Company and Securities Law

Running head: COMPANY AND SECURITIES LAW
COMPANY AND SECURITIES LAW
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1
COMPANY AND SECURITIES LAW
Issue
The issues that are involved in this case are considered to be whether the liquidator has
any authority to claim any amount from any other party.
Relevant Law
There are certain duties that are performed by the directors if they are a part of an
organization. The director of an organization or a company is considered to be acting on behalf
of the company and needs to focus on the best interests of the company. The main duty or the
responsibility that a director has is to regulate and govern the operations or the functioning if a
company so that it can incur certain amount of interests that would benefit the company in some
way or the other. The directors if they do not acquire the best possible benefits then the company
would incur a loss which would impact the financial status of the company. Therefore, the
directors need to be able to work towards achieving benefits for the company and it should be in
good faith. There would be a breach of duty of the directors if they try to do an act by dishonest
means and thus good faith would not be taken into consideration. It has been mentioned in the
section 181 of the Corporations Act. Therefore, the directors have certain restrictions or
limitations imposed on them and their duties. The directors have certain powers and authorities
which would assist them in carrying out their responsibilities effectively. Therefore, even if the
directors carry out their functions if it is done in a dishonest way then the directors would be
liable to compensate for the damages caused to the company since it was done without good faith
and any proper purpose1
1 Huggins, A., Simnett, R. and Hargovan, A., 2015. Integrated reporting and directors’ concerns about personal
liability exposure: Law reform options. Company and Securities Law Journal, 33, pp.176-195.

2
COMPANY AND SECURITIES LAW
Under Section 588 G of the Corporations Act, 20012 it is the duty of the director to
prevent its company from being insolvent. If a company suffers loss or incurs any kind of debts
which cannot be paid back then the company becomes insolvent and therefore, the company
needs to be liquidated. Therefore, a director is liable for not being able to perform the duties or
responsibilities since the director cannot prevent the company from being insolvent. The
directors at the commencement of the act or after such a commencement needs to prevent the
company from being insolvent or would try to pay back the debts that the company owes to its
creditors if the company is unable to do such a thing then it is said that the company is
considered to be insolvent. It could be observed in the case of Robinson and Reed Constructions
Australia Pty Limited (In Liquidation) v J F K Interiors Australia Pty Limited [2015] FCA 15003.
Therefore, a company if it owes any kind of debts or incurs any losses that they are not able to
pay back then under the above-mentioned section the directors are liable or responsible for not
being able to prevent the company or the organization from being insolvent.
A liquidator has certain powers and functions before liquidating the company. The
liquidator takes control of a company once the company becomes insolvent. A director of the
company regulates and governs the activities of the company and takes care of the company’s
benefits in order to prevent the company from being insolvent. The director of a company is
considered to be liable for the losses that has occurred in a company as the director of a company
is considered to look after the functioning of a company and it forms as a part of the duty of the
director to prevent a company from incurring any kind of losses or debts and from becoming
insolvent4 . The liquidator in a company is appointed after the company has owed debts or
2 Corporations Act, 2001 (Cth).
3 Robinson and Reed Constructions Australia Pty Limited (In Liquidation) v J F K Interiors Australia Pty Limited [2015]
FCA 1500.
4 Keay, A., 2015. The shifting of directors' duties in the vicinity of insolvency. International Insolvency Review, 24(2),
pp.140-164.