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Corporate Law ACC2006/ACC204 Group Assignment

   

Added on  2020-05-11

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CORPORATE LAW2 | P a g eQuestion 1IssueWhether there have been breaches in the provisions of Corporations Act, 2001, or not? Whether there is an availability of any defences, or not?RuleCorporations Act, 20011 is the governing act in Australia, through which the different provisions are provided, which apply over the companies of the nation and which have to be strictly followed. Part 2D.1 specifically deals with the director duties, which have to be followed,or else, could result in civil and criminal liability being attracted towards the directors2. Under section 180(1) of this act, the directors of the company, in addition to the officers of the company, owe a duty of care and diligence, when they use their powers and discharge their duties3. In case the provisions covered under this section are not upheld, civil penalties are attracted against the defaulting director or officer, as a result of which, the court can make a declaration of contravention4 against the defaulting person, under section 1317E, pursuant to which, the ASIC can apply for pecuniary penalties5 as per section 1317G or disqualification order6 as per section 206C. Australian Securities and Investments Commission v Macdonald (No 11)7 is a case in which the company’s CEO was considered by the court to have breached section 180(1). This 1 Corporations Act, 2001 (Cth)2 Corporations Act 2001, pt 2D.13 Corporations Act 2001, s180(1)4 Corporations Act 2001, s1317E5 Corporations Act 2001, s1317G6 Corporations Act 2001, s206C7 [2009] NSWSC 287

CORPORATE LAW3 | P a g ewas because not only the CEO failed in informing the board about the draft ASX announcement but also did not take the necessary approval on the final ASX announcement. However, a defence is provided under section 180(2) of this act, which is also known as business judgment rule. As per this section, the provisions covered under section 180(1) would be deemed to have been met where the judgment is made in good faith, where there is a lack of material personal interest, where the individuals properly inform themselves of the subject matterat hand, and where they genuinely believe that the undertaken step is in the best interest of the company8. The directors are also under an obligation under section 181 to act with good faith, for a proper purpose and in the best interest of the company9. Based on this section, the directors have to avoid any such situations where there is a conflict of interest. Section 182 and 183 put a restriction on making an improper use of the position10 held in the company, and the information11 of the company, respectively, specifically when this advantage of taking for personal benefit or the benefit of someone else, or where it cases a detriment to the company. So,where the directors are faced with conflict of interest situation or such where they have material personal interest in the transaction, there is a need for the directors to disclose the same properly and not obtain the benefit of the corporate opportunity of the company for themselves12. ASIC v Stephen William Vizard13was a case in which the director of the company, i.e., Vizard, dealt with the shares of the company and gained a private advantage for him by using theconfidential information of Telstra as he had been a director of the company. This led to Vizard 8 Corporations Act 2001, s180(2)9 Corporations Act 2001, s18110 Corporations Act 2001, s18211 Corporations Act 2001, s18312 Julie Cassidy, Concise Corporations Law (The Federation Press, 5th ed, 2006)13 [2005] FCA 1037

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