Constitutional Law

Constitutional Law

Commonwealth is granted power with the Section 51(xx) of the Constitution to create laws regarding “foreign corporations and trading or financial corporation formed within the limits of the Commonwealth”. A difficulty to interpret this collocation of words has always been arisen. Whether or not the power is encompassed by s 51 (xx) to offer for the incorporation of financial and trading corporations has been the topic of strong scholastic argument.

3 types of corporations (foreign, trading and financial) are referred by Section 51(xx) which may be formed.

A corporation is an artificial person that is recognised by the law and it can file a suit and also be sued in its own name, hold property, make agreements etc and instead of a signature of a natural person, it has a corporate seal. Corporation can be a “sole” where rather than person, property is held by the “office” or a corporation aggregate i.e. organizations, municipal corporations (BCC), trade unions, other associations listed in Associations Incorporation Act like sports clubs etc.

Foreign Corporation

A corporation that is created outside the Commonwealth limits is foreign corporation. Under the law of foreign country, this body is formed and then a corporate legal personality is accorded to it either by the law of source country or Australian law. A corporation that executes its business in Australia but formed outside Australia is also categorised as foreign corporation. (Re Dingjan; Ex ParteWagner) The Commonwealth can exercise its power to legislate rulings or laws concerning to that Corporation when within the limits of the Commonwealth, the corporation is operating, even if the corporation is incorporated outside the Commonwealth.

Trading Corporation

The very heart of trading are buying and selling. The same phenomenon in s 51(xx) is pertained to trade as do the ss 51(i) and 92. That phenomenon include: buying/selling, transport for reward, negotiations, bargains, credit, purchase or sale of money, information, news, tangibles and intangibles.

Financial Corporation

A corporation that is engaged in financial activities is a financial corporation, for instance the buying and selling of money. Such transactions are included in financial activities in which the focus of the business deal is financing (i.e. money lending or borrowing), as different from transactions (i.e. for money, purchasing or selling of specific goods ). Having a profit motive is not essential for a financial corporation.

For commercial purposes, a financial corporation deals in finance, i.e. through making loans; going into agreements of hire purchase; or in other forms supplying credit and this doings is not carried out for the rationale of executing some other business.

Categorisation of Corporations

There have been two tests historically, which have been related to establish whether a corporation is trading or financial. One test is known as purpose test while other is known as activities test. The reason or purpose for the establishment of corporation is asked in Purpose Test, like article of memorandum or in statute are consulted to comprehend what the company does while the current activities of the corporation are asked in Activities ...