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Importance of Role of Senior Executives

Added on - 23 Feb 2020

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1Table of Contents:Introduction2Responsibilities and Duties Breached3Analyzing the Judgment4Relevance of the Decisions6References7
2Australian Securities & Investments Commission v Macdonald (No. 11) [2009]NSWSC 287Introduction:The main aspect which ishighlightedby this decision is the importance which has beenplaced on the role of the senior executives and the directors, which include both non-executiveand the executive directors when implementing and considering essential strategic mattersrelated to the company. The issue apart from being with respect to corporate governance, thisjudgment also widened the scope of duties for the senior executive who were below the boardlevel.The ASIC brought civil proceedings against the seven former non-executive directors andJames Hardie Industries NV (“JHINV”) and James Hardie Industries Limited (“JHIl”) withrespect to breach of their duties under the regarding the public representations that were madeand the preparation of the approval for representation Corporations Act, 2001 (Cth.) (“Act”)(Hargovan, 2017).Thesubsidiaryof the JHIL, James Hardie Group is the subsidiary of JHILwere in thebusiness of manufacturing and selling asbestos until1937.Jsekarb Pty Ltd (“Jsekarb”) andJames Hardie & Coy Ltd (Coy), JHIL’s two subsidiaries which were wholly owned were also inthe same business from the period between1937 to 1987.
3The JHIL Board of directors for compensating the claims with respect to the damagesthat were caused due to their asbestos business made against the group founded the MedicalResearch and Compensation Foundation (“Foundation”) where they made payments andmanaged all such claims(Australian Securities & Investments Commission v Macdonald (No.11), 2009). A draft of theannouncement making the public declaration in the ASX with respectto the same was made and the approval for which was sought by the Board.At the same time,JHIL also entered into with Coy and Jsekarb a deed of indemnity and covenant indemnifying itfrom thedifferent liabilities that arose from their asbestos business(“Agreement”).The group made an announcement in the ASX that there was a total fund amounting to$293 million in the foundation and that this amount was deemed to be sufficient for payment ofall such legitimate claims which they have anticipated to arise due to the damages as mentionedabove caused by their business in asbestos.A press conferencecalled by CEO of JHIL Mr.Macdonald also allegedly confirmed the same.In the weeks that followed, there were similarASX announcements that were made. There was no disclosure of the Agreement in any of theannouncements that were made.There was a restructuring that took place of group under JHINV after the establishment of theFoundation.After the Foundation was established, the James Hardie group went through a. Thisnow formed the new holding company and the incorporation of this company was intheNetherlands.International representations were made by the CEO in 2002 regarding the James Hardie Groupregarding the Foundation’s sufficiency of funds. In 2007 Februray there were civil proceedingswhich were started by ASIC again JHIL and JHNIV for conducts that were misleading anddeceptive in nature and also for making representations and statements that were not true
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