BUSINESS AND CORPORATION LAW.

Running Head: BUSINESS AND CORPORATION LAW
0
Corporate Law
CLAW314
9/12/2019
Student’s Name

ASIC v Adler (2002) 41 ACSR 72
1
Contents
Overview..........................................................................................................................................2
Brief of the case...............................................................................................................................2
Issues and duties of directors...........................................................................................................3
Penalties s........................................................................................................................................5
Actions to prevent insolvency.........................................................................................................5
Involvement of ASIC.......................................................................................................................6
Observation or Comments...............................................................................................................7
Lessons and Learning......................................................................................................................7
References........................................................................................................................................9

ASIC v Adler (2002) 41 ACSR 72
2
Overview
For every business corporate governance and ethics seems to be an important aspect as it
develops the trust of investors and other stakeholders. A company is a legal person but not a
natural one and requires certain individuals to act on its behalf. These individual are generally its
promoters and directors that do transactions on behalf of a company and decides for the
company. In this manner, they play an important role and have some duties. The duties are
mentioned common law as well as the statue. Corporations Act 2001 (Cth) is the legislation of
the federal government of Australia and carries corporate law of the nation. In recent times,
many of the cases have reported there when directors/officers acted breaching their duties. In the
presented report the discussion will be done on one of such case named ASIC v Adler (2002) 41
ACSR 72. The report will consist of different aspects related to this case such as parties, matter,
the decision of the case, authorities involved in the case and lesson that one may get from the
subjective case.
Brief of the case
In the case presented hereby, mainly three people were involved in this case, namely Rodney
Adler, Ray Williams, and Dominic Fodera. Rodney Adler was the shareholders and non-
executive director of a company named HIH. Another person Ray William was Chief executive
officer and founder of HIH and the third person was Chief Financial officer and director of the
company. HIH had a subsidiary named Casualty and General Insurance Co Ltd (hereinafter
referred to as HIHC). Adler also owed another company named Pacific Eagle Equity (PEE). PEE
has received a loan worth $10 million to HIHC, which was undocumented as well as unsecured

ASIC v Adler (2002) 41 ACSR 72
3
(Lawcasesummaries.com, 2019). Dominic Fodera pursued this transaction. Other directors of
HIH were not aware of this loan. PEE was the trustee of a unit named Australian Equities Unit
Trust (AEUT). This unit was again owed by Adler Corporation, which was controlled by Adler.
In other words, Adler indirectly had control of AEUT. The units of trust have been sold by PEE
to HIHC for the exchange of $10 million whereas they were not worthy enough.
PEE used the loan amount in different transactions. Out of this amount the company spent $4
million in acquiring shares of HIH. The intention behind the purchase of these shares was to
create a good reputation for the company's market price before investors. Soon after this
purchase, PEE sold theses shares at the loss of $2 million (Du Plessis, Hargovan, and Harris,
2018). Another $4 million has been spent to purchase shares of unlisted companies of Adler
Corporation that was also a deal of loss. Rest $2 million has lent out to Adler, which was again,
an issue since it was unsecured.
Issues and duties of directors
If to discuss issues involved in the case, this is to state that different directors breached their
duties under Corporations Act 2001. This act provides some general duties of directors, which
are mentioned under section 180 to 183 of the company. These sections prescribe that in what
manner a director or officer is expected to do. Section 180 of the said act that every director or
officer of the company must discharge their functions with due care and skills similar to a
reasonable person (Legislation.gov.au, 2019). The section further states that while making a
business judgment, such people need to ensure that such judgment has made for a proper purpose
and good faith of the company. In addition to this, the person who makes such judgment must
have reason to believe that the decision is appropriate and in the best interest of the company.