Productivity Commission Safe Harbour †Free Samples to Students

Question: Discuss about the Productivity Commission Safe Harbour. Answer: Introduction: The legal issue raised in the Janice situation is the company formation. Janice established a new company, Artifice Pty Ltd. The company had one director and one shareholder. The director and the shareholder was the same person, her husband. This move by Janice is legal. Under the Australian corporate law, a proprietary company should have a minimum of one director and one shareholder. Artifice Pty Ltd having being formed legally is now a company. Nit is legal and a separate entity from the owners, the directors and the shareholders. It can therefore own property and enter into contracts separately and independently management. The painting sold by Janice to the company therefore becomes the companys property (Singh, 2016). Janice therefore cannot deliver the painting to Tim legally. Tim will have to enter into a new agreement with the company. Tim however had an agreement with Janice initially. If the agreement was made official substantiated in writing, it would be similar to a contract. If a contract is entered, the contract would be binding to both parties in the contract. Tim could sue Janice for violation of a contractual agreement entered between him and Janice. However, if the agreement was just an agreement that could not amount to a contract, that would not be binding. This means Tim would have no legal options (Harris Hargovan, 2016). Tim would have lost. The legal issue raised in this situation is the functions of a director in a company. Can a director transact business on behalf of the company? Can a director enter into contracts on behalf of the company? According to the Australian Corporate law, a director of a limited company can transact business management on behalf of the company. He or she can make contracts on behalf of the company. The fact that Janice represented the company when they came into an agreement with Tim meant that the company now had a contractual agreement with Tim (Harris, Hargovan Adams, 2013). When the agreement was due, the painting had to be delivered to Tim after he makes the payment. Another legal issue was raised when the value of the painting increased in value. Janice knew that she could not re-negotiate with Tim for they had come to an agreement. She came up with a strategy to allege that the corporate management constitution of Janice GEMS Pty Ltd place a prohibition on sale of artworks. She would allege that its business activities were restricted to the acquisition and display of artworks. It is important to note that this is just an allegation. For a company constitution to be changed, it would require a special resolution which must meet certain criteria and are not easy to pass. Tim has a legal option of suing the company of breach of contract. In carrier Australia ltd vs Hunt (1939), the company changed some paragraphs in the constituting which ended in the removal of a director. The company was later held for breach of contract (Harris, 2016). A special resolution is not an easy thing even for a small company and if this special resolution to change the companys constitution is not passed, Janice Gems Pty Ltd. will be found guilty of breach of contract. Tim will probably have his painting eventually. References Harris, J. and Hargovan, A., 2016. Productivity Commission safe harbour proposal for insolvent trading. Governance Directions. Harris, J., Hargovan, A. and Adams, M.A., 2013. Australian corporate law (Vol. 2). LexisNexis Butterworths. Harris, J., 2016. Journal of Banking and Finance Law and Practice. Journal of Banking and Finance: Law and Practice. Singh, A., 2016. Australian corporate law [Book Review]. Ethos: Official Publication of the Law Society of the Australian Capital Territory, (240), p.58.