Corporations Law : Assignment

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Added on 2020-05-16

Corporations Law : Assignment

Added on 2020-05-16

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ASIC v Whitlam | (Student Details: )CORPORATIONSLAW

January 21, 2018CORPORATIONS LAWIntroduction ASIC v Whitlam [2002] NSWSC 591 is a leading case which highlights the disqualification ofdirector of company, when they breach the civil penalty provisions covered under theCorporations Act, 2001. This case had Justice Gzell of the Supreme Court of New South Walesstating that even though the general goal in disqualifying a person was to safeguard the public,there is also the significance of the deterrence from the future conduct which mandates suchdisqualification, when the judges decide upon such orders being made or in not doing the same.This case presents that the chair of the board are required to maintain high standards at all times(Hincy and McDermott, 2018). Though, this decision was reversed later on by Court of Appeal.Background information On July 10th, 2003, a lower court finding was reversed by the Court of Appeal where it was heldthat Whitlam had been in breach of the different sections of the erstwhile Corporations Law.There were a number of allegations made regarding the contraventions made by Whitlam, in hisfailure of properly voting against the Resolution 6, which had been instructed upon by theshareholders, who had appointed Whitlam as their proxy. This particular resolution had proposedcertain amendments to the Articles of Association, which would have resulted in the fixedamount of annual remuneration being increased and the same being distributed amongst thedirectors, where the resolution was passed. This raise was to $665,000 from the earlier $617,000,and this resolution was supported by Whitlam (McConvill and Bagaric, 2004). There was a failure by Whitlam in signing the poll papers which covered the votes given by 3973members, which were against this particular resolution. Based on the articles of association of2

January 21, 2018CORPORATIONS LAWNRMA, these votes were rendered invalid as a consequence of this. Even though the votes werenot counted up earlier, the returning officer got legal advice on this matter where the lawprovided that these votes had to be counted up, even with the failure of Whitlam in signing thesepoll papers. This ultimately led to the votes against the resolution being counted up and thisresolution was resultantly defeated. However, this was done a little too late and the publicationswere made in the newspaper advertisements, which showed the opposite (Neylan, Mir and Sato,2018). This led to the ASIC initiating civil proceedings against Whitlam, who was the Chairman andPresident of the company, where it was stated that Whitlam had breached section 232 of theCorporations Law in his failure on voting the proxies, based on the instructions given by themembers, against the resolution. Further, it was claimed that Whitlam had been in breach ofsections 180, 181 and 182 of the Corporations Act, 2001 (Cth) (CA) in terms of changing theminutes of meeting of directors of the NIGL (Allens, 2002). Duties breached The director duties mentioned to have been contravened by Whitlam are the three key duties ofdirectors, which attract civil penalties covered under 1317E of CA. Under section 180(1) of thisact, the duty of care and diligence as a civil obligation has been provided (Jade, 2018). Thissection provides that the directors in the company have to exercise their powers and fulfil theirduties with a degree of diligence and care, as would be done by a reasonable individual, where: This person was the director of company in the circumstances; andHeld the office of the director and had the same responsibilities in the company (WIPO,2015).3

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