Bruce and Lee are the only shareholders and directors of Ninja Computers Pty Ltd, a two-dollar company that operates a computer stores in Sydney. Bruce and Lee share management of the company. Bruce is the managing director, which also involves responsibility for the company’s finances (because he worked for several years as an accountant with a large firm). Lee manages the company’s staff, business marketing and client relations. Lee knows very little about finance but is a good people person. Lee has complete trust and confidence in the ability of Bruce to manage the business, given the background and experience of Bruce.

On 1 July 2017, Lee received a telephone call from one of the company’s trade suppliers (SupplyCo) demanding that an overdue monthly supply account be paid. Lee thought this was very strange because Bruce was normally very efficient at paying the company’s bills. However, Lee was very busy that day and he left a message for Bruce on his desk.

Two weeks later when Lee asked Bruce about the bill, he replied that he paid it. On 1 August 2017, Lee again receives a telephone call from SupplyCo demanding payment. Lee emails Bruce about this, who replies that he has “sorted it out”. What Bruce has in fact done is pay off the creditor using the company’s credit card which is now over its limit.

Any doubts that Lee had about the company’s financial position is removed when Bruce sends an email to him advising that the company had been able to review its tax position and received a “huge” refund from the tax department, which he has used to buy new company cars for each of the directors costing $55,000 each. Although Lee is not happy about Bruce buying the cars without consulting him, Bruce insists that he only bought the cars to take advantage of a special tax advantage in buying luxury cars for business purposes.

Bruce, who has a reputation as a liar, had given false information to Lee. Bruce has been selling several company assets to pay off the luxury cars and his personal gambling debts. The money used to pay for the Christmas party was taken from another company credit card that Bruce signed up for. The company has been surviving on credit for all of 2017. Bruce has been able to conceal this from Lee by failing to keep proper financial records since 1 August 2016.

On 1 November 2017, Lee tries to use his company credit card, but it is rejected by the ATM due to insufficient funds. Lee tries to contact Bruce but his answering machine states that he is on holiday and will return to work on 8 November 2017.


On 9 November 2017 Lee becomes concerned because Bruce does not return from holidays and his mobile phone has been disconnected. On 10 November 2017, Lee receives a telephone call from the company’s bank manager who informs him that the company has now exceeded its $150,000 overdraft and that, for this reason, the bank will no longer honour any payments made by Ninja Computers Pty ltd.

On 14 December 2017, a liquidator is appointed by the court. The liquidator now seeks to repay the creditors of Ninja Computers Pty Ltd, but the company has insufficient funds and assets to make any repayment of debts totalling more than $285,000.

· (a)  Advise the liquidator, with reference to the Corporations Act 2001 (Cth), as to what action she should take against Bruce and Lee and the chances of her success. [14 Marks]; and 

· (b)  Assume ASIC, instead of the liquidator, has taken legal action Bruce and Lee for breach of the Corporations Act identified in your answer in part (a). Explain, with reasons, what are the most likely potential legal consequences for Bruce and Lee? [6 Marks] 

End of Question.

Hint: Your answer must address the relevant legal issues studied in this course. The question draws on selected material covered in topics 1-3. Therefore, no discussion is required on the law concerning directors’ fiduciary duties or statutory duties under ss 180-184 of the Corporations Act.


1. Submission Procedure: TOP Office Level One [Marked Drop Box] 

2. Assignment Cover Sheet must be submitted with student signature and with 
word count 

3. Plus, copy of assignment to be lodged at turnitin 

4. Late submission will attract penalty (mark deduction of 5 % for each day late) 

Most Important: Plagiarism is a serious academic offence and can result in failure of this course. Students are expected to submit answers based on individual effort (this is not a group project).

Requirements for a pass/good mark:

1. A legal analysis of the question with reference to relevant principles of corporations law (case law) and, where appropriate, relevant statutory provisions of the Corporations Act 2001 (Cth).

2. Students are expected to reference the relevant chapters in the prescribed textbook and to draw supporting information from there (Hint: read the relevant parts of Chapter 18 of your prescribed textbook).

3. You are strongly advised not to use the internet for resource materials (as it is unnecessary and you run the real risk of drawing on irrelevant information and/or foreign law). The Current Edition of your Prescribed Textbook is more than adequate to answer the questions.

4. Students are expected to footnote references1 and to provide a bibliography.2

5. Marks will be deducted if the answer does not meet the minimum word count – a word count must be indicated on the cover sheet. 

6. Use of margin of 1.5 and font of 12 (Times New Roman] – with answers on single side of each page.

7. A good answer to Question 1 and 2 will do the following (adopt the following structure) with respect to the question:

· (a)  Identify the material (relevant) facts – and NOT simply repeat the question;

· (b)  Identify the legal issue (or issues);

· (c)  Identify the relevant case law;

· (d)  Apply the legal principles and relevant case law and statute law to the given facts;

· (e)  Offer legal reasons (with legal authority) as to whether various parties are liable (a 
simply Yes or No answer with personal views is totally inadequate).

8. Satisfactory answers will also

· (a)  Be proof-read to eliminate spelling and grammatical errors;

· (b)  Be referenced, with a bibliography;

· (c)  Meet the minimum word length requirement and

· (d)  Not simply copy/reproduce the textbook (answer must show own understanding)

· (e)  Not be plagiarised.

On completion of this topic you should be able to: 1.1 know the sources of Australian company law;

1.2 Understand current structure of Australian company law;

1.3 Understand how company law is administered – role and powers of corporate regulator: ASIC

1.4 Explain the different types of companies and the purposes for which they are used (including the distinction between proprietary and public companies)

Topic 1



Sources of Company Law (1) General Law/case law (made up of both common law

and equity) and (2) Statute Law: Corporations Act 2001 (Cth) • sets out key rules that govern or facilitate the formation,

management, operation and termination of companies

• Passed by Federal Government in July 2001, but Act has been amended ever since;

• Continuous process of law reform (both statutory and through judicial development of case law)

• Content of company law never stands still! • Over 1,500 sections. • See: How to use the Corporations Act at Ch 1 of

Australian Corporate Law (6th ed, 2018)

3 TLAW 402 (Week 1) Regulatory Framework

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Sources of Company Law

(3) Other sources includes:

– Corporations Regulations

– ASIC Act 2001 (Cth) – sets out functions and powers of regulator (corporate watchdog), Australian Securities and Investment Commission (ASIC)

– ASX Listing Rules (is contractually binding on publicly listed companies)

– Accounting Standards

4 TLAW 402 (Week 1) Regulatory Framework

of Company Law



DEVELOPMENT OF AUSTRALIAN COMPANY LAW • History of company law statutes in Australia (key

legislative milestones) • Companies Act 1862 (UK) • Uniform Companies Acts (1961) • Co-operative Scheme (1981) • Corporations Law Scheme (1991) • Corporations Act 2001 (Cth) –single, national law governing

all aspects of companies from formation to termination;

• Constitutional problems • Until July 2001, Australia lacked a single, national law • Reason: Section 51(xx) of Constitution interpreted by the High

Court to give limited company law making powers to Federal Government

• Political solution in 2000 when States referred their corporate law making powers to the Federal Government

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• ASIC Act 2001

• Role & functions

• Registers new companies

• ASCOT database

• Powers of investigation

• Power to bring legal proceedings

• Education

• website –

See: Ch 2 of Australian Corporate Law ( 6th ed, 2018)

6 TLAW 402 (Week 1) Regulatory Framework

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Legislation ASIC administers • Corporations Act 2001 (Cth)

• ASIC Act 2001 (Cth)

• Other statutes: – [Insurance Contracts Act 1984

– Superannuation (Resolution of Complaints) Act 1993

– Life Insurance Act 1995

– Insurance Act 1973

– Retirement Savings Account Act 1997

– Superannuation Industry (Supervision) Act 1993

– National Consumer Credit Protection Act 2009]

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of Company Law



ASIC’S AIMS AND PRIORITIES ASIC’s aims (set out in s 1(2) of the ASIC Act 2001) are:

• Assist and protect retail investors and consumers in the financial economy

• Build confidence in the integrity of Australia’s capital markets

• Facilitate international capital flows and international enforcement

8 TLAW 402 (Week 1) Regulatory Framework

of Company Law



What does ASIC do? • As the corporate regulator, ensures that company directors

and officers carry out their duties honestly, diligently and in the best interests of their company; ensure compliance with Corporations Act.

• As the markets regulator, assesses how effectively authorised financial markets are complying with their legal duties to operate fair, orderly and transparent markets.

As the financial services regulator, license and monitor financial services businesses to ensure that they operate efficiently, honestly and fairly. These businesses typically deal in superannuation, managed funds, shares and company securities, derivatives, and insurance.

9 TLAW 402 (Week 1) Regulatory Framework

of Company Law



ASIC’s Company Law Functions • Functions

– Registering – eg companies (1.95 million co’s)

– Licensing – eg financial services

– Monitoring – eg financial markets trading

– Regulating – eg Regulatory Guides (explains how ASIC interprets the law): ASIC RG 217: ‘Duty to Prevent Insolvent Trading: Guide for Directors’ (July 2010) sets out key principles to help directors understand and comply with their duty to prevent insolvent trading.

– Deterrence and enforcement (use of civil penalties provisions under Corporations Act 2001)

– Educating – eg

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ASIC’s Investigation Powers • power to commence an investigation – where

reason to suspect a contravention [s13 ASIC Act]

• power to require a person to give all reasonable

assistance in connection with an investigation

and/or to be examined on oath and answer

questions [s19 ASIC Act]

• power to inspect books [s29 ASIC Act]

• power to require production of books about

affairs of a company [ss30-33 ASIC Act]

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ASIC’s Enforcement Options • Seven broad strategies for law enforcement:

– Preservation

– Legal Action

• Civil Penalties

• Criminal Prosecution

– Administrative Action

• Enforceable Undertakings

• Infringement Notices

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ASIC’s Enforcement Options • Broad strategies for law enforcement:

Administrative Action – Enforceable Undertakings (discretionary/flexible remedy to help

enforce law; alternative to court action; not for offences involving fraud; deliberate misconduct or high level of recklessness): For ASIC’s policy on enforceable undertakings – see Regulatory Guide 100, Enforceable undertakings.

– Infringement Notices: Leighton Holdings Limited (Leighton) paid total of $300,000 after ASIC served 3 infringement notices alleging co had not complied with continuous disclosure provisions of Corporations Act 2001 and relevant provisions of the (ASX) Listing Rules. Also, ASIC accepted an enforceable undertaking (EU) which commits the co to reviewing its disclosure practices.

Legal Action – Civil Penalties [fines, banning orders, compensation]: – Criminal Prosecution [higher fines and/or imprisonment]

13 TLAW 402 (Week 1) Regulatory Framework

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ASIC’s response to allegations of misconduct/ non-compliance

ASIC may:

• carry out surveillance to check compliance

• assist parties in obtaining compliance

• conduct a formal investigation

• refer the matter to another agency/entity (eg CALDB)

14 TLAW 402 (Week 1) Regulatory Framework

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