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Business Law and Corporation Law Assignment

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Added on  2020-05-28

Business Law and Corporation Law Assignment

   Added on 2020-05-28

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Business and Corporation Law
ASIC v Padbury Mining Limited [2016]
FCA 990
15-Jan-18
(Student Details: )
Business Law  and Corporation Law Assignment_1
Business and Corporation Law
Introduction
The ASX announcements are something which has to be made in a careful manner. This is
particularly important because a misleading ASX Announcement can result in the prosecution of
the listed entity by the ASIC, along with the officers of the entity, who authorized the made
announcement. The Corporations Act is another important matter which has to be considered by
the companies. This act presents different duties which have to be followed by the key personnel
of the company, and included in this is the duties set out under Part 2D.1 of this act. Where this
is not done, the result is imposition of civil and criminal liabilities on the relevant person
breaching their duties (CCH Australia, 2011).
An example where both the above mentioned aspects were merged is the case of ASIC v Padbury
Mining Limited [2016] FCA 990. This case had both misleading ASX announcement and breach
of director duties (Narushima, 2016). This discussion presents an analysis of this case, in order to
show how these beaches took place and the decision given by the court in this matter.
Background of the Case
Constant attempts were being made by Padbury Mining Limited since last some time, where the
attempts were related to the development of a deep water port, located in Western Australia’s
Oakajee, along with an associated railway network (ABC News, 2016). A victorious
announcement was made by Padbury on April 11th, 2014 at 9:40 am, where it was stated that the
company had attained funding of $6billion in a successful manner for the project. Though, this
announcement failed to make adequate disclosures regarding the conditions which were
precedent, as the funding was dependent on it, and also failed in identifying the parties who
would be providing this claimed funding. These precedent conditions help a lot of importance.
This is because the conditions precedent required the company to get a bank guarantee which
could match the funding which had been provided by the proposed funder. It came to be known
later on that the company did not have the ability of doing so (Levy, 2016).
Page 2
Business Law  and Corporation Law Assignment_2
Business and Corporation Law
Before the announcement was made, the last sale price was $0.02 for each of the share. Once the
announcement was made, the shares were traded at the value of $.0.045 and were traded in the
range of $.0.032 and $.0.052 for each share. The total numbers of shares traded were
209,366,987. On the day of the announcement, at 2:15 pm, the shares went in a trading halt
based on the request of the company. This was due to the announcement regarding more details
of funding being pending. Till April 29th, 2014, the shares were in suspension or in trading halt.
This was the date on which the announcement regarding the funding parties had terminated their
agreement. As a result of this, the project never got the funding which was needed and this led to
the project never being constructed. This led to the company being prosecuted by ASIC, along
with two of the directors, who had been involved in the making of the first announcement being
prosecuted by the ASIC. These two were the chairman, Terence Quinn, and the managing
director, Gary Stokes (Levy, 2016).
Duties breached
In the introduction portion of this discussion, it was stated that the directors of the companies
have been given certain responsibilities and duties by the Corporations Act. Amongst the
different duties is the one covered under section 180(1), which provides the duty of care and
diligence. As per section 180(1), the directors or the other officers of the company are required to
exercise their powers and have to discharge their duties, in a careful and diligent manner (ICNL,
2018). This has to be done as would be done by a reasonable individual, where this individual:
Was an officer or the director of the company in the situations faced by the company; and
Was holder of the office as was held by and also had the same responsibilities in
company, as the officer or the director held (Austlii, 2018).
This section provides that a breach of this section would attract civil penalty covered under
section 1317E of this act. Section 1317E relates to the declaration of contravention. Upon the
court becoming satisfied that the civil provisions have been breached, they make a declaration of
contravention. One of the civil penalty provisions is the director/ officers duties. Under
subsection 2 of this section, the contents of declaration of contravention have been covered. This
section also provides that once a declaration is made, the ASIC can seek a disqualification order
Page 3
Business Law  and Corporation Law Assignment_3

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