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Corporate Law Assignment | ASX

   

Added on  2019-11-25

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Running head: CORPORATE LAW ASSIGNMENTCorporate Law AssignmentName of the StudentName of the UniversityAuthor Note

1CORPORATE LAW ASSIGNMENTCorporate governance may be defined as the procedure by which a corporation isgoverned. It is the interaction between all the participants including the board of directors,shareholders and the management of the company in influencing the performance of thecompany and striking a balance between the societal and individual goals as well as social andeconomic goals. A common objective of any organization is to establish an effective governanceframework that fulfils the needs of the individual circumstances which enhances theorganizational performance while acting in compliance with the constitution, policies,procedures and the external laws and regulations applicable to the company1. The ASX Corporate Governance Council has introduced Principles and recommendationswith respect to corporate governance, which would enable the listed entities on the ASX to boostup the confidence of the investors. The implementations of the recommendations with respect togood corporate governance shall enable the listed entities to fulfill the reasonable expectations ofthe investors. The basis for these Principles and recommendations is based on the ‘if not, whynot’ approach2. It implies that if the board of directors of the listed entity that a recommendationmade by the Council is not appropriate and it does not adopt it, it is required to provide anappropriate explanation for not adopting such recommendation that is, ‘if not, why not’approach. According to Principle 7 of the Corporate Governance, a listed entity is required toestablish a risk management framework to identify the risks associated with the businessactivities carried out by the organization and to mitigate such risks immediately, thus, ensuringthe business activities are carried out diligently and appropriately3. 1 Booth, Simon A. Crisis management strategy: Competition and change in modern enterprises. Routledge, 2015.2 ABC (2017) <http://www.abc.net.au/news/2017-04-26/ardent-leisure-ceo-to-stand-down.../8472304>.3 Council, ASX Corporate Governance, and A. S. Exchange. "Corporate governance principles andrecommendations . ASX Corporate Governance Council." (2014).

2CORPORATE LAW ASSIGNMENTIn the given scenario, the first issue that arises is to determine whether Ardent Leisurerecognized and managed the risk that arose from the Dreamworld incident4. As mentioned abovethat principle 7 of the corporate governance recommendations made by the ASX, a corporation isrequired to identify the risks and mitigate such risks to ensure a good corporate governancepractice. In case the Board of listed entitles is unable to recognize the risks and resolve the same,the participants of the company, that is, the shareholders, employees, consumer and the societyshall suffer loss and such failure shall also affect the reputation and goodwill of the company aswell. The ASX has recommended that the listed entities should establish one committee thatwould be responsible for recognizing the risks and mitigate it before it affects the participants ofthe company and the company altogether. The members of such committee shall includeminimum three directors who shall be entitled to carry out their business activities independentlywithout any interference5. The recommendations made by ASX with respect to the riskmanagement strategies, also requires the company to review the activities of the riskmanagement committee for ensuring the efficacy of the committee6. The board of the listedentities must ensure that the role and structure of the internal audit functions must be disclosed.The company must disclose environmental, social and economical risks and the structure that isadopted by the company for the dealing with such risks. In the given scenario, the company Ardent leisure has suffered losses due to the accidentthat took place in DremaWorld, which claimed lives of many patrons. The accident took placedue to a technical failure in the rides of the Dream world Leisure Park. It is the responsible of an4 The Guardian. (2017) <https://www.theguardian.com › World › Australia › Dreamworld>.5 Mann, Catherine Renshaw, et al. "From the dean." (2016).6 Fitzpatrick, Jeff, et al. Business and corporations law. LexisNexis Butterworths, 2011.

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