Corporation Law Article of Association

Questions: 1. Explain what is meant by an entrenched provision and why David in your case study may want to have such provisions included in the companys constitution. In answering your question please refer to the relevant provisions of the Corporations Act.2.What type of authority do you think (if any) Michelle has to order the amount of stationery and the i pad. In your opinion do you think the company is bound to pay Office works or not? Answers: 1. An entrenched clause or entrenchment clause of a basic law or constitution can be defined as the provision, which undertakes certain amendments, becomes either more difficult or inadmissible. As per the Corporation act 2001, the articles might contain several kinds of provision for entrenchment to the extent which is the specified provision of the articles and may be changed only on the conditions that are more restrictive that those applicable unless a special resolution are met or complied with. The recognition of entrenchment provision in the Article of Association of a company is to apply additional degree of legal safeguards. It is worth mentioning that there is certain type of alterations, which is either not easy or burdensome (Stoutet al. 2016). Under the given case study, David may want to have such entrenchment clause added to the constitution of his company on the grounds that he can manage the affairs of the company. On the application of the entrenchment clause the article may contain the provisions for entrenchment to such an effect that each of the specified provisions of the articles can be changedbased on the conditions and procedure, which is more restrictive than those applicable are (Kershaw 2012). It is noteworthy to denote that new act does not take any responsibility of defining the term entrenchment neither does it provides an explanation for recognition of entrenchment clause. Any such amend amends made in the new clause would take into the consideration the addition of new clauses in the article. As mentioned in the case study the company would be requiring a loan of $100,000 but without the approval of David, it is not possible to approve the loan. Under Section 23 of the Corporation Act 2001 states that private agreement between shareholders would not bind the company unless the articles of association of the company provided such restrictions. The articles of association represent the constitutional document of the company and any such changes made to the specified clauses of articles of association may require additional number of conditions to be fulfilled which is referred as entrenchment clauses(Dhar 2012). Under the given case study of David, the entrenchment provision would however need to comply with the memorandum of association of the company and be in accordance with the Corporation Act 2001. Hence, any entrenchment clause, which against the provisions of the company law or memorandum off association such provisions, would be declared as void and unenforceable. U nder division 3 of the Corporation Act 2001 It is noteworthy to denote that any such clause in the articles of associations which grants special rights in relation to the terms of voting to a minority group which is against the wisdom of shareholder is valid (Hanrahan, Ramsay and Stapledon2013). The entrenchment provision introduced by David should would provide for amendments to the articles of association of the companys document. 2. A receptionist is an employee who undertakes an office or administrative support position. The areas of work for receptionist usually cover waiting area or front office desk of an organisation or any business. Under the given case, study Michelle who is a part time receptionistis attributed with the responsibility of helping out in the execution of office work. About the order made by Tom, Michelle gives orders for the purchase of stationary and I pad for work. The receptionist is usually bound to cover the areas of work in order to assist the business they work for which includes keeping and filing records and other office related task necessary to keep business activities moving (Stout et al. 2016). It is noteworthy to denote that business expenses are those expenses that are required to be paid to run the business. Hence, under the given case study, the company is bound to pay for the office works since it is necessary to run the business with the items required for executing t he business activities. However, such business expenses incurred may be deductive or non-deductive. The purchase of office stationary and i pad are generally considered as business deductible expenses which is entirely and wholly incurred in the production of business income. It should be noted that expenses incurred are not depended upon the event that might or might not occur in the future course of event. The lawful liability to pay the expenses must have been occurred in context to the business expenses irrespective of the date of actual payment of money. To be deductible, a business expenses must be in nature of ordinary and necessary (Goulding 2013). An ordinary expenses is one that is commonly accepted in the trade or business while necessary expenses is the one that is helpful and appropriate in the current case study. Thus, the expenses do not have to be indispensible to be considered as necessary. It is the obligation of the company under the given case to pay for the office cost incurred in due course of business. Reference List: Dhar, K., 2012. Articles of Association and Alteration of Articles.Available at SSRN 2014347. Goulding, S., 2013.Principles of company law. Routledge. Hannigan, B., 2015.Company law. Oxford University Press, USA. Hanrahan, P.F., Ramsay, I. and Stapledon, G.P., 2013. Commercial applications of company law.COMMERCIAL APPLICATIONS OF COMPANY LAW, CCH Australia Ltd,. Kershaw, D., 2012.Company law in context: Text and materials. Oxford University Press. Stout, L.A., Rob, J.P., Ireland, P., Deakin, S., Greenfield, K., Johnston, A., Schepel, H., Blair, M.M., Talbot, L.E., Dignam, A.J. and Dine, J., 2016. The Modern Corporation Statement on Company Law.