ASIC v. Rich [2003]: An Analysis of Section 180 (1) of the Corporations Act, 2001

This presentation analyzes Section 180 (1) of the Corporations Act, 2001 in the context of ASIC v. Rich [2003]. It explains the duty of care and diligence that directors of a corporation must observe and the business judgment defense that can be availed in case of breach of duties. The presentation also discusses the elements of the business judgment rule and how it was applied in the case. The conclusion highlights that Jodee Rich and other executive directors had not failed to observe their statutory and common law duties as prescribed for directors of a corporation.

ASIC V. RICH [2003]
An Analysis

SECTION 180 (1)
CORPORATIONS ACT, 2001
 180 (1) of the Corporations Act, 2001 lays
down the statutory duty of care and
diligence.
 This provision states that when
discharging one’s duties as the director of
a corporate entity one must observe a
certain degree of care and diligence to
ensure that they are acting in the best
interests of the company.
 This is the “Duty of Care” that the
directors of a corporation must observe.

What is a business
Judgment?
 Section 180 (3) states that a
business judgment is a decision
to act or refrain from acting
taken by the administration of
the company.
 This applies only in business
decisions that a materially
relevant to the operations of the
corporation.

Business Judgment
Defence
 Section 180 (2) of the act lays down the business
judgment rule which states that the provisions of
Section 180 (1) would be deemed to have been met
when acting on behalf of the company if the act in
question has any or all of following elements:
 The judgment is made in good faith;
 If the business judgment is free from any personal
self interest;
 If the directors have understood and researched the
subject matter to the extent that is reasonably
possible;
 If the directors reasonably believe the act would be in
the best interests of the company.

APPLICATION
 The Judge when delivering the judgment
observed that ASIC had failed to establish
their cause of action, exaggerated their
claims and quoted pieces of evidence out
of context in order to establish their
claims.
 It also comprehensively laid down the
Business Judgment defense in such
cases.
 The acts of the directors contained all the
elements of Section 180 (2) and thus
they could avail the business judgment

CONCLUSION
 To conclude when the directors of a
corporation are in breach of their duties
under common law and the provisions of
Section 180 (1) of the Corporations Act,
2001 the business judgment defense can
be availed.
 Jodee Rich and the other executive
directors had not failed to observe their
statutory and common law duties as
prescribed for directors of a corporation.

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