Assignment on Business Law - (Doc)

Added on - 29 Apr 2020

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Running head: BUSINESS LAW ASSIGNMENTBusiness law AssignmentName of the StudentName of the UniversityAuthor Note
1BUSINESS LAW ASSIGNMENTThe Sydney Morning Herald, March 20, 2017The Directors and the Executives of Dick Smith have been accused of committing a breach oftheir directorial duty to exercise reasonable care after the company has suffered financialcollapse in January 2016.The former directors of the Dick Smith had to face legal action 14 months after theelectronics chain was put into administration. Receiver brought a legal action against thedirectors and executives to recover losses worth $60 million as the directors failed to exercisereasonable standard of care and skill managing the company’s inventory. The company wasalleged that its inventory purchasing decisions are based on maximizing rebates instead ofdemand of the customers which led to an increase in the redundant stock amounting to $180million by October 2015. The excessive stock led the company write off $60 million of inventoryin November 2015.The directors were accused of inflating profits artificially in the 2015 financial year, asthey were recoding rebates as profit. Although the directors denied that they made the purchasingdecisions based on rebates, the chief financial officer of the company admitted in court that thecompany did adopt a strategy to enhance the earnings from rebates. The law firm defending thedirectors contended that the directors have always acted diligently, consciously and exercisedreasonable care while carrying out the business operation of the company.Issues in the articleThe issue that arises in the Dick Smiths case is that the directors have failed to exercisetheir statutory duty to exercise due care and diligence while carrying out the business operationsof the company.
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