Directors Responsibility in Ethical and Legal

Added on - 28 May 2020

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Running head: DIRECTORS DUTIESDirectors DutiesName of the StudentName of the UniversityAuthor note
1DIRECTORS DUTIESTable of ContentsIntroduction......................................................................................................................................2Case introduction (Material Facts)..................................................................................................2Duties breached by the directors of the company............................................................................3Decision of the court........................................................................................................................4Conclusion.......................................................................................................................................6References........................................................................................................................................7
2DIRECTORS DUTIESIntroductionThe directors have the responsibility of governing the organization in an ethical and legalmanner. There are various duties imposed on them through parliamentary legislations as well asprecedent common law. They have to comply with such duties and responsibilities while theydischarge their power towards the organization. However if they are not able to comply withsuch duties they are imposed with financial sanctions as well as suspension from management.They may also be subjected to criminal penalties under section 6.1 of the Criminal Code. Theprimary legislation which deals with such duties in Australian companies is the Corporation Act2001 (Cth) (the Act). These duties include duty to act in best interest, observing diligence andcare like a reasonable person, not misusing information or position in company, making properdisclosure and not indulging in insolvent trading.Case introduction (Material Facts)In the case of Fodare Pty Ltd v Shearn (2011) claims have been brought by Fodare Pty Ltdagainst its director Ms Shearn along with her Husband, Son and Daughter in Law. The claimswere brought by the company upon the instigation of the liquidator. The company was inpossession of a property at Menangle Park which was purchased at $195000 in March 1989. Theproperty had been sold for a sum of $1,200,000 on 22ndJuly 2003. The organization wassupposed to receive settlement money which accounted to 1,081,736.41. However the defendantwho was the sole director of the company during that time misdirected such funds in a waywhich were not in compliance with her duties in form of a director. The court in this case heldthat the director was liable to the breach of her duties in relation to misappropriating the funds.
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