Corporation Act 2001 - Case Study

RUNNING HEAD: CASE STUDY
Corporation Law
Name of the student
Name of the university
Author Note

1
CASE STUDY
Issue:
The primary issue related to the provided case study is whether the parties have satisfied
the legal duties.
The secondary issue related to the provided case study is whether there is any
performance of breach of duty.
The last issue related to the provided case study is whether the parties performing the
breach of duty can be held responsible or liable.
Rule:
Corporation Act 2001, Section 588G, defined the meaning of Insolvent trading. The
specific rule in the context of the same is applicable while any person is performing the duty of a
director in any entity. While carrying out the responsibility of the director of the entity incurs any
debt, this specific section is applied to rule the case. However, this is obligatory that the entity is
facing the issue related to insolvency during the period of incurring the debt. At the same point
of time, the entity shall be insolvent during the period where such debt took place. While any
entity incurs any debt, there must be valid ground for suspecting the fact that the entity is facing
issues in the context of insolvency1. The fact is that while any person is not able to save the
entity from incurring the debt, that person will create contradiction against the mentioned
provision.
Owing to this, it has been identified that any person is held liable for committing any
offence if eventually, the entity faces the issue related to insolvency owing to incur of debt and
that specific person must hold the position of the director during the time of incurring the debt.
1 Fernandez, Prafula. "Insolvent Trading of Companies." Legal Issues in Business 4 (2002): 29

2
CASE STUDY
Director’s duties
In accordance with Corporation Act 2001, sec 180, director of any entity is obliged to
carry out his responsibilities in the context of a specific entity with diligence and proper care like
a noble individual. Corporation Act 2001, Sec 181 states that any director is obliged to carry out
the responsibilities on behalf of the entity and the same must be in good faith. It is further stated
that the obligation of a particular director involves satisfying the obligation and the same must be
for a good purpose. Sec182 of Corporation Act 2001further states that any director shall not
utilise his position and power in any inappropriate manner. If the same happens, it will be
considered as the destruction of the entity. It has been explained by Corporation Act, sec 183 that
any directors shall not use any information associated with the entity for gaining any benefit or
advantage of any other party2.
Further, they shall not use the private information that is held with the director in an
inappropriate manner which in turn may lead to the destruction of the entity or institution. For
supporting the discussion made above, the case study of Bell Group Ltd v Westpac (No 9) 3can
be considered. If any director breaches his duty, whether irresponsibly or intentionally they can
be considered as responsible under the criminal proceeding as stated under Corporation Act
2001. Further, the directors shall not mismanage their position for gaining any advantage that is
detrimental to the entity. If it is observed that the directors are complying with their duties, they
can be eliminated from the entity and also will be asked for payment of compensation. Case
study of ASIC v Australian Investors Forum Pty Ltd 4can be considered for establishing the
above explanation. The major objective of the directors is acting with good faith to support the
statement mentioned above. Directors of any entity are judged in the context of reference and
2 Wolfe, Richard P. "The Fiduciary Duty of Directors and Officers Under the Louisiana Business Corporation Act of 2014." Loy. L. Rev. 60
(2014): 523.
3 Bell Group Ltd v Westpac (No 9)
4 ASIC v Australian Investors Forum Pty Ltd