CORPORATIONS AND BUSINESS STRUCTURES

Running head: CORPORATIONS AND BUSINESS STRUCTURES
Corporations and Business Structures
Name of the Student
Name of the University
Authors Note

CORPORATIONS AND BUSINESS STRUCTURES1
Answer 1
Issues
In this paper the issue to be discussed is whether Sam, Rosa, Mia and Charlotte have any
lawful responsibilities under the Corporations Act, 2001 (Cth).
Rule
The given scenario is discussed on the basis of the provisions of the Corporations Act,
2001 (Cth). Many authors are of the view that directors are the key assets of the company. In
order to run a company effectively the directors determine and implement policies, make
decisions, prepare and file official documents, call meetings such as annual general meeting,
meeting with shareholders and maintain and keep financial reports. Section 9 of this Act1 defines
the term director which include persons lawfully selected as an additional director, or ‘de facto’
director, or ‘shadow’ director2. The said Act3 describes that the directors have certain duties that
must be performed adequately to maintain the organization appropriately and its member as well.
The duties can be divided into two categories, such as Fiduciary duties under the Australian
General law and Statutory duties under the Corporations Act, 2001 (Cth). The fiduciary duties
include:
 Duties to act in good faith and not against the interest of the company;
 Duty of not using power improperly;
 Duty to dodge encounters; and
1 Corporations Act, 2001 (Cth)
2 Tomasic, Roman, Stephen Bottomley, and Rob McQueen. Corporations law in Australia. (Federation
Press, 2002).
3 Corporations Act, 2001 (Cth)

CORPORATIONS AND BUSINESS STRUCTURES2
 Duty to preserve discretion4.
On the other hand, duties under the Corporations Act, 2001 (Cth) include the following duties,
such as:
Section 180 of the Corporations Act, 2001 states that it is the duty of a director to act
diligently and with proper care like a prudent person while taking significant decisions for the
business.
According to Section 181 of this Act5 it is the duties of the director to act in good faith
and for the benefit of the organization. It also describes that the duties must be done for a proper
purpose. A director also have the duty to resolve the disputes of the organization. This duty is
considered to be a mandatory duty of trust and belief under this Act6.
Section 182 of the said Act7 states that it is the duty of the director to not to use the
position improperly to take undue advantage for personal benefit or for the benefit of the others
because it may cause harm to the business.
In addition, section 183 elaborates that a director must not disclose any material
information for illegitimate purpose and for taking undue advantage either for personal benefit or
for the benefit of the others8. This type of illegitimate activity may cause harm to the business.
4 Clarke, Thomas. "The evolution of directors duties: bridging the divide between corporate governance and
corporate social responsibility." (2007) Journal of General Management 32.3: 79-105.
5 Corporations Act, 2001 (Cth)
6 Corporations Act, 2001 (Cth)
7 Corporations Act, 2001 (Cth)
8 Ramsay, Ian. "Directors' Duties in Australia: Recent Developments and Enforcement Issues." (1999)
Company Financial and Insolvency Law Review 3.2.

CORPORATIONS AND BUSINESS STRUCTURES3
Section 191 of the said Act9 elaborates that it is the duty of the director to reveal all the
important matters connected to the affairs of the organization. The matters include those
important matters where the personal benefit of the director is connected10.
Section 588G of the said Act11 deals with the issue of insider trading. This issue states
that a director will be held responsible for insolvent trading only when any arrangement has been
confirmed by the director after taking debt, when the organization is bankrupt or may turn
bankrupt or there exists admissible grounds which requires that the organization may turn
bankrupt12.
Analysis
In this given problem, Rosa and Sam, both of them are the directors and shareholders of
the organization, the name of which is SRT Pty Ltd. They are also the receivers of the trust, the
name of which is Tipping Trust. The Trust mainly involved with the trade of locksmith.
On the other hand, Mia and Charlotte are recognized as partners of a wholesale trade.
After a specific period, all the shares of the organization are sold by Rosa and Sam. Not only
that, both of them have utilized a small part of the revenue to make a trip to Australia. The
wholesale business governed and directed by Charlotte and Mia amalgamated with the locksmith
trade of Rosa and Sam. A decision relating to the alteration of tax statement for which additional
ten percent has been charged not informed to Mia by Charlotte. The additional amount of
expense is charged from a bank account and the Charlotte the main role in operating it.
9 Corporations Act, 2001 (Cth)
10 McConvill, James. "Directors' duties to stakeholders: a reform proposal based on three false
assumptions." (2005) Australian journal of corporate law 18.1: 88-102.
11 Corporations Act, 2001 (Cth)
12 McConvill, James, and Martin Joy. "The Interaction of Directors' Duties and Sustainable Development in
Australia: Setting off on the Uncharted Road." (2003) Melb. UL Rev. 27: 116.