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Law Of Business Organization - Corporations Act 2001

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Added on  2019-10-30

Law Of Business Organization - Corporations Act 2001

   Added on 2019-10-30

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LAW OF BUSINESS ORGANISATIONPART 2a)Even though the company is a legal entity s per s. 124 Corporations Act 2001 but yet thedecisions on the behalf of the same are taken by the top management usually the CEO orMD (Managing Director). At times, there are certain civil or criminal liabilities that mayarise for the company due to the inappropriate or fraudulent conduct of particular agents.In such a situation, the concept to directing mind and will is found useful in order toconfer liability on the person or persons who collectively represent the mind of thecompany and are responsible for the negligence or fraud committed. The directing mind ofthe company usually refers to the top management personnel who has the requisiteauthority from the board of directors and hence directs the company into a particulardirector for achieving stated goals (Baxt, Fletcher and Fridman, 2008).The ‘directing mind and will’ in the context of a company would refer to any individual whois acting as the agent of the company and has a sphere of authority within which he/she issupposed to act. This concept tends to highlight that the state of mind of the companyessentially refers to that of the agents particularly the top management that has the maximumcontrol. As a result, any liability arising from such actions would essentially not be limited tocompany but the agent whose mind and will were involved in the underlying action.However, there are certain safeguards particularly for the top management available such asthe business judgement rule in order to escape liability (Ciro and Symes, 2013).b)One of the key advantages of the company business structure over other businessstructures (partnership, sole trader) is that the liability is limited to the assets of thecompany and the personal assets of the owners cannot be liquidated for the settlement ofcompany dues unless there is a personal guarantee. However, in certain cases or situations,it is possible that court ignores the limited liability and holds the shareholders or owners asresponsible for the company outstanding liabilities. This is called as piercing of thecorporate veil and is usually carried out in limited circumstances (Cassidy, 2013).Some of these circumstances include serious corporate frauds, corporate asset and personalasset intermingling, corporate form abuse to exploit limited liability protection, under-capitalization of the firm and failure to distinguish between the identity of the company andthe respective owners. A simple example where the piercing of corporate veil would be done
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