Business Law Case Study Duty Breach
15 Pages3654 Words86 Views
Added on 2020-04-15
Business Law Case Study Duty Breach
Added on 2020-04-15
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Running head: BUSINESS LAWBusiness lawName of the StudentName of the UniversityAuthor Note
BUSINESS LAW1Table of ContentsAnswer 1..........................................................................................................................................2Answer 2..........................................................................................................................................7References......................................................................................................................................12
BUSINESS LAW2Answer 1Issue 1.The issue in this case is to analyze the question that whether the directors duties havebeen violated by the directors of Uninest Limited (Uninest) according to the provisions ofthe Corporation Act 2001 (Cth) (CA)2.The issue is this case is also to identify whether any liability would be imposed uponNeales in relation to the companyRule The directors and other officers of a company are required to discharge their duties and exercisetheir powers by observing care and diligence as set out by Section 180(1) of the CA. however adefense is available for the directors known as the business judgment rule as set out is Section180(2) of the CA1. When a business judgment is made by the directors, it has to be done for a proper purpose and ingood faith. The decision must also not have any material personal interest as a subject matter ofthe decision, while making the decision the directors have an obligation to inform themselvesabout the matter of the decision to degree which is reasonably appropriate. The directors mustbelieve rationally that the decision judgment is taken for the best interest of the corporation. However, whether such skill and care has been applied or whether the defense of businessjudgment rule can be taken is based on the application of the objective test. The objective test isprovides that in order to determine compliance with the Section a reasonable imaginary director1 Corporation Act 2001 (Cth) at Section 180
BUSINESS LAW3is placed in the position of the existing directors. The actions which the imaginary director wouldtake in the same situation are set as a bench mark to analyze whether the duty has been compliedwith by the existing directors or not. The directors are imposed with a duty to act in the best interest of the company and for a properpurpose and in good faith in relation to the company as per the provisions of Section 181 of theCA. The duty is also found in the common law and equitable obligations of the directors2. The directors are imposed with the duty to not use their position in a detrimental way to theorganization as per the provisions of Section 182 of the CA. The directors by the virtue of theirposition have the power to make any decision in relation to the organization and therefore theorganization is at the risk of being exploited by the decision making of the directors. It isessential to impose a legal duty on the directors not to misuse their role in the company. Whilemanaging a company there are situation where a conflict of interest may occur. However suchconflicts have to be avoided by the directors of the organization and when any conflict of interestposition takes place the directors have to opt towards selecting the profit of the company otherthan personal interest of the profit of any their party related to them3. The same duty is provided in Section 183 of the CA where the information gained through theorganization is not to be misused by the directors for personal profits causing loss to theorganization4.Under Section 191 of the CA the directors are also required to make all disclosures related to aconflict of interest position and any personal interest to the board5. 2 Corporation Act 2001 (Cth) at Section 1813 Corporation Act 2001 (Cth) at Section 1824 Corporation Act 2001 (Cth) at Section 1835 Corporation Act 2001 (Cth) at Section 191
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