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Business Law and Corporate Law (pdf)

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Added on  2021-06-14

Business Law and Corporate Law (pdf)

   Added on 2021-06-14

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Running head: BUSINESS AND CORPORATE LAWBusiness and Corporate LawName of the StudentName of the UniversityAuthor Note
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1BUSINESS AND CORPORATE LAWTable of ContentsCase Introduction.............................................................................................................................2Breach of Duties..............................................................................................................................2Critical analysis of decision of court...............................................................................................3Relevance of decision on operation of Australian Companies........................................................7References........................................................................................................................................9
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2BUSINESS AND CORPORATE LAWCase Introduction In this case, the plaintiff, Australian Securities and Investments Commission [ASIC]claimed that Southcorp Limited (“Southcorp”), the defendant, failed to comply with itsobligation to notify ASX about the impact of its 2000 vintage wines would imply reduced sales,which further implies reduced profit for the financial year 2003. Although the executive ofSouthcorp provided a brief about number of analysts regarding the impact but such informationwas provided at a time when the share price had already fallen. It led to a trading halt by ASXthat had been imposed upon the company (Riaz et al. 2015). Breach of DutiesThe plaintiff alleged that the defendant has violated subsection [674(2)] of theCorporations Act 2001 (Cth) on 18 and 19 April in the year 2002 as it failed to informAustralian Stock Exchange Limited [ASX] about certain important information that thecompany sent in an email on 18 April to the stock market analysts. The information that wasconveyed was that all the 2000 vintage super premium wines of the defendant were expected tobe sold in the financial year 2003. It was further conveyed that the impact of the gross profit ofthe 2000 vintage was expected to be as per the order of 30 million dollars. The plaintiff claimed that the defendant, Southcorp Limited has committed a breach ofthe disclosure obligation as set out under section [674(2)] of the Act. As per section [674(1)] ofthe Act, the corporations are obligated to make disclosure as per the listing rules. According tosection [674 (2)] of the Act, a listed disclosing entity must acknowledge the market operative ofabout any particular matters or events as they arise if such listed entity include any provisions of
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3BUSINESS AND CORPORATE LAWthe listing rule which makes such notification as mandatory. This requirement is mandatorybecause it enables the operator to inform the participants in the market about the informationnotified by the entity. Further, such information must be such that is not available generally untilnotified by the company itself and any prudent person would reasonably expect revelation ofsuch information as it might have a significant impact on the price of enhanced disclosure [ED]securities of the entity (Gonçalves and Lopes 2015).Critical analysis of decision of courtAt the time when the legal actions were brought against the defendant, it was a ‘listeddisclosing entity’. The shares of the Southcorp are ED securities, which are included in thecertified list of the listing market operated by the ASX. As per subsection [111 AP (1)] of the2001 Act, a disclosing entity is obligated to make continuous disclosure and comply with therequirements set out under section [674] of the Act. Under section [1317E (1)(ja)] of theCorporations Act 2001, if a court is of the opinion that the person has violated section [674(2)]of the Act, the court shall declare such an act or omission as a breach and subject the infringer tocivil penalty. Riaz and Kirkbride (2017) states that as per the submissions made by the plaintiff,[ASIC] stated that disclosure of the documents amounted non-compliance of the disclosure ofmaterial information that was associated with the 2000 vintage wine. The defendant contendedthat the information relating to the impact of gross profit from the sale of the 2000 vintage wineswas general information, hence, was not released to the market and neither was notified to theASX.
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