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Corporations Law (LAWS3100)

Added on - 06 Oct 2021

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Running head: COMMERCIAL AND CORPORATION LAW
Commercial and Corporation Law
Name of the Student
Name of the University
Author Note
Commercial and Corporations Law1
Answer to Question No 1
Issue
There are two issues involved in this case. The primary issue is to determine whether
Marlow can resign from Clear Vision Limited and incorporate a new company to conduct the
block chain business. The secondary issue is to determine the changes in the advice if their
constitution contained a clause identical to Section 194 of the Corporations Act 2001.
Rules
As a general rule, a director can resign from a company by giving a notice of
resignation. Director can resign by giving the notice to the registered office of the company
under the Corporations Act 2001. Otherwise, they may give a written notice of the
resignation to the Australian Securities and Investments Commission, accompanying with a
notice of resignation given to the company. Under Section 5.1 of the Corporations Act 2001,
the company should notify ASIC about the resignation of the director, if the same has not
already been done by the director of the company. In this case, the director will not breach
any of his fiduciary duties and he can resign at any time. However, it is provided under
Section 201A of the Corporation Act 2001 that it is mandatory for a company to have at least
one director. If the company has only a governing director to conduct their business, the
director may acquire obligation while resigning. As a consequence, if the sole governing
director of the company is willing to resign, he may lead the company to breach the provision
of the Section 201A of the Corporations Act 2001. The director may cause the company to
knowingly have less than one minimum director. The director and the company both may
liable for this under the Act.
Section 194 of the Corporations Act 2001 provides that if the director has any
material interest in affairs related to the company, and discloses the interests to the directors,
Commercial and Corporations Law2
then the company cannot avoid the transaction merely because it has the existence of the
interest and the director may proceed any transactions relating to the interest, unless the
interest is of a nature that which is not required to be disclosed under Section 191. A
company can include the clause 194 or any clause identical with this clause in their
constitution.
Application
Marlow was the majority shareholder and effectively involved in delivering expert
advice to IT investment businesses. He was the governing director of the firm. He was aware
that he is responsible for providing the services of the company under its constitution. Sean
and Becky trusted Marlow to run the business for the collective interests. In this present
situation Marlow cannot resign the company under the Corporations Act 2001, to cause a
pain to Sean and Becky as they did not agree to contribute capital for developing the block
chain product. It was provided under the constitution of Clear Vision Ltd, that Marlow should
be engaged in the business of the company. If he resigns from his position, then the company
would be left with no one to effectively govern the business. Therefore, it would be suggested
to Marlow to find an appropriate replacement for his position before he gives the notice of
design. Under Section 201F (1) of the Corporations Act 2001 Marlow can appoint another
director with a help of a resolution from Sean and Becky. He can resign the company after
doing so and conduct the block chain business with Polly and himself keeping himself as a
sole shareholder and directors.
If Clear Vision Ltd had a clause in their constitution identical with Section 194 of the
Corporations Act 2001, Marlow would not have been able to resign the company. Under this
Section Sean and Becky could not have been able to avoid the transaction as Marlow had
made necessary disclosure about his interest to develop the block chain product. The Clear
Vision Ltd cannot avoid the transaction in this case. Therefore, Marlow can proceed with the
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