Company Law Final Exam

This article provides answers to questions related to Company Law Final Exam. It explains the concept of a fiduciary, why partners are considered fiduciaries, and the standard of care and diligence required of directors. It also advises on remedies available to a party in case of oppressive conduct by other members. Additionally, it covers the tests used to demonstrate insolvency and defences that can be raised by directors who have breached s 588G. Lastly, it provides advice on the rights and duties of a receiver.

Question 1. With reference to relevant case law and legislation explain the concept of a
fiduciary? And why partners are considered to be fiduciaries?
Answer: The fiduciary relationship is said to be created when one individual lies some sort of
trust or reliance on the individual. Here the person who delegates such reliance is said to have a
fiduciary duty in order to act according of the best interests and benefits of the party. Moreover,
the individual who owes such duty is addressed as the fiduciary whereas the person to whom
such duty is owned is called as the principle. Moreover, the term fiduciary relations are related to
the one to whom any power or property is given with respect to the benefit of another party.
Mainly it is an relationship where the one person stands bound against the other in order to
exercise certain powers and rights while acting in good faith. Also, such relationship may or may
not arise out of the jural relationships. Further, the companies legislation of the country which is
the Corporations Act of 2001, does not specifically talks about such concepts but there lie some
sections which states the manner in which the directors or the other members are required to act.
Section 180 along with section 181 to 183 of the Act, sets out th general rules with regard to the
ways in which the office holders of the company must exercise their powers discharge their
duties with due diligence and care(Butzbach, 2022). Also the partners are considered to be the
fiduciaries as simply, as the whole concept of partnership and their duties are based on the
principle of fiduciary relationship. Every single partner of the firm is required to act in just and
faithful manner to each other. According to this the partners also holds the fiduciary relationship
towards the late partners legal representatives as well with regard to his interest in the
partnership property)(Ajai, 2018).
Question 2: With reference to ss 232 - 234 of the Corporations Act 2001 advise Violet if
Katherine and Rita’s conduct is oppressive and any remedies that may be available to Violet
Answer: section 232 of the act specifies the grounds for which the court cn make an order where
the conduct of the company affairs or the proposed act or omission on behalf of the company ar
either contrary to the interest of its members or are of an oppressive or unfair nature.
Moreover , the section 233 states that the court can make an order for the wound ip of the
company or its existence or modification or its regulation and the conduct. The other beinmg the
section 234 states the fact that whon can apply for the order .
Question 3. With reference to at least one relevant case, explain what is required of directors to
fulfill the standard of care and diligence in s 180 of the Corporations Act 2001
Answer: The Corporation Act, section 180 specifies the provisions regarding the due care and
diligence of the directors and other officers. It states that the directors are required to exercise
their powers and similarly must discharge their duties while applying the due care and diligence
to it which would have been applied by any reasonable prudent man while acting as the director

o the company or has been occupied by the office which he held’s)(Tan,2021).Moreover, the
clause 2 of the sections states that the directors are also required to make the judgements of the
business in accordance of the given requirements of the subsection 1 which is that he must a
decision in good faith while acting for a proper purpose and must not enjoy any material interest
in the subject matter of the judgement. Moreover, the said concept was also more elaborated in
the case of Cassimatis v. Australian Securities and Investments commission of 2020, where the
court dismissed the appeal of the storm financial and Julie cassimatis stating that the directors
had breached their required duty of due care and diligence while managing the storm financial)
(Salazar, 2021)
Question 5
In relation to the duty to prevent insolvent trading in s 588G of the Corporations Act
2001,explain:
1. the three tests used to demonstrate that a company is insolvent
Answer: The corporate insolvency tests are a method by which the ability of any
company with respect to meet its liabilities can be ascertained. Majorly there lies the
three different tests for the purpose of determining the more reliable picture of any
company. The very first is of the cash flow test, the inability of the company to pay its
bills as they fall marks a clear sign of its precarious financial situation. Further, a
commercial insolvency test must looks ahead of the future payments and even though in
some conditions the said payments are inherently late. Thus the directors of the company
must b able to demonstrate that the clear payment procedure must have been followed.
The other being the balance sheet method, where the actual financial position of any
company with respect to its assets and liabilities can be very well ascertained by viewing
its balance sheet. The other method is of the legal action test, which helps in knowing that
whether the company has outstanding statutory demands with respect to the non
payments of its debts or nay other unanswered courts orders)(Williams, 2021)..
2. the defences that can be raised by directors who have breached s 588G.
Answer: As per the provision of section 588H of the corporations act of 2001 of the
country, majorly there lie the four defences. Where the very first is that the directors of
the company has a reasonable grounds to expect its solvency. The others is that the
directors also has a grounds to believe that a competent and more reliable person stand
responsible for giving the defendant with the data about solvency and similarly on the
basis of that expected the solvency. The others is that the that the directors who were at
the time the debt was incurred did not take part in the management of the company
because of the reasons of illness or some other good reason. The very last is that the
director took all reasonable steps to prevent the company incurring the debt)(Meyer,
Leixnering, Veldman, 2022)
Question6: Advice to Richard as to his rights and duties as a receiver?

Answer: as per the provisions of the country there lies certain number of duties and
powers of the receiver. The very first being the general powers, the receiver must take the
possession of the company and also its operations in order to collect the debts and all the
relate properties for the purpose of payment to creditors. The other is that he is also
entitled to have all the rights and privileges with respect to the title of the books, records
and assets of the company. He also serves as the trustee of the receivership and similarly
conducts its operations for the benefit of the creditors)(Ghouma,BenNasr & Yan, 2018)..
References
Butzbach, O. (2022). The elusive nature of shareholders’ claims over the corporation, or
the strange non-death of shareholder primacy. In The corporation: Rethinking the iconic
form of business organization. Emerald Publishing Limited.
Salazar, A. (2021). Implementing the New Purpose of the Corporation: The Duty of
Directors to Tie Executive Pay to Employees’ Interests. Available at SSRN 3962966.
Williams, C. A. (2021). For whom is the corporation managed and what is its purpose? A
stakeholder perspective based on the law of Delaware. In Research Handbook on
Corporate Purpose and Personhood. Edward Elgar Publishing.
Meyer, R. E., Leixnering, S., & Veldman, J. (2022). Rethinking the Corporation:
Introduction. In The Corporation: Rethinking the Iconic Form of Business Organization.
Emerald Publishing Limited.
Ghouma, H., Ben-Nasr, H., & Yan, R. (2018). Corporate governance and cost of debt
financing: Empirical evidence from Canada. The Quarterly Review of Economics and
Finance, 67, 138-148.
Tan, W. (2021). Peering Through Equity's Prism: A Fiduciary's Duty of Care or a
Fiduciary Duty of Care?. Journal of Equity.
Ajai, O. (2018). Developing a corporate director's internal fiduciary duty to promote
corporate sustainability: a comparative survey of hard and soft laws benchmarking
Nigerian law. International Journal of Business Governance and Ethics, 13(2), 170-198.