Directors' Breaches of Duty and Legal Action

This assignment examines a scenario where directors of a company have allegedly breached their fiduciary duties. The analysis focuses on specific actions taken by the directors that constitute a breach, including potentially illegal resolutions and shareholder manipulation. It explores the legal ramifications of these actions, referencing relevant sections of the Corporations Act, and outlines potential legal recourse available to Banjo, an individual affected by the directors' misconduct.

Running head: LAW OF BUSINESS ASSOCIATIONS
Law of Business Associations
Name of the Student
Name of the University
Author Note

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Table of Contents
Question 1........................................................................................................................................2
a....................................................................................................................................................2
Issue.............................................................................................................................................2
Rules............................................................................................................................................2
Application..................................................................................................................................3
Conclusion...................................................................................................................................3
b...................................................................................................................................................3
Issue.............................................................................................................................................3
Rules............................................................................................................................................4
Application..................................................................................................................................4
Conclusion...................................................................................................................................5
Question 2........................................................................................................................................5
Issue.............................................................................................................................................5
Rules............................................................................................................................................6
Application..................................................................................................................................6
Conclusion...................................................................................................................................8
Reference.........................................................................................................................................9

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Question 1
a.
Issue
Can Max able to enforce the clause in the constitution making him the company solicitor?
Rules
The Corporation Act has legislated in the section 136 about the company where it has
right to form the constitution for effective according to the relatable company and every
members of the corporation. The section 9 of the Corporation Act has also legislates the special
resolution where the members of the company like shareholders must present their votes of at
least 75% which should passed such resolution in favor of the shareholders. According to the
case facts the directors of CCP has passed a special resolution for the alteration of the
corporation’s constitution where they inserted a new clause giving the board the right to
expropriate the shareholding of members only less than 10% of the total shares issued (Donner
2016).
Directors are bound on duty towards the shareholder of the company and other members.
The section 181 of the Corporation Act provided the legislations where directors are bound to do
their duties with care and diligence good faith and must not misuse their position. If they
breached the duty of section 181 180 to 183 and 184 under the corporation act therefore the
members of the shareholders of the corporation can take legal action against them (Coffee Jr,
Sale and Henderson 2015).

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Application
According to the case fact when Max has been engaged as a solicitor with the company he
has included a clause in the constitution while appointing himself as a company solicitor and
must not replaced except for negligence towards the company. The director must know about the
clause where they cannot replace in until and unless Max engaged with any activities of
negligence but in the General Meeting they have passed a special resolution to alter the
company’s constitution and inserted a new clause giving the board the right to expropriate the
shareholdings of members on in less than 10% of the total shares issued (Hiller 2013). Therefore
as being the directors of the company they must owned the duties of work with the corporation
along with proper care and diligence good faith and should not misuse their position in the
company but they breach the section of 181, 182 to 183 and 184 of the Corporation Act while
passed a new resolution and fire Max without any negligence from him. Therefore Max can take
legal action against them (Coffee Jr, Sale and Henderson 2015).
Conclusion
Max can take legal action against the directors for breached their duties.
b.
Issue
As per the case facts the issues has been found whether the inclusion of the clause
allowing the director to expropriate his shares even though the other shareholders have passed a
special resolution?

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Rules
The special resolution is introduced when the company wants to change their name, types
style or any other extra clauses regarding the related with the Corporation then the corporation
act provides such legislations. It should be formed under a specific criteria before it should be
passed or voted by the members of the board of the company under the special resolution act.
The section 9 of the Corporation Act has defined such legislation where the special resolution for
the cooperation must be introduced where 75% of the vote should casted should provide by the
shareholders and others members of the company (Hiller 2013).
Application
The fact of the case is the directors of the Chocolate Cleaning Products Pty Ltd (“CCP”)
Alana and David has been decided to fire Max who is the company solicitor and also hold 5% of
the shares of the company. The company has also Sol who is an investor and mentor and
experienced in the cleaning products industry. However the directors of the company are
thinking that it is enough of having advice of Sol about the proposed expansion activities and
there is no need of Max who is the solicitor of the company for other activities in the company.
Therefore they have introduced a new clause under the special resolution where it has mentioned
about the right to expropriate the shareholdings of members on in less than 10% of the total
shares issued (Donner 2016).
The special resolution must be introduced for the company or the corporation for changing
the name types or adding extra clauses under the Corporation Act. A special resolution should
pass under some special criteria for the members of the board where they must give their vote in
regarding the clauses which has been added or changing in the Corporation. At least 75% of
what should be cast in favor of that special resolution by the members and the shareholders. The

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section 9 of the Corporation Act has legislated the special resolution for the corporation where
the shareholders should give at least 75% of votes along with the others members of the
company which helps to amending or changing the constitution of adopting a new company
name of changing the company type of selective share buyback of any changes regarding the
share capital of the shareholders right (Hiller 2013).
The section 249L(c) of the corporation act has legislated such acts of the special resolution
with the intention to propose the special resolution and state the actual words of the resolution.
Therefore under the Annual General Meeting the casting of the votes should be process in favor
of the special resolution. The passing of a special resolution must be processed by ASIC on form
205 notification of resolution or form 2205 notification of resolution regarding shares (Donner
2016).
Conclusion
According to the special resolution it has been passed in the general meeting was shared
holders also cast their vote. Therefore the directors has right to expropriate shares of Max.
Question 2
Issue
As per the fact of the case the issue is whether Banjo can able to take any legal action
against the directors for breached their Aqua table and statutory duties towards the company?

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Rules
It is important for a company when they make any new resolution or changes regarding
the company and the shareholders and other members of the board then the participation of every
member are necessary (Hiller 2013). The Corporation Act Section 180 legislates the acts of duty
with care and diligence of the directors officers and employees where they must act with good
faith which has been legislates section 181 and section 182 has stated the use of positions of the
directors said they must follow some civil obligations for running the company and holding the
position of directors of the company. The section 184 has defined the legislations where the
directors’ must act with good faith and should not misuse their position or any information of the
company which cause any bad effect or criminal offences with the company (Coffee Jr, Sale and
Henderson 2015).
It is also important for the director that they must not reckless or intentionally dishonest
towards the corporation or commit any offensive and they must not fail to exercise their powers
and discharge their duties in good faith in the best interest of the corporation or any proper
purposes. For running a corporation at directors must not have any personal interest or benefit
out of the Corporation. As per to the case study the issue has been arises when Banjo who is one
of the non executive directors of Aussie Boats Ltd (“AB”) has disagreed with the resolution and
issue of shares which he thinks it will be better to enter into discussion with MWB before the
terms of the takeover also things that the directors have breach there equitable or statutory duties
towards the Corporation (Donner 2016).
Application
The fact of the case is Aussie Boats Ltd (“AB”) is the listed public company which has
been supplying custom built boats to the Australian market for the past 25 years but due to the

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rising of a new business company Millionaires on Water Ltd (“MWB”) have started a new
luxury yachts companies has made more hi-tech fit-outs boats which affect the marketing
business of Aussie Boats Ltd (“AB”) (Hiller 2013). Before they want to planning extension
activities into international market for a number of years but they have failed due to the lack of
fund but recently they make some initial discussion with both consultants consultancy firm La La
Loopsy Pty Ltd but they have failed to work on the issues due to the lack of funds. Now the
Aussie Boats Ltd (“AB”) has decided to buy up stock from Millionaires on Water Ltd (“MWB”)
where that company has owned 35%of shares with the plan takeover bid imminent. However
$500,000 of shares of La La Loopsy Pty Ltd in return for the provision of a report on
opportunities for AB to supply boats internationally and $1 million of shares to the public to be
issued for the purpose of raising additional capital for expansion purposes (Donner 2016).
Therefore when the meeting has take place they have immediately engaged in previously
planned expansionary activities which help them to improve the market share and should be
informed by high quality consultancy and market research. However the MWB has also took the
shares which help in reduction of 18% of sticks in exhibit limited but Banjo who is one of the
non executive director has found that the director of the company Clancy and Jack has are acting
really out of concern for their positions as MWB is known to terminate the positions of executive
director after completing take over (Coffee Jr, Sale and Henderson 2015).
It is necessary in the board meeting that when a special resolution has been passed the
presence of every share holders and others board member should participate in the general
meeting. The corporation at has legislative in section 180 that director must own the duty with
proper care and religion towards the other directors and employees of the company. The section
181 has been legislative that the directors of the company must act with good faith towards the

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other directors and the members of the company and the section 182 has defined the use of the
position of the director feather must work with every civil obligations for running the company
and holding the position of directors of the corporation (Hiller 2013). The corporation act has
been also legislative in section 184 that the director of the company should not misuse their
position or disclose any information about the company which made any criminal offence
towards the corporation to the company and never involved with any offensive activities where
they fail to exercise their powers and discharged the duties in good faith in the best interest of the
corporation or any other causes (Hiller 2013).
The directors are should not reckless or intentionally not being dishonest to the company
and never involved sweet any offensive activities where they fail to exercise their powers and
discharged their duties in good faith in the best interest of the corporation or any other causes.
Therefore as per the activities the director has breached their duties towards the company
and send to hold their position before they make the resolution and take over the company to
new company with new issue of shares with the share holder (Donner 2016).
Conclusion
Therefore Banjo can take legal action against the directors for which the equitable and
statutory duties for being the director of the company and the court can make penalties according
to the section 1317E of the Corporation Act for breached their duties of the position of the
director.

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Reference
Coffee Jr, J.C., Sale, H. and Henderson, M.T., 2015. Securities regulation: Cases and materials.
Donner, I.H., 2016. Fiduciary Duties of Directors When Managing Intellectual Property. Nw. J.
Tech. & Intell. Prop., 14, p.203.
Hiller, J.S., 2013. The benefit corporation and corporate social responsibility. Journal of
Business Ethics, 118(2), pp.287-301.
Knepper, W.E., Bailey, D.A., Bowman, K.B., Eblin, R.L. and Lane, R.S., 2016. Duty of Loyalty
(Vol. 1). Liability of Corporate Officers and Directors.
Langford, R.T., Ramsay, I. and Welsh, M.A., 2015. The origins of company directors' statutory
duty of care.
Lin, C., Officer, M.S., Wang, R. and Zou, H., 2013. Directors' and officers' liability insurance
and loan spreads. Journal of Financial Economics, 110(1), pp.37-60.
Loewenstein, M.J., 2015. Equity and Corporate Law. SMUL Rev., 68, p.783.
Lunn, B., 2014. Strengthened director duties of care for cybersecurity oversight: Evolving
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Spamann, H., 2016. Monetary Liability for Breach of the Duty of Care?. Journal of Legal
Analysis, 8(2), pp.337-373.