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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 1IssueLiam and Peta are directors of a company that has become insolvent as of June 2017. Thecompany was already unable to meet all its debts yet Liam and Peta continued to transact andhad even received demands for unpaid taxes which the company did not pay. The issue here is todetermine if the directors can be legally pursued for civil or criminal liability as per theprovisions of the Corporations Act, 2001.RuleCompanies in Australia are governed under the Corporations Act, 2001. As per Section95A (1) of the act a company that is unable to meet its debts is not considered to be solvent. Asprovided by Section 95A (2) of the act a company that is not solvent is insolvent1. This has beenreiterated in Sutherland v Hanson Construction Materials Pty Ltd[2009] NSWSC 2322.Section 588G of the Corporations Act, 2001 states that the directors of a company have aduty to ensure that a company refrains from insolvent trading3. Thus a director of a companybreaches this obligation if at the time he or she was aware that the company is or will likelybecome insolvent or a reasonable person in the same position would be aware of the same. Asprovided for in Section 588(3) of the act the director commits an offence if he continues to incurdebt dishonestly on behalf of the company.1 Bevan, Christopher J.Corporations law. Thomson Reuters (Professional) Australia Limited, 2014.2 Bottomley, Stephen.The constitutional corporation: Rethinking corporate governance. Routledge, 2016.3 Schultz, Emma, Gloria Y. Tian, and Garry Twite. "Corporate governance and the CEO pay–performance link:Australian evidence."International Review of Finance13.4 (2013): 447-472.
Corporation Law  -  Assignment Sample PDF_2
2CORPORATION LAWIn case of insolvent trading ASIC may impose or apply for civil penalties to the followingeffect:Disqualifying the director from managing the affairs of companies.Imposing substantial fines.Imposing payment of compensation to the company which is equal to the loss suffered bycreditors as provided in Section 588J of the act.If incurring debt through insolvent trading dishonestly is established the ASIC can pursuethe directors with criminal penalties under Section 588K of the act.Application The given set of facts and circumstances state that the company was not being able topay its creditors which is why a prioritization of such payments was made by the directors.Moreover they were not being able to meet their tax obligations. Thus following the provisionsof Section 95A (1) of the act it can be inferred that the company was insolvent. Liam and Petacontinued to transact even though any person in their position would ideally be aware that thecompany is insolvent. This was thus a conspicuous breach of their duties under Section 588G ofthe act.Thus for such a breach ASIC could pursue both directors for civil penalties under Section588J of the act. However it has been stated that Liam was suffering from cancer and that is thereason behind not being informed about the financial position of the company. Thus it may beinferred that Liam was not acting dishonestly when undertaking insolvent transactions as he wasunaware of the financial position of the company. Thus it may be inferred that ASIC cannot
Corporation Law  -  Assignment Sample PDF_3

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