Business Laws Assignment (Solution)
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Added on 2021-06-14
Business Laws Assignment (Solution)
Added on 2021-06-14
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Running head: BUSINESS LAWSBusiness LawsName of the studentName of the universityAuthor note
1BUSINESS LAWSPart A Issue 1Through the analysis a question arises that whether the directors of SkyTrans have failed tocomply with the statutory directors duties as provided under the sections 180-184 of theCorporation Act 2001 (Cth) (CA)Rule Any person who has been found to be a director of a company according to the rules of the CA(Section 9) is bound to follow the duties which have been set out by the CA under section 180-184. The duties also comprise of common law equitable duties which the directors of thecompany have to abide with. These duties state that the directors have to work with “due careand diligence”, “in good faith and proper purpose” , “not making misuse of position” and “notmaking misuse of information of the company” to bring a loss to the company. The duty of due diligence and care This duty is stipulated through the provisions of section 180 of the Act. The section is subdivided into two parts where the first part is in relation to the breach of the duty and the secondpart incorporates the common law provisions of the business judgment defense1. The duty of duty of due diligence and care is stipulated via section 180(1). Under this duty thedirectors are required to continue their work with respect to the company with a degree of careand diligence which any reasonable person would have been expected to depict in the role of thedirector. A similar kind of duty is also imposed in the directors via the provisions of common1Corporation Act 2001 (Cth) s 180
2BUSINESS LAWSlaw2. The duty has been emphasized in recent court cases where it had been applied to approvalof financial statements in the case of Australian Securities and Investments Commission vHealey and Others [2011] FCA 7173 and on board approval of statements issued by a companyin the case of ASIC v Hellicar [2012] HCA 174. The duty is complied or not can be found out byapplying an objective test which is stated in the section. As discussed above the test stipulatesthat the duty will not be deemed to have not been complied where the reasonable director insimilar situation did not indulge into making similar decisions. Further in the case of AustralianSecurities and Investments Commission v Cassimatis (No 8) - [2016] FCA 10235 it has beenruled that the duty is applicable even on the sole shareholders of the company and the powers ofthe majority shareholders to ratify the decision of the directors would not be adequate to save thedirectors form the contravention of the duty. The duty of good faithThe duty is set out under the rules of section 181 of the CA. Under the duty the director isrequired to “act in good faith and in the best interest of the company.” Further their actions underthe duty have to be carried out for a proper purpose. The duty incorporates the common lawduties to avoid conflict of interest and in relation to this give priority to the benefits of thecompany. The duty also incorporates the duty of trust and fidelity which is called fiduciary duty6.One of the primary cases where the breach of the duty had been discussed is the case of BellGroup Ltd (in liq) v Westpac Banking Corp (No 9) (2008) 225 FLR 17. In this case it had beenruled by the court the duty to act in good faith and proper purpose are both different duties.2Corporation Act 2001 (Cth) s 180 (1)3 Australian Securities and Investments Commission v Healey and Others [2011] FCA 7174 ASIC v Hellicar [2012] HCA 175 Australian Securities and Investments Commission v Cassimatis (No 8) - [2016] FCA 10236Corporation Act 2001 (Cth) s 1817Bell Group Ltd (in liq) v Westpac Banking Corp (No 9) (2008) 225 FLR 1
3BUSINESS LAWSFurther it had been stated by the court in the case of Australian Securities & InvestmentsCommission v Adler (2002) 168 FLR 2538 it had been held by the court that the directorviolated the duty under the provisions of section 181 by letting the company to purchase highrisk assets when it actually had to reduce its risk exposure. The duty of not to improperly use position and information Under this duty the directors are required to not indulge into improperly using their position forthe purpose of gaining a personal advantage or the advantage of any third party which may causedetriment to the company. The duty has been stated through section 182 of the CA9. a similarduty is provided under section 183 under which directors are required to not indulge intoimproperly using information for the purpose of gaining a personal advantage or the advantageof any third party which may cause detriment to the company10. Application It has been stipulated via the scenario that Simon and Marilou are the directors of SkyTranswhich carries out a business in form of a mobile phone store. It is further provided that Simon isthe Managing directors of the company and he is looking after the finances of the company. Ithas been suggested by the case study that there has been failure on the part of Simon to paysupply Co who supplied for the company. In relation to such circumstances it can be providedthat Simon has breached the provisions of section 180 of the CA. As he is the director of thecompany he has been provided with an obligation to ensure due diligence and care in relation tohis operations. As discussed above the test stipulates that the duty will not be deemed to have not8 Australian Securities & Investments Commission v Adler (2002) 168 FLR 2539Corporation Act 2001 (Cth) s 18210Corporation Act 2001 (Cth) s 183
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