law

STUDENT – KNOWLEDGE ASSESSMENT TASK

Task Number 1 of 3 Task Name AT 1
National unit/s code FNSTPB504 National unit/s title Apply legal principles in
corporations and trust law
FNSACC624 Monitor corporate
governance activities
National qualification code FNS60217 National qualification title Advanced Diploma of
Accounting
RMIT Program code C6163 RMIT Course code BAFI5223C, ACCT5430C

Section A – Assessment Information
Duration and/or due date: Week 7
Task Instructions
Summary and Purpose of Assessment
This short-answer assessment task is one of three assessment tasks you need to complete satisfactorily, in order to be deemed competent for this unit.

This assessment task allows you to demonstrate your knowledge on legal principles and issues in corporations and trust law matters and corporate governance obligations.

Assessment Instructions What
• You must satisfactorily answer all 40 questions
• You should answer all questions in the spaces provided, using full sentences, word count and dot points when requested
• All work must be your own

Where
This is an online assessment task. You will need to answer all questions on CANVAS.

How
The knowledge assessment is accessed through the Canvas shell and you must complete and submit your responses within the allocated assessment timeframe.

If you are not able to attend the scheduled assessment timeframe you need to advise your teacher so that an alternative assessment arrangement can be made. This knowledge assessment is an individual assessment task that must be completed with minimal support from your supervisor (allowed support includes further explanation of the task requirements or explanation of assessment criteria etc).

Instructions on submitting Knowledge Assessment
This is an online assessment task. You will need to answer all questions on CANVAS.

Conditions for assessment
• You must complete the task within the maximum allowed duration
• This is an individual task that you must complete with minimal support from others (allowed support would be questions related to the location of equipment needed)
• Please make arrangements with your assessor at least one week prior to the assessment due date if you feel you require special allowance or allowable adjustment to this task
• Please ensure your full and correct name is written on the student version of this assessment task (do not use nicknames or abbreviations)
• You will be assessed as satisfactory or not satisfactory
• You can appeal the assessment decision according to the RMIT Assessment Processes

Equipment/resources students must supply: Equipment/resources to be provided by RMIT or the workplace:
• Computer and relevant software • Computer and internet access
• Canvas Portal
• Appropriate space to complete the assessment

Section B – Student Answer Sheet
Student Name Student ID

Students provide your responses in the boxes below each question
Questions Satisfactory Y N
Q1: Describe the following types of business structures:
• Sole trader
• Partnership
• Company
• Trust
• Co-operative
• Incorporated association
A sole trader is a business that is under the ownership and control of an individual and there is no separation between the owner and the business.

A partnership is the simplest form of a collective business structure that is only brought into existence when a commercial association exists between two individuals, a common business is carried out between the two individuals in question and the business is being carried out with a goal of making profits.

A company basically refers to an incorporated entity that has gone through a registration process via the ASIC and has fully complied with the Corporations act of 2001. A company is treated as a separate legal entity from its members.

A Trust refers to a relationship where an individual referred to as a trustee holds property on behave of another individual referred to as a beneficiary. This arrangement can be set up either for taxation purposes or for an individual who cannot legally hold ownership of the property in question.

A co-operative is a form of business entity which is owned and run by at least 5 members for their mutual gain or in some instances, for the benefit of the public. A co-operative is also a separate legal entity thus, can sue or be sued.

An incorporated association is an organization formed by two or more individuals for a common purpose whether it is for profit or not. An incorporated association enjoys the same benefits as those of a company but it is cheaper to set up. Unlike an unincorporated association, an incorporated association is regarded as a separate legal entity.

Q2: Outline 6 factors that business structure can determine.
The liability of the owner of the business.
The size of the business.
The businesses ability to perform trade operations regionally and internationally.
The regulations and legal compliances that the business will have to meet.
The business formation cost as well as the cost needed to run the business.
The future requirements of the business, capital wise.

Q3: Discuss 8 key elements of a sole trade business structure.
The business is owned and controlled by an individual.
Like any other business a sole trade may have employees.
The legal liability falls squarely on the owner of the business.
The business and the owner are one and the same.
The owner of the business is personally responsible for all the debts accrued by the business.
The owner can collect all the profits generated through the business as his or her personal income.
The owner of the business is not legally obligated to disclose the results of the business except for the tax obligations of the business.
Considering the fact that the ownership and control of the business rest on individual, it is often quite difficult to raise capital for the business

Q4: List and describe the 3 main types of partnerships.
A limited partnership- limited partnership is a type of partnership where the liability of some of the partners and not all of them is limited.
General partnership- a general partnership is a type of partnership where the liability of all the partners is unlimited.
Incorporated Limited Partnership- this type of partnership is often applied when parties apply for registration of a limited partnership for venture capital purposes under Commonwealth legislation.

Q5: Detail 8 key elements of a partnership structure.
It is made up of a minimum of 2 individuals and a maximum of 20 individuals unless it is a professional partnership.
The partnership is brought into existence through either a written contract, verbal agreement or implication of the partners.
A commercial association must exist between the partners.
All the partners must agree to enter into business
Each partner in a partnership is regarded as an ‘agent’ of the partnership and all the other partners.
The objective of the partnership with the goal of sharing the profits accrued by the business.
The business must be run by all the partners or in some instances, any of the partners on behalf of the rest of the partners.
The business is registered under a new name other than those of the partners.

Q6: What is a registered company?
A registered company is an entity which has undergone the process of registration via the ASIC and has fully complied with the provisions of the Corporations act of 2001.
Q7: Which Act outlines the legal obligations that all company officers and directors must comply with?
The Corporations act 2001 outlines the legal obligations of directors and other company officers.
Q8: Outline 8 key features of a company business structure.
It is owned by shareholders.
It has its own contractual capacity separate from the human beings who own it.
It can enter into contracts with anyone including its employees and shareholders.
A company can sue or be sued.
Has to have the word Limited or ‘LTD’ in its name.
Its shareholders are only liable for the cost of their shares and not the company’s debts.
It has a limited liability.

Q9: Discuss the different avenues available for raising funds in a proprietary company and a public company.
Public companies can raise funds by putting up their shares for sell in ASX. It is important to note that in the case of public companies, the sale of shares can only be done through prospectus. As for propriety companies, they cannot raise funds by selling its shares to the public. Instead they may opt to obtain funds from their shareholders by offering shares to the existing shareholders who may range from 1-50.
Q10: What is a company’s share capital?
A company’s share capital is the amount of money or assets contributed to the company by its members when they subscribe for shares in the company.

Q11: Explain the difference between ordinary shares and preferences shares.
Ordinary shares give its holders the right to the right to share equally in any dividends with all other ordinary shareholders after all other claimants have been paid and have the right to vote at general meetings. On the other hand, preference shares represent an ownership stake in the company and offers benefits such as participation in surplus assets and profits.
Q12: Briefly explain the process of registering a company.
First, a company name needs to be chosen while taking note of the fact that existing names cannot be registered. Secondly, a decision has to be made with regard to how the company is going to be governed. Lastly, a submission of an application to register a company to the ASIC

Q13: What is the common law definition of a promoter?
The common law definition of a promoter is basically individuals who take part in the process of forming or setting up a company.
Q14: What is a pre-incorporation contract?
A pre-incorporation contract is a contract that is entered into by promoters on behalf a company before a company is fully formed.
Q15: What is a company constitution?
A company constitution is a document that provides an outline of the manner in which a company is to be governed internally.
Q16: Provide 6 examples of replaceable rules as set out by the Corporations Act.

The company or directors may allow its members to inspect its books.
The manner in which voting within the company is to be done.
The chairmanship of meetings amongst the members of the company.
Guidelines pertaining to the appointment of managing directors.
Guidelines pertaining to the termination of appointments of managing directors.
Guidelines pertaining to the resignation of directors.

Q17: What are 6 key legal duties and obligations of a company secretary? Identify the section of the Corporations Act for each.
To exercise their powers and discharge their duties with care and diligence (s 180);
To exercise their powers and discharge their duties in good faith and for a proper purpose (s 181);
Not to improperly use their position to gain an advantage for themselves or someone else, or to cause detriment to the company (s 182);
Not to improperly use information obtained by virtue of their position (s 183);
It is also a criminal offence if a company secretary is either reckless or intentionally dishonest and fails to exercise their powers and discharge their duties in good faith in the best interests of the company, or for a proper purpose (s 184).

Q18: Detail 8 tasks performed by a company secretary. Identify the section of the Corporations Act for each.
Taking minutes of directors’ and members’ meetings
Maintaining the company register
Completing and lodging ASIC forms.
Provision of legal, financial and strategic advice during off of company meetings.
Summoning and servicing annual general meetings.

Q19: List 3 types of registers and records that a company must maintain.
Financial records
Register of relevant interests
Register of members
Q20: For a contract to be validly signed, what are the requirements under the Corporations Act?
Company constitution
Signatures belonging to the company secretaries
A common company seal
Q21: Under the Corporations Act, when is a public company required to hold an Annual General Meeting?
Within 18 months from its date of registration and at least once in each calendar year and within 5 months after the end of a financial year.
Q22: List 4 types of member remedies.
Restrictions on majority voting
Oppression remedy
Winding up
Injunction

Q23: If a current officeholder was to declare bankruptcy, could they remain an officeholder? Explain why or why not.
No, they could not remain as office holders because both the courts and the ASIC have the powers to automatically disqualify a bankrupt individual from office.
Q24: Explain voluntary administration.
Basically, voluntary administration refers to a process whereby a company which is under bankruptcy is transferred to the an independent individual whose responsibility is to evaluate all possible options for saving the company and come up with the best result for both the owners of the business and its creditors.

Q25: Detail 6 key features of a trust business structure.
The six key features of a trust business structure include;
 The trustee possesses legal interest on the property in question.
 The beneficiary has equitable interest on the property in question.
 A trustee must conform to the Trustees Act in their State or Territory which is designed to protect the rights of the beneficiary.
 The property involved in the trust is separate from those owned by the trustee.
 The trust permits the separation of legal ownership from beneficial interest.
 The trust is not regarded as a separate legal entity.
Q26: What are the 2 main types of trusts? List and describe each.
Express trust- this basically refers to a trust that is brought into existence via the intentional act of a settlor through the use of a written or spoken apparatus. In this particular type of trust, the intention of the trust is clearly detailed alongside a comprehensive detail of the beneficiaries involved as well as a clear identification of the trust property.
Implied trust- In this type of trust, there is no clear intention with regard to the creation of a trust but all circumstances tend to point towards the fact that in actual sense, a trust was created.

Q27: Trusts need 3 basic elements to exist, what are they?
The 3 basic elements that are needed for the existence of a trust include;
 The intention to create a trust
 Any sought of property which is intended to become trust property.
 The three parties involved in the creation of a trust namely, the creator of the trust (the settlor), the beneficiary of the trust and the trustee.
Q28: What is the purpose of a trust deed?
The purpose of a trust deed is to act as a legal prove of the intention to create a particular trust.

Q29: A trustee is responsible for acting in accordance with the trust deed. What are 6 other responsibilities placed on trustees under legislation and common law?
The responsibility to manage the trust entrusted to him or her in an efficient manner.
The fiduciary responsibility towards the beneficiary meaning he or she must manage the trust only on the interest of the beneficiary.
The responsibility to adhere to the terms of the trust as was stipulated in the trust deed.
The responsibility to act impartially with regard to all the beneficiaries involved in the trust.
The responsibility to maintain all records of the trust account.
The responsibility to take part in all decision-making procedures that pertain to the trust.

Q30: What happens when a corporate trustee is subject to an insolvency administration?
The corporate trustee stops being the trustee upon being declared to be insolvent. In such a case there is a need to seek aid from the courts before the liquidator gains the ability to realize the trust’s assets with a goal of meeting the company’s liabilities.
Q31: Detail 6 remedies available to beneficiaries in dealing with company trustees under the Corporations Act.
Terms of the trust deed
Power of the Court to appoint new trustees
Inherent jurisdiction to remove a trustee
Use of oppression of the minority provisions under the Corporations Act

Q32: What is corporate governance?
Corporate governance refers to a structure of guidelines, relationships, systems and processes within and by which effective control is applied and within a particular corporation.
Q33: Outline the 8 central principles and recommendations set out by the ASX in Corporate Governance Principles and Recommendation.
Lay solid foundations for management and oversight.
Structure the board to be effective and add value.
Instill a culture of acting lawfully, ethically and responsibly.
Safeguard the integrity of corporate reports.
Make timely and balanced disclosure.
Respect the rights of security holders.
Recognize and manage risk.
Remunerate fairly and responsibly

Q34: What are 4 key management processes that support corporate governance?
Development of a governance policy framework.
Conducting constant training in order to improve management skills.
Executive workshops.
Documentation of standards.

Q35: Describe 6 internal control procedures used to support corporate governance.
Separation of duties.
Control of access to accounting systems.
Implementation of standardized documentation.
Physical audit of assets.
Conducting periodic trial balances
Conducting periodic reconciliation of accounting systems.

Q36: Provide 5 examples of performance indicators used to monitor corporate governance activities.
Ethical Standards

Strategy execution

Risk oversight

Executive compensation

Composition of the board

Q37: Provide 5 examples of key result areas used to monitor corporate governance activities.
Corporate Monitoring
Corporate Reporting
Effectiveness of corporate governance
Composition of corporate governance
Corporate compliance

Q38: Diagrammatically present the passage of legislation through Parliament.
S
Q39: What is the superannuation guarantee?
It is a requirement for all employers to provide adequate support for their workforce.
Q40: What is the current general super guarantee percentage?
9.5%

Section C – Feedback to Student

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