Business Law Case Study: Analysis of Violations of Corporations Act 2001 (Cth)

BUSINESS LAW
Student details:
Case Study

Business law
Table of Contents
Issue 1..............................................................................................................................................2
Rule..............................................................................................................................................2
Application..................................................................................................................................4
Conclusion...................................................................................................................................5
Issue 2..............................................................................................................................................5
Rule..............................................................................................................................................5
Application..................................................................................................................................6
Conclusion...................................................................................................................................7
Issue 3..............................................................................................................................................7
Rule..............................................................................................................................................7
Application..................................................................................................................................8
Conclusion...................................................................................................................................9
Bibliography....................................................................................................................................9
1

Business law
Issue 1
Whether the act performed by Roger stands in violation to the provisions of the Corporations Act
2001 (Cth) (“CA”) or not?
Rule
A company being a legal person is very much liable to face consequences of an offence
just like a physical person. In cases of crimes a company is liable to undergo criminal and penal
charges as may apply. But the question arises if a company can be liable for actions of its
individuals like employees and agents ( Hannigan, 2018).
As guided by section 12.2 of the Criminal Code followed by the Commonwealth, the fact
that any wrong is traced on part of a company or not is very much dependent on the performer of
the act. If the act is performed by the agent of such company during the agency period
(employment in employee’s case) then such company shall stand liable for such a wrong
committed.
Whereas as per section 12.3 of Corporations Act, the mens rea factor will be assessed by
the fact that whether or not the company expressly or impliedly authorised the agent to perform
such an act. In such cases the act will be a responsibility of the company though performed by
the agent as it shows a governance failure on part of the company ( Christensen & Kent, 2010).
Also, on the fact of it, an impression of motivation or encouragement is depicted on part of such
company.
2

Business law
But reemphasising on the principle laid under Foss v Harbottle (1843) 67 ER 189, it is
only the board that can take decisions against an individual who has committed a wrong and not
the shareholders for the fact that it is board which is prime governor of the company (Bittle,
2016).
Also referring to section 181 of the CA, the director holds certain duties while acting as
one such as to act in the best interest of the company, duty to exercise ones power for legitimate
purpose and most importantly duty to avoid conflict of interest ( Hanrahan, 2013).
In the case of ASIC v Adler [2002] NSWSC 171 the court highlighted a fact that every
time a purpose is associated to any duty and such duty shall be counted as violated if no
legitimate reason stands for any other director to believe such act being in the utmost interest of
the company.
Also, when any director acts under the professional capacity, one is expected to act with
due care and avoid negligence. In the case Daniels v Daniels [1978] 2 WLR 73 where the assets
were been sold off in much lower value by the directors, the court held:
“Minority shareholders were entitled to bring a derivative action on behalf of the Co
against the directors to recover the loss sustained by the company -the difference between what
the actual worth of the company to how much it was sold for”.
Section 19(1) of CA dictates that any director who seeks an interest is bound to disclose
such interest before the board while making a contract. Or such directors are barred from
contracts that hold their personal interest ( Haque, 2010).
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