Corporate Law and Liability: Australia
Added on 2020-02-19
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Running head: BUSINESS LAWBusiness LawName of the student:Name of the university:Author note
1BUSINESS LAWIntroduction The subject matter of the present case is to define the term good faith and best interestof the company and the relationship between the best interest of the company and in theinterest of the company as a whole. The Corporation Act of 2001 in Australia deals with thesubject matter or any case related to the company or the corporation. In the present case, thereare three terms used, such as good faith, best interest of the company and in the interest of acompany as a whole (Anderson 2014). The terms are interconnected with each other that arebased on the duty of a director of a company. Under the Corporation Act 2001, it has beenstated that every directors has certain duties towards the shareholders and as well as the otherstakeholders and they should be maintained good faith while performing their job (Barker,Barton and Fagan 2016). Therefore, it can be observed that, it is the primary duty of thedirector of a company to act in good faith for the best interest of the company as well as inthe interest of the company as a whole. The objective of the act is to secure the interest of theshareholders and so that the company’s future becomes prosperous. It is true that the termsare interconnected to each other but there are certain differences can be observed regardingthe best interest of the company and in the interest of the company as a whole (Bolimos,Bolimos and Choo 2017). DiscussionAnswer to part AGood faith- The term good faith means to do some job or work sincerely. Under the CorporationAct the term good faith denotes to identify the acts of the director in the course of theirduties. Under the purview of Corporation Act 2001, two section 181 and section 184 deal
2BUSINESS LAWwith the term good faith. In every company directors plays an important role, grab animportant position for the management of the company in a better way, and work in that wayfor the betterment of the company (Brown and Lawrence 2017). It is the primary duty of adirector to look into the matter responsibly and to make a connection between the companyand the stakeholders. Stakeholders consist of certain kinds of persons without whom the company cannot beincorporated or cannot be continued its duties (Chia and Ramsay 2016). It can be stated thatif the director of a company does not work in good faith, there can be certain contradictionshappen regarding the procedure of the company and the primary objective of the Act cannotbe fulfilled. The director should keep in mind that he must perform his duties on the basis ofthe interest of the company and shareholders. Law to secure his own interest without securingthe interest of the company bars him (Dixon 2016). The principle of good faith is based on the principle of equity. Under the CorporationAct 2001, there are certain fiduciary duties and certain statutory duties present and it is theduty of every director to act on the basis (Hannigan 2015). By fiduciary duties it is meant,something that is related to the trust and the term is connected and/ or must regarding theperson posted in an important place. The term good faith is used to denote the performance of the company’s director sothat they can maintain honesty in the job environment. From the definition, it can be clarifiedthat what are the importance of a director in a company. The directors of a company arerepresented themselves as a governing body as the executive head of the company (Hiller2013). It has been stated under section 180 of the Corporation Act that every director of acompany should act diligently and must show certain care to the shareholders of thecompany. It is the primary object of the director of the company to act in good faith and the
3BUSINESS LAWrelevant provisions of the same as discussed under section 181 of the Corporation Act 2001.It has been stated under the section that there are certain mandatory duties for the director ofa company and one of such duty is to act in good faith. It has been stated earlier that thedirector of the company holds an important position in the administration of the company andtherefore if the directors have failed to make them trustworthy, then the future of thecompany can be affected at large (Mills 2014). The primary objective of section 184Corporation Act is to secure the interest of the company and therefore if there is any breachregarding the good faith by the director of the company has been observed and allegationbrought against the director of a company, he shall be liable to face the relevant provisions oflaw regarding the breach. There is another provision under the Corporation Act 2001 that ismentioned under section 184. This section is quite different than the section 181 of theCorporation Act to certain extent (Nicholls, Donald and Liu 2015). The term good faith hasbeen defined under section 181 of the Corporation Act, where section 184 of the CorporationAct deals with the criminal breaches made by the director regarding the term good faith.Certain penalties or also imposed on the directors if the allegations made against the directorsof the company regarding the good faith has been proved or has been supported by theevidences.A director can violate the position of good faith in case where they will be failed toperform their duties sincerely and certain reckless acts done by the directors during the courseof their employment (Riaz, Ray and Ray 2015). In ASIC v Adler (2002), it was held that it isthe duty of the director to act diligently and in good faith with the shareholders of thecompany. Under the scenario of the case, a non executive director of a company has bothcertain shares regarding the insurance company and with an intention to cheat or deceive thecompany and tried to proceed with the same ulterior motive. It has been observed that Adlerwas not disclose all the relevant facts to the shareholders and his colleagues including the
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