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Corporate law, like all law, has a context; indeed, it has many contexts. To understand corporate law today, we need to appreciate the forces—social, political, economic, global and local—which shape that law. Modern corporations and contemporary Australian corporate law should be understood as a product of, and a compromise between, various social, economic and legal ideas and philosophies. This is the focus of the first two chapters of this book.
We began Chapter 1 by emphasising the need to be aware of the different contexts within which corporations and corporate law are created and operate. We considered the historical and regulatory contexts of contemporary Australian corporate law. This chapter considers the importance of the different theoretical and ideological perspectives that assist in understanding the nature of the corporation, the role and purpose of corporations in contemporary society, and the rationales for and against the regulation of corporate activity.
This chapter is the first of two chapters that examine what can happen when a company cannot pay all or some of its debts. This chapter discusses the types of action that can be taken other than winding a company up, focusing upon receivership, schemes of arrangement and voluntary administration. This chapter commences with a consideration of the state of insolvency, and how it may be determined. This is a complex question, relying on an array of information specific to each company, beyond that company’s demonstrated assets and liabilities according to a balance sheet. Each of the actions the chapter considers are also demonstrative of different aspects of insolvency law, with different motivations and consequently vastly different outcomes.
So far, we have established what a company is (Chapter 3), how a company is created (Chapter 4), and what rules govern a company’s internal operations (Chapter 5). This chapter discusses the legal capacity of a company to enter contracts. We discuss how companies enter contracts through agents and the statutory assumptions that protect third parties when dealing with companies. We also discuss pre-registration contracts.
Directors’ duties can be classified into two themes: duties in relation to care and skill, and duties in relation to loyalty and good faith. Chapter 10 provided an overview of the duties as a whole, and Chapter 11 provided the history and current law for those duties which are related to care and skill. Chapter 12 was the first of two chapters addressing the duties of loyalty and good faith and discussed the duty to act bona fide in the interests of the company and for proper purposes, and the duty not to fetter discretions. This chapter deals with the standard of conduct expected from directors by the fiduciary obligation, the duties in the Corporations Act ss 182–183, and the duties on disclosure of material personal interest of directors in ss 191–195 and ch 2E of the Corporations Act.
In this book, we have mostly depicted companies as legal actors in their own right that act through certain human agents. In this chapter, our focus changes: we now think of companies as things that may be owned and controlled. Nevertheless, the motivations of human agents remain at the forefront. Some of the law that we encountered in previous chapters will be relevant here, because it regulates the behaviour of the human protagonists; for example, the law on directors’ duties (see Chapters 10 to 13).