Problem and Solution for Corporation Act- myassignmenthelp.com

Question: Discuss about theProblem and Solution for Corporation Act. Answer: Issue: The main issue of the case is to determine whether a company can do any act that goes against the terms and policy of the constitution of the company or not. Rule: The subject matter of the case has attracted the provision of section 125 of the Corporation Act 2001. It has been mentioned under the Act that a company or constitution should apply all its activities based on the policies and terms mentioned in its constitution (Bottomley, 2016). According to section 125(1) of the Act, the constitution of a company can restrict the power of the company if it may deem fit. Therefore, a company is obliged to abide by the rules of the constitution in general. However, an exceptional clause to the effect has been included under this section. According to section 125(2) of the Act, the rules of the company have been set out by the constitution (Symes, 2016). However, if a company does any act that exceeds the terms of the constitution, the same act could not be stated as invalid in nature. Therefore, a company can take any decision for the best interest of the company and if the constitution does not allow the company to do the act, the same could not b e treated as invalid for the company. Application: In this given case, it has been observed that the directors of the company have taken certain loan for the development of the company and the loan amount has exceeded the terms and policies of the constitution. It has also been observed that the company had a previous loan amount taken from other bank. Therefore, in case of the subsequent bank loan, the company was denied by the bank on the fact that the constitution of the company does not allow the company to do such act. It can be stated according to the provision of section 125(2) of the Corporation Act; a company can do certain acts for the benefit of the company even if the act goes against the terms of its constitution. Such act could not be considered as invalid. Conclusion: It is therefore advised to ABC Bank that it should allow the loan to the company. Reference: Bottomley, S. (2016).The constitutional corporation: Rethinking corporate governance. Routledge. Symes, C. F. (2016).Statutory priorities in corporate insolvency law: an analysis of preferred creditor status. Routledge.