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Corporation Law - Assignment Sample

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Added on  2021-05-30

Corporation Law - Assignment Sample

   Added on 2021-05-30

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Corporation Law
Section 181
corporation act 2001 (Cth)
Directors Duties
Proper purpose, Good
Faith and Best Interest
Whitehouse v Carlton Hotel Pty
Ltd [1987] 162 CLR 285
Corporation Law - Assignment Sample_1
INTRODUCTION
Section 181 of the Act incorporates the duty of good faith, proper
purpose and best interest of the company
It has been established by the case of Salomon v A Salomon and Co
Ltd [1897] AC 22 that a company is a separate legal entity and the
best interest of the company is not the best interest of the directors.
As directors have been provided the responsibility of managing the
company and taking decisions related to it, there are various
situations in which a conflict of personal and company interest takes
place
The duty provided under section 181 obliges the directors in such
situation to act in the best interest of the company rather than
personal interest and ensure that their actions depict good faith and
are towards a proper purpose
Corporation Law - Assignment Sample_2
Case Facts
Charles Whitehouse was the director who had the responsibility of
governing the company in the case in context
There were three classes of shares that were owned by Charles, his
wife and his children.
The A class share was owned by Charles that contained the rights of
the voting.
The B class share was owned by his wife that contained the rights of
partial voting and the C class share was owned by his children that
contained no rights of voting.
Further, divorce had taken place between Charles and his wife.
Corporation Law - Assignment Sample_3
Facts continued...
Charles separated from his wife with while having the custody of his
son while his wife got the custody of his daughter
Meanwhile, he was worried about the control of the corporation in
context that will be transferred to his daughter and wife after his
death
Therefore, he decided to issue the class B shares to his son so that
such problems can be prevented in future
However, he got separated from his son also and then he claimed
that such transfer of shares was not considered to be valid because it
was done in bad faith.
The trial court had stated that the allocation was valid
Corporation Law - Assignment Sample_4

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