Australian Business Law Application - Assignment
6 Pages1488 Words20 Views
Added on 2021-06-17
Australian Business Law Application - Assignment
Added on 2021-06-17
ShareRelated Documents
1ContentsQuestion One...............................................................................................................................................2Issues 1........................................................................................................................................................2Law..........................................................................................................................................................2Application..............................................................................................................................................2Conclusion...............................................................................................................................................3Issue 2.........................................................................................................................................................3Law..........................................................................................................................................................3Application..............................................................................................................................................3Conclusion...............................................................................................................................................3Solution 2....................................................................................................................................................4Issue 1.........................................................................................................................................................4Law..........................................................................................................................................................4Application..............................................................................................................................................4Conclusion...............................................................................................................................................4Issue 2.........................................................................................................................................................4Law..........................................................................................................................................................4Application..............................................................................................................................................5Conclusion...............................................................................................................................................5Reference List.............................................................................................................................................6
2Question One Issues 1Are there any grounds for ASIC to bring civil or criminal actions against Liam and Peta?LawAs per the requirements section 180 of the Corporation Act 2001 is not taken into consideration. Section 9 defines company directors which includes de-facto, shadow and executive directors(ASIC v Healey (2011). A person is director when he is either posted as director or is carrying theresponsibly of a director. The power to govern a company is granted to a director under section198A of the Act. (Tomasic, et al, 2002)Several statuary duties must be comply with by a director including a duty to prevent insolventtrading. Section 588G of the Act deals with the prohibition on insolvent trading by the directors.The duty to prevent insolvent trading is only imposed upon the director:i.When the debt is incurred then such person is the company director;ii.It is on the occurrence of debt that the company becomes or is likely to becomeinsolvent;iii.The director is aware that because of the debt there are chances of the company tobecome insolvent or is already insolvent (Woodgate v Davis (2002).But, under section 588H there are few defenses that are available: (Baxt, 2005)i.Reasonable grounds that the company will not become insolvent on the occurrence ofdebt (Metropolitan Fire SystemsPty Limitedv Miller(1997);ii.The director relied on relevant information;iii.The director was not part of the management when the debt is incurred;iv.Reasonable steps are taken to prevent insolvent debt. Section 588E (4) has raised a presumption that the company must be considered as insolventduring the period when it is not able to keep the financial records of the company and as held inSwanServices Pty Limited (in liquidation) [2016]. The law is now applied. ApplicationME Enterprises Pty Ltd is a company with Liam and Peta as its shareholders/directors. Day to day activities are carried by Peta including marketing/growing the business.Liam is the non executive director. They both review the financial status quarterly based on balance sheet made by employees.Peta make sure that the suppliers of the company are paid on time. But, in May 2017, shereleased that suppliers are not paid. Employees are instructed to pay suppliers on priority basis.In June 2017, a notice is received by the company from Australian Taxation Office for thepayment of taxes.
3No heed is given by Liam and pets on the notice of the office nor is any attempt made to alter thecompanies working to reduce expenditures. The balance sheet of 2017 shows assets < liabilities. But when the events amid May June 2017 were carried out by Peta alone as Liam she wassuffering with cancer and undergoing treatment.There is clear violation of insolvent trading under section 588G of the Act by Peta mainlybecause:i.Peta was carrying on business and is the director amid May –June 2017 and incurringexpenditure knowing that the company is not able to pay its current suppliers;ii.Because of the incurrence of expenditure the liabilities > assets;iii.Peta is aware that the actions might result in insolvent trading of the company.Thus, Peta has violated section 588G of the Act and is held liable for insolvent trading.Liam was not the director during May-June 2017 when the debt is incurred and thus seek defuseunder section 588H of the Act.ConclusionPeta is held liable for insolvent trading. But, Liam can rely on the defense under section 588H ofthe Act. Issue 2If ASIC’s prosecutions team decides to pursue action against Liam and Peta, what penaltiescould ASIC seek from the court?LawWhen there is violation of section 588G of the Act, then, the liabilities includes:A civil liability, in the form of pecuniary penalty (up to $220,000); compensation to company(1317H) or disqualification order (section 206C).Criminal penalties can also be imposed for Fine of $340,000 or five years imprisonment, or bothif the acts are carried out with dishonest and reckless intention. ApplicationSince the acts of Peta are carried out with recklessness thus criminal liabilities scan be imposedof Fine of $340,000 or five years imprisonment. Civil liabilities can also be imposed up to$220,000 and can be disqualified under section 206C of the Act.Conclusion Peta is liable for liabilities but Liam is not ashe was safe under section 588H of the Act.
End of preview
Want to access all the pages? Upload your documents or become a member.
Related Documents
Corporation Law - Assignment Sample PDFlg...
|6
|1009
|135
Application of Law - Assignment PDFlg...
|6
|1458
|225
Assignment on Corporate Law (pdf)lg...
|6
|1030
|65
Corporations Law : Assignment Samplelg...
|6
|1197
|54
Corporate and Corporation Law Name of the Student Name of the Universitylg...
|6
|1299
|147
Corporation Law - Assignment Sample PDFlg...
|6
|1040
|48