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Document on Business Law Assignment

   

Added on  2020-04-07

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Running head: BUSINESS LAW ASSIGNMENTBUSINESS LAW ASSIGNMENTName of the StudentName of the UniversityAuthor Note

1BUSINESS LAW ASSIGNMENTResearch Essay As stated by Hanrahan et al., Corporations acting within the ambit of the AustralianCommonwealth’s jurisdiction are governed and regulated by the provisions of the CorporationsAct, 20011. This act in effect defines the rights of all parties involved in transacting withcompanies and also goes on to ensure that these parties would have their interests safeguarded.The Corporations Act, 2001 is a legislation that also defines the formation of a company and allthe requirements to be complied with. In case of documentation procedures however theCompanies Regulation, 2001 would be the guiding legislation. In addition to this the dutiesprescribed under common law must also be considered as Australia is a common law countryand incorporates common law into its legislative framework. Thus the obligation prescribedunder these positions of law must be adhered to with utmost strictness. The following paragraphswill elaborate on the mandates prescribed by the laws and the degree of adherence to be observedby corporations for each.An employee who is also a shareholder/director would be subject to all fiduciary dutiesprescribed under common law. In the same way the individual occupying such a position wouldalso subject to all statutory obligations prescribed under the Corporations Act, 2001. Thus for anegligent act the company would be able to attribute responsibility to the individual directly.According to Sealy and Worthington, the directors of a corporation are placed at the apex of theorganizational structure and thus are responsible for protecting the rights of the shareholders andthe company as the first priority2. Thus in such a case the directors of the organization wouldhave a good faith obligation to observe due diligence, avoid conflicts of interest and safeguard1 Hanrahan, Pamela F., Ian Ramsay, and Geofrey P. Stapledon. "Commercial applications of company law." (2013).2 Sealy, Len, and Sarah Worthington.Sealy & Worthington's Cases and Materials in Company Law. OxfordUniversity Press, 2013.

2BUSINESS LAW ASSIGNMENTthe interests of the company as prescribed under common law and reiterated in the case of Chanv Zacharia3. A failure to observe these duties would mean that the director would be liable topursued under civil liabilities which may lead to payment of damages and compensation this hasbeen clarified in the case ASIC v Citigroup Global Markets Australia Pty Ltd (No 4)4. Thusunder common law for the negligent act of an employee and a shareholder/director the individualwould be subject to civil penalties and this action can be brought by an aggrieved party or by thecompany itself.In the same way these duties are statutorily embodied in the Corporations Act, 2001.Sections 180-184 of the Corporations Act, 2001 deals with director’s duties. The first dutyprescribed here is that of good faith and due diligence. This implies that when acting on behalf ofthe company the directors of a company must observe due diligence and thus must be well-acquainted with the implications of all documentary mechanism involved with such an action.This diligence must be observed with utmost good faith and if the directors comprehend thatsuch a step may adversely affect the corporation they must refrain from acting in such a manner.Section 181 of the Corporations Act, 2001 involves a duty to ensure all conflicts of interest,especially financial self-interests are avoided. The following sections, namely Section 182 and183 of the act, deal with the misuse of position and information obtained from such a position.These provisions thus ensure that the directors of an organization do not misuse the powersvested in them in any way. Section 184 of the Corporations Act, 2001 is an especially importantprovision as it imposes criminal liabilities on directors for failing to observe the duties prescribedunder the act. Thus under statutory law, for a breach of these duties or for a negligent act by anemployee who is also a director the individual can be pursued with criminal liabilities under the3[1984] HCA 36.4[2007] HCA 963.

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