BLAW20001

Corporate Law 2022

Lecture 1
Introduction to Corporate Law

Julian Panetta
E: julian.panetta@unimelb.edu.au T: 03 8344 6842
Rm – GM02, Mezzanine, Melbourne Law School

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TODAY

• Welcome.
• Housekeeping.
• Subject Administration.
• Introduction to Companies.
• Separate Legal Entity.
• Limited Liability.
• Debt v Equity.
• Meet Ellie….

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WELCOME

• This subject is for everyone!

• We are all starting from the very beginning. Everyone can do
very well in this subject
• Corporate Law is VERY different to PBL
• No MCQ exam... 
• IRAC – core focus
• If you are interested in the JD….this subject will give you a
taste of what it is like to be a JD student and how law
subjects are taught at MLS

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COURSE MATERIALS

• Textbook
• Commercial Applications of Company Law 2022 (“CACL”).
• Canvas Modules
• Prescribed reading list (Module A)
• Assessment Information (Module D)
• Skills videos (Module F)
• IRAC assistance and examples (Module F)
• Other resources (Module E)
• Tutorial questions and lectures
• Prior editions??
• Proceed with caution
• See FAQ in Module A.

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PRESCRIBED READING

• List is in Module A
• Will appear in each weekly module
• Make sure you complete it – it’s assessable.
• When you come across a reference to legislation in the
readings or in lectures – ensure you read the section in full
(in the extract at the back of the book).

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LECTURES

• 1 x video lecture per week.

• Progressively released and uploaded to Canvas.
• Purpose:
• to teach you key content.
• focus you on primary material
• occasionally, problem solving guidance (most of this is done during
tutorials)
• Expectation:
• Do your reading, take notes, ensure you read the legislative provisions
referred to in lectures and prescribed readings
• Questions about lectures?
• Come and see me! Timetable on Canvas

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TUTORIALS

• 1 x 1 hour tutorial per week – commencing in Week 2.

• Online and in-person delivery.
• Please attend the tutorial you are registered into.
• Purpose
• skills based. This is where you will develop your legal writing skills
using IRAC and answer legal hypothetical questions.
• Usually responding to a hypothetical problem
• Please ensure your mic is set to mute and you have your camera on.
• If your tutorial is affected by a University Public Holiday – please attend
any class that week.

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CONSULTATIONS

• Every day of the week.

• In-person and online delivery.
• Timetable on Canvas.
• Attend any without prior appointment.
• Purpose
• If you have any questions about course content, legal writing or
subject administration – go to a consultation
• If you email teaching staff with questions about course content,
you will be directed to a consultation
• See FAQ in Module A to understand why.

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DISCUSSION BOARDS

• Weekly discussion boards on Canvas

• Purpose
• Allows you to discuss course content with your peers.
• Not an online tutor.
• Monitored by staff from time to time.
• Designed to encourage engagement with the subject and
each other.

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TEACHING STAFF

• Julian Panetta – Subject Coordinator

• Kayla Milone – Head Tutor
• Other tutors
• Kit Lee
• Glendon Coote
• Janette Nankivell
• Rebecca Catterwell
• Lachlan Molesworth
• Contact details – on Canvas

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Assessment

• Written Assignment – 2000-words, 30%, individual submission

• Gives you practice responding to legal hypothetical problems.
• Compulsory.
• Available during Week 4
• Check Canvas for the due date.

• 1 x MCQ Online Quiz – 20%

• 60 minutes, 30 questions, 1 attempt.
• Open book.
• No option to ‘stop-the-clock’

• Take-home Exam– 50%

• Problem based hypothetical questions (may include some theory)
• 2.5 hours, 2,500-words, open book.

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Making Notes

• Lots of information on Canvas about how to make good notes.

• Work on them as you go.
• Make your notes useable – not confusing and not too bulky.
• Feel free to discuss note taking with the teaching staff.
• TIP
• To check to see if your notes are useful, set them down
next to a problem and see if you can use them to solve
the problem efficiently and accurately.

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IRAC (Issue, Rule, Application, Conclusion)

• Used to respond to legal hypothetical problems.

• Practiced during tutorials.
• Essential skill to get on top of.
• Lots of guidance in Module F on Canvas.

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What’s New in 22?

• Mandatory use of video / camera for staff and students in

online classes.
• Reduced weight of the final exam.
• Removal of paired assignment.
• Increased number of consultations.
• More opportunities to practice legal writing.
• Additional resources to assist with IRAC
• Skills videos – highly recommended
• Reordering of topics and changes to the syllabus

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What is a company?

• Companies are all around us!

• More than 3 million companies in Australia and growing by

the day

• Examples?

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What is law?

• Two primary sources of law in Australia

• Statute / Legislation / Acts – law made by parliament.
• Case Law / Precedent / Common Law – law made by the
courts.

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What is company law?

• General term used to describe the legal rules governing:

• formation and termination of companies.
• characteristics of companies.
• relationships between participants in companies –
directors, officers, shareholders, creditors.
• companies’ dealings with outsiders.
• Aims/purposes include:
• investor protection.
• commercial stability and consumer confidence.
• balancing competing interests.
• certainty - standard form rules.
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Other sources of company law

 Other sources
◦ Corporations Regulations, ASIC Act, ASIC exemptions,
accounting standards, ASX Listing Rules (for listed
companies).
 Use cases and legislation to support your answer – practice
this skill each week in your tutorial.

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Characteristics

• A company:
• Is a person!
• Can sue and be sued.
• Can enter into contracts.
• Can raise funds.

• Perpetual succession.

• Doctrine of separate legal entity.

• How does a company do all these things?

• Through its people!
• Directors and members (shareholders).
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Private Law / Public Law

• Private law that decides disputes between:

• Shareholders vs the company.
• The company vs shareholders
• Public law that allows ASIC to punish wrongdoers and seek
compensation for the company
• Remember that judges decide cases based on previous case
decisions (precedents) and sections of legislation.
• In this course, all the cases and the legislation apply as the
law – use both in your answers

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Separate Legal Entity

• The company is a separate legal person - an ‘artificial legal

person.’
• Humans are ‘natural legal persons.’
• Companies can legally do most things that humans can do,
and some extras e.g. issue shares.
• Company can incur obligations and hold rights, and sue and
be sued, in its own name.
• Company can contract with its controllers and others.
• Company has ‘perpetual succession.’
• Company is a separate taxpayer.
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Salomon v Salomon

• So Mr Salomon was
• Director
• Shareholder
• Employee
• Secured creditor under the debenture securing the debt
• Issue –
• was Mr Salomon entitled to priority under the debenture
over other, unsecured creditors of the company?
• Depends on whether the company and its controller are
separate legal entities.
• Court said yes.
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Other cases

• Lee v Lee’s Air Farming Ltd:

• Mr Lee was the director of a company.
• Issue - could Mr Lee be both the controller of a company
and its employee?

• Macaura v Northern Assurance:

• Who had the insurance policy? The man or the company?
• Issue - was Mr Macaura the “owner” of property that
belonged to a company controlled by him?

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Equity capital – what are shares?

• S124 CA
(1) A company has the legal capacity and powers of an individual both in and
outside this jurisdiction. A company also has all the powers of a body corporate,
including the power to:
(a) Issue and cancel shares in a company
…
• Claims against a company to which ‘rights’ attach
• Lots of different ‘rights’ – depends on the particular shares
• Shares are valuable assets that can be sold by the shareholder
• But remember, shareholders don’t own the company’s assets!
• Companies can be shareholders in other companies – this entitles them to
shareholder rights and remedies.

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Equity capital – classes of shares

• Shares can be created with different rights attaching e.g. different

• Dividends ‘rights’
• Voting rights
• Rights and priorities in repayment of capital or surplus on winding
up
• Called ‘class rights’
• Company decides these rights: s 254B
• Directors have power to issue shares (s198A) but the issue of shares
may require shareholder approval in some circumstances

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Equity capital – ordinary shares

• Most companies elect to issue shares of two classes:-

• Ordinary Shares; and
• Preference Shares
• Typically speaking, ordinary shares will have the following
rights:-
• Right to share equally in dividends
• Right to vote at the general meeting of the company

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Equity capital – preference shares

• Different to ‘ordinary’ shares.

• Preference shares usually carry rights to:
• A fixed dividend
• priority for repayment of capital
• But limited voting rights
• no right to share in surplus on winding up
• Shareholders approve these rights: s 254A(2)
• There may also be other shareholder approvals required e.g.
variation of class rights, done in later lecture

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Debt finance

• Debt is money that the company owes to outsiders.

• Can be secured or unsecured.
• Debt MUST be repaid even if the company is profitable or not.
• Debt often attracts interest!
• Risky….

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Debt v Equity

• Depends on the company’s needs and objectives.

• Equity Finance?
• Looks good!
• Not required to pay a dividend.
• Appears safer.
• Debt finance
• More attractive?
• Has to be repaid.
• Nothing worse than having the bank on your bank…

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Limited liability

• The company’s debts have to be paid by the company, not its

shareholders.
• In a company limited by shares, a member’s liability to pay the debts of
the company is limited to the amount (if any) unpaid on their shares: s
516.
• If shares are fully paid for, no further contribution required.
• Company may issue shares that are partly paid.
• Shareholder is obliged to contribute further if a “call” is made on partly
paid shares.
• If call is not paid, shares may be forfeited.
• CA s 254M.

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To summarise

• Ensure you are familiar with all in the information in the Canvas
modules.
• Understand the assessment.
• Understand the purpose of lectures, tutorials and consultations
• Consolidate your understanding of:-
• Key corporate law principles
• Salomon's’ Case
• Limited Liability
• Types of shares
• Debt v Equity financing

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Next week….

Lecture 2
Business planning and internal management of
companies

INTRODUCING…
Ellie!

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