Corporate Law Report: Analysis of Director's Duties and Safe Harbour

This report analyzes a corporate law case involving Mr. Daly and other directors, focusing on breaches of director's duties under the Corporations Act 2001. It examines whether the directors breached their duties, specifically highlighting the misuse of company resources for personal gain and the breach of good faith. The report discusses the implications of trading while insolvent, considering potential defenses available to the directors. Furthermore, it assesses the applicability of the new 'safe harbour' defense, concluding that it would not assist the directors due to the specific conditions of the case. The analysis references relevant sections of the Corporations Act and external sources to support its findings.

Running Head: Corporate Law
Corporate Law
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Corporate Law 1
Contents
Question 1........................................................................................................................................1
Question 2........................................................................................................................................1
Question 3........................................................................................................................................1
References........................................................................................................................................3

Corporate Law 2
Question 1
The duties of the director were breached by Mr Daly under the Section 588. According to this
section a person with develop various options in the business environment to rectify the situation
of the company. However, it is important to see that the steps taken by Mr Daly were in favour
of the company or not. Mr Daly used the organizational resources for personal use which does
not provide any kind of betterment to the situation of the business (Marsh, & Roberts, 2017).
Thus, it should be noted that the protection of safe harbour will not apply on the case of Mr Daly
has he did not use the money to reduce the debts of the business. Also it should be noted that Mr
Daly breached the duty to act in good faith for the organization given under section 181 of
Corporation Act 2001. Along with this, he also took undue advantage of his position to take
personal gains that breached the section 182 of the act (Austlii, 2019).
Question 2
The fact should be noted that the other two directors apart from Mr Daly also breached their
duties as one director had taken loan from the company because of less cash in hand due to
property dispute with ex-wife. So, it should be noted that both the directors are equally
responsible for making Mr Daly use the money for his daughter’s wedding. All the directors of
the company condemned unethical acts which were explained by Australian Securities and
Investment Commission that the directors have used a huge amount in the Investport Income
Opportunity Fund. Also the company had two other funds registered as well as unregistered and
the unregistered fund was having transactions of huge sum. Thus, it should be noted that the
Investport Income Opportunity Fund was used to provide money to Mr Daly on credit (ABC.net,
2019).
Question 3
No, it should be noted that the safe harbour will not assist the directors because there are some
conditions in this case that should be fulfilled and Mr Daly and other directors were unable to do
the same. The condition is that the business need to pay to the people in the business, secondly
the company need to agree on all duties announcing commitments, thirdly the indebtedness

Corporate Law 3
should be brought directly and indirectly in the business. The safe harbour does not shield the
chief from facing the penalties if they have performed wrong (Black, Schaillee, and Cibich,
2018).

Corporate Law 4
References
ABC.net., (2019). The talented Mr Daly: The story of a businessman, 150 investors, and a $20
million opportunity. (2918, August 26). Retrieved from
https://www.abc.net.au/radionational/programs/backgroundbriefing/the-talented-mr-
daly/10158316
Austlii., (2019). Corporations Act- 2001 Sect 182. Retrieved from:
http://classic.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s182.html
Black, J. Schaillee, N. and Cibich, K. (2018). Australian law reform: the new ‘safe harbour’ for
directors and stay on enforcement of ‘ipso facto’ clauses. Retrieved from <
https://www.nortonrosefulbright.com/en/knowledge/publications/f8b92454/australian-
law-reform-the-new-safe-harbour-for-directors-and-stay-on-enforcement-of-ipso-facto-
clauses >
Corporations Act, 2001 (Cth)
Marsh, S., & Roberts, S. (2017). Personal liability for insolvent trading: Company directors find
berth in safe harbour. Governance Directions, 69(10), 611.