Corporate Governance and Responsibility

The assignment examines the evolving relationship between corporate governance, corporate social responsibility (CSR), and the firm's impact on society. It delves into various perspectives on CSR, its implications for business practices, governance structures, and democratic processes. Key concepts like agency theory, stakeholder engagement, and the legal framework surrounding corporate behavior are also discussed. The assignment encourages critical thinking about the ethical and societal responsibilities of corporations in a globalized context.

Corporate Law

TABLE OF CONTENTS
INTRODUCTION .........................................................................................................................................................3
Company Constitution............................................................................................................................................3
Disclosure Provisions.............................................................................................................................................4
Balancing Interests of the investors........................................................................................................................5
Breach of disclosure provisions..............................................................................................................................6
CONCLUSION...............................................................................................................................................................8
REFERENCES................................................................................................................................................................9

INTRODUCTION
Corporation Act 2001 is a regulation which binds business entities into legal obligations
and duties. It is important for the organisations to abide by the each of the provisions of the act
and also respect the rights of the investors1. This act is primarily regulated in Australia to protect
the rights of the investors in the corporate world. In every business, satisfaction of customer is
essential and to provide that satisfaction there must be some guidelines and rules which much be
introduced by the government so that everyone can apply those rules. One of the extremely
important subject which s being focused upon in today's world is that of Corporate Governance.
It has been characterized as the medium through which the performance of any corporate can be
enhanced2. A highly essential and instrumental role is played by the directors as well as other
authorized persons of any company. One of the many duties and responsibilities imposed upon
the director is to make effective disclosures, as stipulated under the act or by the regulatory
authorities. The rationale behind imposition of this obligation to ensure that the company is
operating in a fair manner and the interests of the investors are not getting hampered.
Company Constitution
Since 1998, every country is in need of constitution so as as Australia with a update on
companies. Taking such concern about organization, a proper set of rules and regulation is being
established known a company’s Constitution which will comprise of Memorandum of
Association and Article of Association3. These rules are generated in order to operate business
entities.
As per the business environment, there are so many business activities carried out in the
organization and in order to operate each of the firms in a smooth manner adherence to the
provisions of the act is a necessity. The corporation act 2001 covers some laws which are related
to other business entities such as partnerships and some of the managed investment schemes and
other laws. It is mandatory for every business to follow rules which the government has
implemented to ensure maintenance of fairness and justice in the market. There are many
guidelines which help in setting new organizations as this is also mentioned in the corporation
1 Wigmore, J.H, (2012) Principles of judicial proof. Rarebooksclub Com.
2 Bainbridge, S, (2015) Corporate Law. West Academic.
3 Horrigan, B, (2010) Corporate social responsibility in the 21st century: Debates, models and practices across
government, law and business. Edward Elgar Publishing.

act 2001 for the Australia. It is mandatory under the legislation to register a corporation before it
could commence its operations in the nation. The registration process includes all data about the
company the name, details about the employee, name of the directors and lastly, the names of the
all the investors4.
Disclosure Provisions
The listed companies of the nation are required to make the disclosures in order to update
the market as well as the investors. The information which is disclosed is considered to pose a
material effect on the value of the securities of the concerned entity. Corporation act 2001
describes the rights of the employee and employer and also describe about the right of the
investors which shall necessarily be protected. Corporation act 2001 discusses about provision
that some power shall granted to the authority to deal with the employee and other members of
the company.
For example board of director have some absolute power to take decision in the respect to
the matters of the company. There are many provisions which shall describe some Powers as per
the act. As per the corporation act 2001, section 700(4) governs the situation wherein the
securities are received from a foreign nation. In such a situation the management of the company
is required to make all the stipulated disclosures. The need to insert disclosure provision in the
act is to protect company from any kind of Global crisis which will effect the economic position
of a company5. For an example it has been seen that Lehman Brother wen into serious financial
crisis because there was no proper disclosure of provision to investor. Disclosure shall provide
transparency and shall not to form, any sort of ,misrepresentation between the parties. So
purpose of disclosure is very clear among to business organization regarding making offer to
investors regarding.
The provision disclosure define the action which discloses all the relevant information
about the securities which are important. This in turn ensures that the investors of the company
are constantly updated about all the information which interests them or affect their rights in the
corporate. Further, Section 704 provides for making the requisite disclosures to the investors, in
the event of offer of securities. Section 727 has imposed a strict obligation on all the corporates
4 Audretsch, D. and Lehmann, E.E, (2011) Corporate governance in small and medium-sized firms. Edward Elgar
Publishing.
5 Friedman, L.M, (2011) Contract law in America: a social and economic case study. Quid Pro Books.

to essentially make a disclosure before offering securities in the market for sale. As per this act
there are some restrictions also mention in this act.
Under section 734 of corporation act 2001 explain about the restriction which impose on
the advertisement of the company and that shall be decided by the board of the company that
give some kind so benefit to company. The corporation act apply some restriction to be applied
on the document which has to show or which are not need to show that depend upon the type of
the document. Some documents need to disclose when the offer has been made to investor before
he invest into the company that is his right to know about the company for the example the
prospectus of the company and the revenue model of the company and the all the information
statement need to disclose that all explain in the section 709 of the corporation Act. section 709
also explain about the offer which made between the company and the investor all the terms and
the conditions should mention in this company can hide there some secrete like the product
which they use in making the goods but not the information which a inventor must know about
the company.
Corporation act 2001 section 707 sub section (1) is all about the offer which is made
between the investor and the company for some specif sale of the products and the sub section(2)
explain about the the offer of the body’s control. Further, section 671B(1) of the act imposes an
obligation on the persons making acquisition of more than 5% shares in listed company6. The
said disclosure shall be made within a period of 2 days and also make a copy of the same
available to Australian Securities Exchange (ASX). Such shareholders are termed as substantial
shareholders and disclosure of their acquisition enables the investors to stay informed about the
movements of the company. This provision is particularly helpful in the case of takeovers and
mergers. In light of these provisions it can be stated that the disclosure provisions of the
Corporation Act are completely balanced in nature to keep the investors as well as the market
players to stay updated.
Balancing Interests of the investors
Balancing the interests of the investors is one of the prime concerns of ASIC and the
same is clearly reflected in the manner the disclosure provisions have been designed. To bring
the equal balance between the inventor and company there should be the transparency of the
offer and about the inner information of the company that maintain the balance between two of
6 Spamann, H, (2010) The “antidirector rights index” revisited. Review of Financial Studies 23(2) pp 467-486.

them. when both the parties sign an agreement then both the parties must have the required
knowledge about the sale controlling body then the key principle has to disclose and also all the
documents related to it. The investor of the company is important because that give the monetary
support to the company for his own profit and he or she also take some share of the company for
the profit but for this he has right to know that what is the actual position of the company that’s
why it is important to disclose the document between the both the parties7. According to the
various laws in the cooperate law it is very important to maintain the transparency between both
the parties so that it shall bring no confusion remain.
It is very essential that all the information must be produced in a clear manner as it will
lead various other consequences for an example it the information is being clear in the mind of a
person or an investor then he will be able to quote an offer well. If the disclosure of the
document is important because if that will be in proper manner than there will be least chances of
the legal issues arise. If company later faces these issue that will not good for the company good
will8. Sometime it has been seen that while inventor is investing money in the company than
certain clause if which are not clear in inventors mind than the offer will not execute in the same
manner which was planed by both the parties9 Such confusion in the making shall leads to beach
and rise in liability against corporation act.
Breach of disclosure provisions
If the act is disclose later than the legal issue arise between both the parties than
company need to pay the penalty which will be imposed for the breach of the provision for not
disclosing the document regrading investment. If party hide the facts that result into such legal
liabilities which both the parties need to handle and that give a negative affect on the company
reputation10. The directors of the company are imposed with the full responsibility in respect to
the disclosure requirements. For instance Section 286 pertains to disclosure of financial records,
7 Bebchuk, L.A and Weisbach, M.S, (2010) The state of corporate governance research. Review of Financial Studies
23(3) pp 939-961.
8 Lan, L.L and Heracleous, L., (2010) Rethinking agency theory: The view from law. Academy of management review
35(2) pp 294-314.
9 The University of Law. 2016. [Online]. Available through.
<http://www.law.ac.uk/futurelawyers/practice-areas/corporate/>. [Accessed on 13th January 2017].
10 Lindgreen, A and Swaen, V, (2010) Corporate social responsibility. International Journal of Management Reviews
12(1) pp.1-7

and violation of the same shall be considered as a strict liability offence. In addition , the
directors are made liable under section 344(1) if they fail to abide by the stipulated compliances
under 2M.2 and 3. A director shall be regarded to abide by all the provisions of the act if he has
undertaken reasonable efforts to comply with the disclosure requirements. The purview of
reasonable efforts include recruitment of staff which is competent to undertake the procedure,
and a similar opinion was held in ASIC v. Fairlie (1993). As mentioned earlier the general
disclosure obligation is imposed on the director, and in the vent the director fails to abide by any
of the provisions in relation to disclosure, section 674 (2) shall be contravened. It has been
opined by the courts in various judgements that contravention of section 674(2) by the company
shall be considered as contravention on the part of the director.
In addition section 180 can come into play which requires the director to discharge their
responsibilities in a reasonable manner and with a degree of diligence11. Section 180 can also be
applied on those who are occupying the office with similar responsibilities. The case of James
Hardie Industries NV v. ASIC (2010) scrutinized the law under section 674 and propounded for
an objective test. It was held that the directors and other officer s of the company are not entitled
to determine the materiality of an information in respect to disclosure under section 674. Further
in case of ASIC v. Fortescue Metals Group Ltd. (2001) or the Fortescue Metals Case it was
opined by the court that an acute responsibility has been imposed on the director to ensure that
an effective and efficient mechanism is established in the company to stay in compliance with
the disclosure requirement12. A culture of compliance shall be promoted by each one of them as
observed by ASIC v. Chemeq (2006).
CONCLUSION
As per the above discussion it shall be concluded that corporation act 2001 protect the
rights of company and give protection investor. It is very important for the company and for the
investor to disclose all the documents related to offer that maintain the transparency between the
parties. If the proper documents were not disclosed than later legal dispute arise between the
parties and that give diverse affect to company’s reputation. This project shall describe about the
11 Carroll, A.B and Shabana K.M, (2010) The business case for corporate social responsibility: A review of concepts,
research and practice. International journal of management reviews 12(1) pp 85-105
12 Scherer, A.G and Palazzo, G, (2011) The new political role of business in a globalized world: A review of a new
perspective on CSR and its implications for the firm, governance, and democracy Journal of management studies 48(4) pp 899-
931

related provision and section of the corporation act 2001. The project discuss about the liability if
proper disclosure of the document is not be done by the company.

REFERENCES
Books and Journals
Audretsch, D. and Lehmann, E.E, (2011) Corporate governance in small and medium-sized
firms. Edward Elgar Publishing.
Bainbridge, S, (2015) Corporate Law. West Academic.
Bebchuk, L.A and Weisbach, M.S, (2010) The state of corporate governance research. Review of
Financial Studies 23(3) pp 939-961.
Carroll, A.B and Shabana K.M, (2010) The business case for corporate social responsibility: A
review of concepts, research and practice. International journal of management reviews
12(1) pp 85-105
Friedman, L.M, (2011) Contract law in America: a social and economic case study. Quid Pro
Books.
Horrigan, B, (2010) Corporate social responsibility in the 21st century: Debates, models and
practices across government, law and business. Edward Elgar Publishing.
Lan, L.L and Heracleous, L., (2010) Rethinking agency theory: The view from law. Academy of
management review 35(2) pp 294-314.
Law R, Qi, S and Buhali, D., (2010) Progress in tourism management: A review of website
evaluation in tourism research. Tourism management 31(3) pp 297-313.
Law P., (2011) Corporate governance and no fraud occurrence in organizations: Hong Kong
evidence Managerial Auditing Journal 26(6) pp 501-518
Lindgreen, A and Swaen, V, (2010) Corporate social responsibility. International Journal of
Management Reviews 12(1) pp.1-7.
Scherer, A.G and Palazzo, G, (2011) The new political role of business in a globalized world: A
review of a new perspective on CSR and its implications for the firm, governance, and
democracy Journal of management studies 48(4) pp 899-931
Spamann, H, (2010) The “antidirector rights index” revisited. Review of Financial Studies 23(2)
pp 467-486.
Wigmore, J.H, (2012) Principles of judicial proof. Rarebooksclub Com.
Online

The University of Law. 2016. [Online]. Available through.
<http://www.law.ac.uk/futurelawyers/practice-areas/corporate/>. [Accessed on 13th January
2017].