Limits on right to alter constitution Corporations Act Entrenching Provisions S136(3) – Recognises that a companies constitution may contain provisions (entrenched provisions) that restrict the companies ability to modify or repeal its constitution by imposing further requirements for special resolution. i.e. More than 75% of the voting required etc. Member Provisions s140(2) – A member is not bound by a modification of the constitution made after becoming a member so far that the modification: requires member to take more shares increases members liability towards share capital imposes or increases a restriction on the right to transfer shares already held Variation of Class Rights – Shares/Debentures Limitations on the power to alter a companies constitution when its share capital is divided into difference classes. Debentures – A company can issue preference shares only if certain rights attached to those shares are set out in the companies constitution or otherwise approved by special resolution. S246B-s246G – Designed to restrict majority shareholders from varying or cancelling class rights. Oppression Remedy - IMPORTANT S232 – Enables members to apply to the court for a remedy if the majority of votes in favour a resolution alter the constitution/replaceable rules contary to members interests and are as a whole, oppressive, unfairly prejudicial or unfairly discriminatory to members.
S206B – Automatically disqualifies a person from managing corporations if the person is convicted of serious criminal offences or becomes bankrupt. S206F – Power to disqualify a person from managing corporations if the person was an officer of two or more companies that became insolvent. Purpose To deter for would-be offenders that seek to offend Protects the public from exposed to “persons who have offended and will if not restrained” – Chew v NCSC Managing a corporation S206A – A person is if they make decision which: PAGE 267 – IMPORTANT! Automatic Disqualification A person is automatically disqualified from managing corporations if they are convicted of an offence that: Disqualification by court order S206C(1) – Gives the court the power to disqualify a person from managing corporations where a court has declared under s1317E that the person contravened a civil penalty provision. Failed Companies S206D(1) – Gives the court the power to disqualify a person from managing corporations for up to 20 years if within the last seven years the person has been an officer of two or more failed companies. S206E(1) – Gives the court the power to disqualify a person from managing corporations if the person: ASIC Powers – ASIC power to disqualify a person from managing corporations for up to five years. Cullen v Corporate Affairs Commission – Appropriate to disqualify a person under the predecessor of s206F. Evidence indicated that a director of four failed companies had not met the standards that the community expected a director to reach. Did not attempt to mitigate loss or remit group tax. Removal of Directors – S203D – Provides that members may by resolution remove a director before the expiration of their period in office. Removal in this manner is permitted despite anything to the contrary contained in the constitution or in a separate agreement between the director and the company. S230D(1) – The effect of the removal does not take effect until a successor has been appointed. This section attempts to give members of public companies some control over the positions of the board of directors.
In developing whether a has committed insider trading it is useful to begin at s1042B which questions the “application of division” of the insider trading legislation and whether it is applicable to this security. Since securities are a financial product pursuant to s1042A under “Division 3 financial Products means: (a) securities” which are defined in s 761A (a) under security where it states that a security is “a share in a body...or legal or equitable right or interest in a security”; we can assume that any holdings are securities and thus financial products. Therefore, s1042B (a) applies since it “applies to acts or omissions…to Division 3 financial products (regardless of where…issuer carries on a business)”. Since “a person whom is working within a company” information satisfies the definition of 1042A inside information because it was “not generally available” and it would “have a material effect on the price or value” of the security - pursuant with 1042C’s definition of “generally available” and 1042D’s “material effect” definition – then clearly in combination with s1043A(b), “a person whom is working within a company” has knowledge that is defined as inside information. Example with Chinese Wall in Place – (if no Chinese Wall, B is outside party) “a person whom is working within a company” has told B about the information that has been established to be inside information, and as per s1043A (2) which implies “a person whom is working within a company” should have “ought reasonably to (have) know(n), that the other person (B) would have or would likely....enter into an agreement to apply for, acquire, or dispose of relevant Division 3 financial products” then “a person whom is working within a company” has breached insider trading laws. The Merchant bank with both A and B work will also be liable, as it has breached the both ASX Market Rule 7.18.1 and Corporation Act 2001 s1043F due to its inability to stop the passing of inside “information known to persons included in one part of the business of the Market Participant” being made “available (directly or indirectly) to those in another part of the business”. Does Insider Trading include FUTURES?
A “future” must be defined as a financial product according to Corporations Act 2001 s1042A Division 3 Financial Product. According to s761D(1)(a) under “Meaning of Derivative” it states that “a party to the arrangement must, or may be required to provide at some future time consideration of a particular kind or kinds to someone” and that s761D(1)(c) “the value of arrangement, is ultimately determined, derived from or varies by reference to the value or amount of something else including an asset” which therefore implies that futures contracts brought on the SFE are derivative products according to s761D(1) and therefore they are also within the definition of s1042A which includes “derivatives” as Division 3 financial products. Can Insider Trading apply to SFE? It has been established that “a person” has purchased products that are defined within s1042A Division 3 Financial Products, then it must be established if s1042B can apply to this derivative purchase. Corporation Act 2001 s1042B (a) applies since it “applies to acts or omissions…to Division 3 financial products (regardless of where…issuer carries on a business)”. Although “a person” has purchased the shares on the Sydney Futures Exchange, s1042B (a) implies that the purchase place is irrelevant in determining insider trading provisions. Since in the previous question it was established that “a person whom is working within a company” information satisfies the definition of inside information because it was “not generally available” and it would have had “a material effect on the price or value” of the Division 3 Financial Product – it must be determined whether or not B has breached insider trading provisions by purchasing a parcel of futures as a result of this inside information. FROM HERE GOTO CHINESE WALL EXAMPLE Defences to Insider Trading - Exceptions to s1043A