logo

Business Law | Assignment (Doc)

   

Added on  2020-03-16

14 Pages3371 Words289 Views
Law
 | 
 | 
 | 
Running head: BUSINESS LAWBusiness lawName of the StudentName of the UniversityAuthor Note
Business Law | Assignment (Doc)_1

1BUSINESS LAWQuestion 1Heading Directors Duties (Common law and statutory)Issue The issue identified in relation to the first question is to determine the liabilities of thedirectors of the company in relation to insolvent trading, conflict of interest and duty to discloseinterest along with the defenses available for such violations. Rule Section 588G of the Corporation Act 2001 (Cth) prevents a director of an organization toindulge in an activity which they believe may make the organization insolvent or indulging in anactivity knowing the fact that the organization is already insolvent1. In the case of Rema Industries and Services Pty Ltd v Coad & Ors2it had been ruled bythe court that the directors cannot claim a defense that they were not involved in the decisionrelated to insolvent trading and they were a silent party. It is a defense under section 588H of the CA that a person was not present in relation tothe decision because of illness or a good reason. In addition it is a defense if it is objectivelyproved that the directors had reasonable grounds to carry on with the decision3. 1 Corporation Act 2001 (Cth) at Section 588G2 (1992) 10 ACLC 5303 Corporation Act 2001 (Cth) at Section 588H
Business Law | Assignment (Doc)_2

2BUSINESS LAWSection 181 of the CA provides a duty of best interest and proper purpose. Accordinglythe directors have to act in good faith, best interest and appropriate purpose of the company. Thebreach of the duty relates to a civil liability provisions4. There is also an equitable duty imposed on the directors by common law similar to that ofthe duty under section 181 to act is best interest of the company and be loyal to the company. The directors of an organization as mentioned in section 182 of the CA have beenprovided with the duty of maintain the dignity of their position in the company and not uses thepowers provided through their position in the company to causes losses to the organization andmake personal profit5. They have an obligation to disclose any personal interest in the transactionwhich the company undertakes, to the other board of directors. in addition if by chance asituation is created where there is a conflict of interest between the benefit of the company andpersonal benefit of a director, the organizational interest should always be prioritized by thedirector. The directors are also obligated under the provisions of section 183 of the CA not toutilize any information of the company to make personal gain6. The directors have the duty ofnot misusing information and position in a manner which may cause an issue for the company inform of any financial or reputational interest. Application Through the scenario it has been provided that Nolan, Andy, Erica, Jack and Helen arethe directors of an organization dealing in wholesale business of jewelry named Gemsales Pty4 Corporation Act 2001 (Cth) at Section 1815 Corporation Act 2001 (Cth) at Section 1826 Corporation Act 2001 (Cth) at Section 183
Business Law | Assignment (Doc)_3

3BUSINESS LAWLtd. It has been analyzed by the directors of GS that the market for jewelry is becomecompetitive and they need an expansion. Their company does not have the capital and assets tofinance the expansion and they indulge in an act of obtaining a loan. There was a chance in this case that company may become insolvent because of actionsrelated to the loan taken by the company. The company obtained a loan of $4 million where $3million had been used purchase more stock and $1 million to purchase a warehouse. Thus thedirector of GP have prima faice violated the provisions of section 588G of the CA related toinsolvent training. Erica although had not attended the meeting would be liable for the breach of section588G as per the application of the Rema Industries case. This is because the case provides thatdirectors who are not involved in a meeting cannot claim the absence as a defenseAndy in the given situation was also not present at the time the decision had been takenbecause of being in hospital as a result of serious injury. Here Andy can be exempted from thebreach of section 558G under section 588H as he might is entitled to claim the defense of illnessdiscussed above. Helen in the same way as Erica would be liable for the violation of section 588G eventhough she did not vote in relation to the decision according to the principles provided in theRema Industries case. Jack and Nolan as they both voted in relation to the loan would be clearly liable for thebreach of section 588G and would be personal liable for all loss incused by the company throughthe act in the same way as for Eric and Helen.
Business Law | Assignment (Doc)_4

End of preview

Want to access all the pages? Upload your documents or become a member.

Related Documents
Business Law Case Study Analysis
|12
|2289
|244

Directors Responsibility in Ethical and Legal
|8
|1744
|45

Company Law Assignment: Fiduciary Duty | Advice for the Clients
|7
|1223
|23

Business Law Case Study Duty Breach
|15
|3654
|86

Corporate Law: Duties and Liabilities of Directors
|12
|2972
|313

The Provisions of the Corporation Act
|14
|3338
|106