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Corporation Law - Assignment Sample PDF

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Added on  2021-06-14

Corporation Law - Assignment Sample PDF

   Added on 2021-06-14

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Running head: CORPORATION LAWCORPORATION LAWName of the StudentName of the UniversityAuthor Note
Corporation Law - Assignment Sample PDF_1
1CORPORATION LAWQuestion 1IssueA company has two directors Liam and Peta. The company has not been paying itscreditors and thus has been receiving calls for the same. It is determined that it cannot dischargeall its debts at once and thus the company prioritizes which creditors to pay and which ones tokeep on hold under the instructions of the directors. There also unpaid tax obligations which thecompany cannot pay. The issue here is to determine if by such transactions the directors havebreached their statutory obligations for which they can be pursued by the ASIC for civil and/orcriminal liabilities and the penalties that can be awarded for the same.RuleSection 95A (1) of the Corporations Act, 2001 states that when a corporation is unable tomeet its debts it would be considered insolvent. This is reaffirmed in Section 95A (2) of the act.As laid down in the case Sutherland v Hanson Construction Materials Pty Ltd[2009] NSWSC232 when the cash flow of a company is not sufficient to cover all its debts it would beconsidered insolvent1.The Corporations Act, 2001 prohibits a company from entering into transactions and thedirectors of a company must ensure that is ceases to trade when it can no longer meet its debtobligations. Section 588G lays down the statutory provision for the same2. As per Section 588G1 Nix, Michael. "The Australian Company: Operations and Finances."Commerce and Culture. Routledge, 2016. 79-110.2 Baxt, Robert. "Company Law and Securities."AUSTRALIAN BUSINESS LAW REVIEW45.4 (2017): 344-346.
Corporation Law - Assignment Sample PDF_2
2CORPORATION LAW(3) of the act if the company continues insolvent trading dishonestly the directors would becriminally liable3.When imposing liability, in case of a civil action the penalties that maybe awarded by theASIC are4:Disqualifying the directors of the company from future company management;Impose a substantial fine;Ask for compensation to the company in terms of the losses of its creditors as per Section588J of the act.In case of criminal proceedings the provisions of Section 588K state that the director willbe criminally liable to compensate the company for losses suffered by its creditors5.ApplicationThe set of given circumstances evidently show that the company could not meet its debtsyet it continued to transact and incur further debt. Thus following the judgment in Sutherland vHanson Construction Materials Pty Ltd[2009] NSWSC 232 and the provisions of Section 95A(2) the company would be deemed insolvent. Thus the further trades undertaken by the companywould constitute a breach of the director’s statutory duties under Section 588G of the act. ThusASIC could impose civil penalties on both the directors as stated above. Liam however was a cancer patient at the time of the incidents and thus he did not haveknowledge of the financial status of the company. Thus he was not acting dishonestly and thus3 Tomasic, Roman. "The rise and fall of the capital maintenance doctrine in Australian corporate law." (2015).4 Hargovan, Anil. "Corporate law: Foreign directors of Australian companies put on notice: No leniency forignorance of duties."Governance Directions69.1 (2017): 37.5 Thampapillai, Dilan, et al.Australian Commercial Law. Cambridge University Press, 2015.
Corporation Law - Assignment Sample PDF_3

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