can
arise and who can be liable?

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Tutorial 12 - Week 13:

ASSIGNMENT RETURN AND REVISION
Learning Objectives
To diagnose skill difficulties from your attempt at the
assignment.
To further develop skill in answering problems: in
extracting the issues involved in complex fact scenarios; in
applying the law to fact situations, dealing with both legal
uncertainty and uncertainty in application, and in making
reasonable predictions of Court outcomes.
To ensure that at very least you have a sufficient
understanding of all examinable aspects of corporations law
as to be able to prepare for the final examination.
To reflect on your approach to learning in this subject.
Required Preparation
1. Review your answer to the assignment. Think about what preparation you did, what
you did well and what you think you could do to improve your response.
2. Look at your study plan from the first tutorial, briefly answer the following questions
and hand your answers to your tutor (do not write your name or student number on
you sheet):
a. Did you commit the amount of time to this subject you anticipated?
b. Did you generally stick to the times you planned to set aside for accessing the
lecture material and other materials posted on LMS for this subject?
c. Were your plans realistic? Should you have allocated more or less time to
studying this subject?
d. What were difficulties you encountered in sticking to your plan?
3. Peruse all notes, downloads and books you have use for Law of Business Association.
Determine whether you understand what problems or issues every area of law is
calculated to deal with or solve. If there is an area or areas for which you o not
understand the issues or problems it is calculated to deal with or solve, frame a
question for your tutor which will elicit them for you.

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