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Business Laws and Corporation ACT | Assignment

   

Added on  2019-11-25

9 Pages2220 Words199 Views
Running head: BUSINESS LAWSBusiness LawsName of the studentName of the universityAuthor note

1BUSINESS LAWSCase introduction The case, which is researched for in this task, is based on the Director’s breach of dutyunder the Corporations Act. The aim of the task is to throw a light upon the facts, which led tothe breaching of a director’s duty of care and diligence towards his company. The act specifiescertain conditions in which the directors are bound to exercise due care and diligence. Theviolation of which can cause the director to be legally answerable to the court. Thus, theconditions in which the directors of the company acted were in controversy with the provisionsin the Corporations Act and therefore, the court’s decision is important in light of the case1. Storm Financial Limited was a financial service provider company who providedfinancial advice to the investors. Mr. and Mrs. Cassimatis the, directors of the company were thesole shareholders of the company too. Whilst, they were involved in the various activities of thecompany, Mr. Cassimatis generated a model to be invested upon. The investors of the companywho were retired or near to retirement made the investments. These investors had assets andresources of their investment in limited quantity. The investment entailed the investors to borrowthe money against their homes. This would happen when the investors would borrow the moneyagainst their homes to invest in the index funds. This was held under contemplation in the courtwhere, it was thought to have been an incompetent step by the directors who ought to be moreresponsible. The court further claimed that a reasonable director would have had thought about theconditions this model would bring the investors in. A reasonable director in his right mind wouldthink about the likelihood of the retired or near to retirement investors who would be prone to1 Australian Securities and Investments Commission v Cassimatis (No 8)[2016] FCA 1023 at [1]

2BUSINESS LAWShigh risks involving their houses mortgaged against their investment. This was thought to havebeen inappropriately advised by the directors. In conclusion, the court discussed about thedirector’s duties and the breach of the same in this case. The judge purported that the duty ofcare and diligence must have been the priority in this case and not the financial decision on theadvice. This could eventually lead to the reputational harm or by an extent a loss of license dueto failure of complying with the laws.Breach of the duties by the directorThe main allegation which had been brought by the ASIC against the directors in this case wasthat they have breached section 180(1) of the Corporation Act (CA). The section provides that asan officer or a director of a company a person must act in the best possible interest of thecompany and in good faith. The section extends to stating that the actions of the directors ofofficers of a specific company would not be taken as directed towards the company’s bestinterest if a reasonable person in the same position of such director or officer would not havetaken such actions in similar circumstances2. Thus the AISC alleged that Mr and Mrs Cassimatis did not direct their actions to the best interestof the company as they were involved in providing advice to disadvantaged old people through afinancial model created by them3. Section 945A and 1041E of the CA had been breached by the directors or not also had to bedetermined by the case. Section 945 provides that there must be a reasonable basis to provideadvice to the clients by the corporation4. Section 1041E deals with misleading or false statement2 Australian Securities and Investments Commission v Cassimatis (No 8)[2016] FCA 1023 at [2]3 Australian Securities and Investments Commission v Cassimatis (No 8)[2016] FCA 1023 at [3]4 Australian Securities and Investments Commission v Cassimatis (No 8)

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