Audit Negligence and Civil Liability
Added on 2020-04-21
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Running head: Australian Company LawCompany Law
Australian Company Law 1ContentsTutorial.......................................................................................................................................2Answer 1................................................................................................................................2Answer 2................................................................................................................................2Answer 3................................................................................................................................3Tutorial.......................................................................................................................................4Answer 1................................................................................................................................4Answer 2................................................................................................................................4(i)............................................................................................................................................4(ii)...........................................................................................................................................4(iii)..........................................................................................................................................5Tutorial.......................................................................................................................................5Answer 1................................................................................................................................5(a)...........................................................................................................................................5(b)...........................................................................................................................................6Bibliography...............................................................................................................................8Book.......................................................................................................................................8Cases......................................................................................................................................8Legislation..............................................................................................................................8
Australian Company Law 2TutorialAnswer 1The corporation act, 2001 state the general rule that the every director of the companyprohibit to trade while insolvency as contemplated under section 588G of an Act. In this case,Jamie and Paul are personally liable to pay outstanding debts as trade in losses. In the contextof present problem, the reason set out that they breach the duty of care and diligence undersection 180 and also they also step in a contracting with a third party without anyunderstanding that the performance of the business is also affected if they contract with otherparty, consequently breach the duty to owe toward third party. The insolvency shows by theexisting ground of “reasonable suspicious”. The case referred in the present response to the problem is that 1in which court held that everydirector must owe with third party while contracting. Moreover, the present case also represents the liability of Irene, friend of the director. Thecase,2referred in the response to the problem is that any person other than director of thecompany can also be personally liable to pay debts as it influences the opinion of thedirectors completely. Such advice results into insolvency of the company. Answer 2The appropriate response to the problem is that Percy can enter into an agreement of saleshare agreement under 568(1AA) of corporation act, 20113. The following merits lies infavor of Percy to execute agreement on selling share:The two directors namely Abe and Charles having prejudiced interest.Percy is unnoted by several other members of the company. The agreement can be executed as Percy is not having sufficient means to survive.No adequate payment of dividends made in favor of Percy after tax profits. 1 Arrowhead Capital Finance Ltd (in liquidation) v KPMG LLP [2012] EWCH 1801 (Comm)2 Deputy Commissioner of Taxation v Clark [2003] NSWCA 913 Tricker, RI Bob, and Robert Ian Tricker, Corporate governance: Principles, Policies,And Practices. (Oxford University Press, USA, 2015) 632
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