Director's Duties in DEF Ltd Assignment

Added on - Jan 2021

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Director's Duties
Table of ContentsINTRODUCTION...........................................................................................................................3MAIN BODY...................................................................................................................................31. Have Rocky, Drago and Clubber breached any directors' duties?..........................................32. Do they have an arguable defence?.........................................................................................43. Advise whether the same standard will be applied to Drago, as the company's chieffinancial officer?.........................................................................................................................5CONCLUSION................................................................................................................................6REFERENCES................................................................................................................................7
INTRODUCTIONA company is an artificial person who appoints individuals called directors. They carryactivities on behalf of the body corporate. Corporation Act, 2001 has been enacted in Australia togovern every matter of companies and its directors (Marshall, S., & Ramsay, I., 2012).A directorhas duties, rights and responsibilities provided by thisact. They are legally bound to exerciseduties for acting in everyday work as well as important matters. The report is based on a case ofthree directors who have raised fund for their primary business activities. Along with this, thereare some questions pertaining to that case study which explains breach in directors duties,arguable defence and application of similar standard of a director who is also a Chief FinancialOfficer (CFO).MAIN BODYIn the given case, DEF Ltd. Was formed by three directors named Rocky, Drago andClubber in the year 2011. It is also listed on Australian Stock Exchange. It raised a fund of$20million from investors for conducting drilling activities on a number of sites. After sample ofthe sites was given for a geological test, it was found that the level of gold deposits is too lowwhich rendered it uncommercial to proceed. An amount of $5million was already spent on this.There came a dilemma in front of three director about whether to continue with drilling activitiesor not to which Clubber and Drago argued to stop all such activities and return rest of the moneyto shareholders (Hill, J. G., & Conaglen, M., 2017). On the other hand, Rocky was adamant tohalt the activities and had an optimistic view it. Clubber and Drago agreed with Rocky's decisionand resumed the work which was completed in the year 2018. All the capital raised for drillingactivities has been exhausted. On considering the above case scenario the following questionsraised are as follows:1. Have Rocky, Drago and Clubber breached any directors' duties?Companies appoint directors to manage its activities. They have a fiduciary relationshipwith the corporation which states that every director should act for the benefit of the entity.There should be transparency, honesty and accountability in every decisions made by them.Corporation Act, 2001 has been implemented for regulating Australian body corporates. Itcomprises different sections describing provisions for areas and activities. It also provides dutiesthat are required that are mandatory for every director to discharge. On examining the above
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