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Corporate Law - Assignment

Added on - 23 Nov 2020

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CORPORATE LAW
Table of ContentsINTRODUCTION...........................................................................................................................1PART A...........................................................................................................................................11. Is the duty to prevent insolvent trading a fiduciary duty? Why or why not?..........................12. How does the safe harbour defence Section 588GA operate?................................................13. Who does it (s588GA) protect, and is this different to the business judgement rule s180 (2)?Give reasons................................................................................................................................24. Are there any restrictions on the operations of s588GA defence? If so, what are they?........35. Do you think the changes to Division 3 will have an effect on the number of voluntaryinsolvencies in Australia in the future? Why or why not?..........................................................3PART B............................................................................................................................................41. Did Mr. Daly breach any directors' duties? If so, which ones and how?................................42. Did any of the other directors breach their duties? If so, which duty and how?.....................53. Do you think the company was trading while insolvent? Give reasons.................................54. If the company was trading while insolvent-are there any defences available to Mr. Dalyand /or other directors? If so, what are they? Give reasons.......................................................65. Would the new safe harbour defence assist the directors? If yes, how? If no, why not?........6CONCLUSION...............................................................................................................................8REFERENCES................................................................................................................................9
INTRODUCTIONCorporate law is the body of law, rules and regulation that governs the business sector. Itis necessary because it tells that how any of the business is required to operate and what are thosethings which need to consider while managing any of the activity which is related withorganisation. At present, all of the company is required to register themselves beforecommencing any of the business activity. In context of this file, there is the detail discussionabout safe harbour defence in s588GA where number of questions will be answered and in thesecond part there will be discussion related to the directors duty on the basis of “The talentedMr. Daly”.PART A1. Is the duty to prevent insolvent trading a fiduciary duty? Why or why not?Yes, it is the fiduciary duty to prevent insolvent trading because as per the section 588Gof Corporations Act, 2001, any of the corporation which is unable to perform there day to dayactivity then it is called as insolvent trading.If any of the director takes loan in this situation thenthey will be held personally liable in this situation. From the commencement of corporate law,number of changes had been done so that better results can be obtained and because of thatliability of director have been imposed in that situation. It is assumed that most of the work in anorganisation is done by director so it is there responsibility that they must inform new andexisting investor about the financial position of the company (Welch and et. al., 2016). There arenumber of work which should be done by director on daily basis and because of that they knoweach and every information about the internal management system of of the company so in thataccordance director has the fiduciary duty to inform each and every information to themanagement. Even their should not be any of the additional debt when association is in the stateof insolvent and if that happens then legal action can be taken against the director of theorganisation. Here, Directors are required to work ethically and honestly where each single detailshould be shared with other member of the organisation. It is important that director must workas per the guidelines which are mentioned under the Corporation Act 2001.2. How does the safe harbour defence Section 588GA operate?There are number of situation where company want makes director personally liable andfor that Corporation Act 2001, have introduced the concept of safe Harbour so that directors can1
get additional benefit and cannot be held personally liable in most of the situation. Under Section588G(2), it has been explained that how director can defence themselves in those situation whereorganisation is declared as insolvent. Some of the conditions are explained below where directorswill not be held personally liable:The situation where directors want to improve the financial condition of an organisation.Debt incurred once the doubt of insolvent was created.The situation where director want to create number of alternate(Wang, 2015).All the above mentioned point must be done for the purpose of betterment of anorganisation where it is necessary that these decisions must be taken only after consulting thequalified professional who is expertise in their own field. Even there are some of the situationwhere directors will be not be allowed to take the defence of safe harbour and those situation arementioned below:For the purpose of giving payment to the employees who are working for organisation.To complete all the requirements which are required for fulfilling the taxation report.But, before taking the help of safe harbour it is necessary for director to prove some ofthe additional things which are mentioned below:The steps which were taken by the management team was to avoid all debt amount whichwas incurring.They were not involved with the management during the course of taking decision andhere directors are required to prove with valid reason.3. Who does it (s588GA) protect, and is this different to the business judgement rule s180 (2)?Give reasons.Section588GA has been commenced for protecting the right and interest of all thosedirectors who have taken the best possible decision to reconstruct the organisation which havebeen declared as insolvent(Tracol, 2016). In addition, it provides the opportunity to directorwhere they can save themselves from the liability which arises during the course ofreconstruction period. When it comes to section180(2) of Corporation Act, 2001, there are someof the duties and work which need to be done by the directors which are given U/S180(1):All the decisions should be fair without any discrimination or personal benefit.All of the decision must be taken for the betterment of organisation.2
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