Corporations and Business Structure | Case Study
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Running head: CORPORATIONS AND BUSINESS STRUCTURE
Corporations and Business Structure
Name of the Student
Name of the University
Authors Note
Corporations and Business Structure
Name of the Student
Name of the University
Authors Note
CORPORATIONS AND BUSINESS STRUCTURE1
Issue:
The first concern, according to the given case study, is whether the legal duties have been
fulfilled by the parties in the specific case.
The second concern, according to the given case, is whether the parties have breached
any legal duty in the specific case study.
The third concern, according to the given case, is whether the lawful parties will be
responsible or liable for performing breach of duty.
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. It has been observed that an individual can be held guilty for commission
of offence eventually, the entity is facing the issue regarding insolvency in the matter of
1 Fernandez, Prafula. "Insolvent Trading of Companies." Legal Issues in Business 4 (2002): 29
Issue:
The first concern, according to the given case study, is whether the legal duties have been
fulfilled by the parties in the specific case.
The second concern, according to the given case, is whether the parties have breached
any legal duty in the specific case study.
The third concern, according to the given case, is whether the lawful parties will be
responsible or liable for performing breach of duty.
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. It has been observed that an individual can be held guilty for commission
of offence eventually, the entity is facing the issue regarding insolvency in the matter of
1 Fernandez, Prafula. "Insolvent Trading of Companies." Legal Issues in Business 4 (2002): 29
CORPORATIONS AND BUSINESS STRUCTURE2
incurrence of debt and that particular individual should hold the position of a director during the
incurrence of debt.
There are different provisions of law that can be easily connected to the specific study of
Groenveld Australia Pty Ltd & Ora v Nolten &Ors2. In connection to the Corporation Act the
different duties that are considered to be statutory in which the director of the organization
comply with the disposing of their duty. The statutory duty of the director is provided in the
legislation according to section 180, 181, 182, 183, and 184. As mentioned in section 180 of the
Corporation Act 2001, it is the duty of the directors to perform their responsibilities diligently
and with adequate care. Section 181 of the Corporation Act states the action of the director that it
should always be in the favour and should according to the best interest of the business. Section
182 of the Corporation Act 2001 elaborates that the directors should not misuse their position to
gain any benefit from any other individual by bringing the detriment to the company. Section 184
of the said Act3 states that if any director intentionally and recklessly perform the breach of duty,
they can be held liable under criminal proceeding as specified in s 181, 182, and also 183.
Different type of duty is found to be imposed on the company's director through a method of
common law that also includes the duty to perform in bonafide and also for the benefit of the
company, discretion to retain the duty, liability in avoiding the interest of several conflicts and
not using the proper power that should be followed. Any director of the company can be easily
removed from the position of the director if it is observed that they are not complying with their
duty and they have to pay damages to the company. The director of that specific company can be
2 Groenveld Australia Pty Ltd & Ors vs Nolten & Ors (No 3) [2010] VSC 533
3 Corporations Act, 2001 (Cth)
incurrence of debt and that particular individual should hold the position of a director during the
incurrence of debt.
There are different provisions of law that can be easily connected to the specific study of
Groenveld Australia Pty Ltd & Ora v Nolten &Ors2. In connection to the Corporation Act the
different duties that are considered to be statutory in which the director of the organization
comply with the disposing of their duty. The statutory duty of the director is provided in the
legislation according to section 180, 181, 182, 183, and 184. As mentioned in section 180 of the
Corporation Act 2001, it is the duty of the directors to perform their responsibilities diligently
and with adequate care. Section 181 of the Corporation Act states the action of the director that it
should always be in the favour and should according to the best interest of the business. Section
182 of the Corporation Act 2001 elaborates that the directors should not misuse their position to
gain any benefit from any other individual by bringing the detriment to the company. Section 184
of the said Act3 states that if any director intentionally and recklessly perform the breach of duty,
they can be held liable under criminal proceeding as specified in s 181, 182, and also 183.
Different type of duty is found to be imposed on the company's director through a method of
common law that also includes the duty to perform in bonafide and also for the benefit of the
company, discretion to retain the duty, liability in avoiding the interest of several conflicts and
not using the proper power that should be followed. Any director of the company can be easily
removed from the position of the director if it is observed that they are not complying with their
duty and they have to pay damages to the company. The director of that specific company can be
2 Groenveld Australia Pty Ltd & Ors vs Nolten & Ors (No 3) [2010] VSC 533
3 Corporations Act, 2001 (Cth)
CORPORATIONS AND BUSINESS STRUCTURE3
banned to engage in any other company or any other corporation for not less than five years, and
there is proper evidence in the context of breaching of duty4.
According to the provisions of section 198 of the Corporations Act, 2001 (Cth), all
powers of a director can be exercised by a newly appointed director unless those powers which
are decided to be exercised after an annual general meeting.
Director Duties:
The actual behaviour of any director that is essential in performing the duty of the
director depending on the organization, inclusive of the position and responsibility of a specific
director. Any director including the power of an executive director must have some experience
and expertise in terms to gain a greater standard. All the directors must use the power and should
carry out their activities with responsibility and role, and there should be presence of care and
diligence that a prudent person should always do. If the particular directors is observed to be the
selector to perform the director’s duty under the evidence that is considered to be conditional.
The specific study of ASIC v Australian Investors Forum Pty Ltd5 can be consulted for reference
purpose. The director should carry out the same activity as per the responsibility and role of the
panel of director that go together with the same organization or the company. All the directors of
an organization must arrange a meeting to achieve the objective as per the least requirement or
need. Section 181 and section 180 of the Corporation Act 2001 states that the director's
responsibility to perform his/her activity diligently and carefully. The case of Bell Group Ltd v
Westpac (No 9)6 can be consulted to support the mentioned statements.
4 Balotti, R.F. and Hinsey IV, J., 2000. Director Care, Conduct, and Liability: The Model Business Corporation Act Solution. The Business
Lawyer, pp.35-61.
5 ASIC v Australian Investors Forum Pty Ltd [2005] NSWSC 1198
6 Bell Group Ltd v Westpac (No 9)
banned to engage in any other company or any other corporation for not less than five years, and
there is proper evidence in the context of breaching of duty4.
According to the provisions of section 198 of the Corporations Act, 2001 (Cth), all
powers of a director can be exercised by a newly appointed director unless those powers which
are decided to be exercised after an annual general meeting.
Director Duties:
The actual behaviour of any director that is essential in performing the duty of the
director depending on the organization, inclusive of the position and responsibility of a specific
director. Any director including the power of an executive director must have some experience
and expertise in terms to gain a greater standard. All the directors must use the power and should
carry out their activities with responsibility and role, and there should be presence of care and
diligence that a prudent person should always do. If the particular directors is observed to be the
selector to perform the director’s duty under the evidence that is considered to be conditional.
The specific study of ASIC v Australian Investors Forum Pty Ltd5 can be consulted for reference
purpose. The director should carry out the same activity as per the responsibility and role of the
panel of director that go together with the same organization or the company. All the directors of
an organization must arrange a meeting to achieve the objective as per the least requirement or
need. Section 181 and section 180 of the Corporation Act 2001 states that the director's
responsibility to perform his/her activity diligently and carefully. The case of Bell Group Ltd v
Westpac (No 9)6 can be consulted to support the mentioned statements.
4 Balotti, R.F. and Hinsey IV, J., 2000. Director Care, Conduct, and Liability: The Model Business Corporation Act Solution. The Business
Lawyer, pp.35-61.
5 ASIC v Australian Investors Forum Pty Ltd [2005] NSWSC 1198
6 Bell Group Ltd v Westpac (No 9)
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