LAWS19032 - Company & Association Law


Added on  2020-03-04

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Running head: COMPANY AND ASSOCIATION LAWCompany law casesName of the student:Name of the university:Author note

1COMPANY AND ASSOCIATION LAWPart A1.Issue:The issue of the case is whether the company had breached their duty or not. The issue is whether the company had violated the provision of section 180 of theCorporation Act or not.The present case is based on the Corporation law of Australia. The issues of the case areattracting the provision of the breach of director’s duty and the responsibility of the directorto the shareholders. The provision that is engraved under the law stated that the directors arebinding to state all the risk factors regarding the business to the share holders and the groundswhere they are investing money. In the present case, a violation regarding the rule had beenfollowed and the issue of the case cropped up as a consequence.2.Relevant Laws:The present case is dealing with the principles laid down under the Corporation Act2001. A company director bases the present case on the breach of duties (Laing, Douglas &Watt, 2015). Section 180 of the Act prescribes certain rules regarding the duties that adirector has to maintain while performing his duties. A term care and diligence are mandatoryfor a director to show towards the staff as well as the other stakeholders of the company. TheCorporation Act restricts the director from doing any arbitrary acts or misuses the power. Themain purpose of the Act is to protect the interest of the staff in general. Provision of section180 is applicable in this case. Ground of section 180(1) is wide and the internal meaning ofthe same is epidemic in nature (Langford, 2015). In Australia, there is an institution namedAustralian Security and Investigation Commission, who deals with the related matters andconducts an investigation if there is any allegation made against a company director.

2COMPANY AND ASSOCIATION LAWPrimarily the provision of section 180(1) of the Act stated that a director of a company mustshow due diligence regarding the company related matter. Due diligence means that he musttake certain reasonable steps that a prudent man takes in certain circumstances. Anothersubject that secured by the section is the company director must not hide any facts regardingthe company from its shareholders who investing their money to buy the shares of thecompany. It is stated under the provision of the section that a company director should haveto perform his duties in good faith. It is obnoxious if he misemploys his chair with someulterior motive (Pearson, 2016). Under the Corporation Act, these provisions are engraved thatmake the Director of a company to perform his duties according to the rules. In AustralianSecurities and Investment Commission v. Fortescue Metals Group Ltd. [2011] FCAFC 19,it was held by the court that, it is not expected from a Director to violate the norms of section180 and should not treat the violation as a stepping-stone. The rules of the Act will beapplicable upon the sole directors of a company with an intention to establish a clarityregarding the company related matters and to secure the interest of the shareholders (Tills &Wills, 2016). In Vrisakis v. Australian Securities and Investment Commission [1993] 9 WAR395, it was held that in case of any risky business, a director should apply his prudent mindand keep a balance regarding the same to restrict the potentiality of the risk. A closeinterpretation of the rules laid down under the Corporation Act states that in case ofcontravention of the Act, loss is not mandatory to be proved (Hargovan, 2017). The actualbreach holds the enough evidentiary value to hold a director guilty under the same. However,it should be kept in mind that the provisions of section 180 do not support the rule of strictliability. In Shafron v. Australian securities of Investment Commission (2012) 247 CLR465, it was stated that responsibilities under section 180 of the Corporation Act does notlimited up to the statutory duties. The responsibilities are applicable on every directors of the

3COMPANY AND ASSOCIATION LAWcompany. Apart from section 180, certain provisions of section 945A of Corporation Act areapplicable in this case (Aroney et al., 2015).3.Application:The case of Cassimates is regarded as one of the most important cases in the historyof Australia where there is a breach made by the company director regarding his duties. Inthis case, the provision of section 180 of the Corporation Act is applied vehemently (Rahim, &Alam, 2014). The fact of the case is that Australian Securities and Investment Commission hadbrought an action against the company Storm where Mr & Mrs. Cassimates was the soledirector. The allegation made against them was that they had breached the provision ofsection 180 of the Corporation Act and misemployed their power (Sealy & Worthington, 2013). Itwas also alleged that they had cheated the shareholders of the company and misplaced theirmoney. The company was a reputed company and the directors of the company had misusedthe name of the company to attract the vision of the shareholders and gained money fromthem. Mr. Cassimates had developed an investment model called storm model and vowed toprovide certain facilities to the investors. It was announced by the company that those whowill invest their money to the company will get the opportunity to witness a double gearinginvestment and they will be eligible to borrow loan for their home and get certain marginalloan. The intention of the Directors was to grab money from the investors and bear theexpenses of the storm model. As per the statement of Australian Securities and Investment Commission, Mr.Cassimates knew that there were certain risks in the investment process but he did not madethe investors alert regarding the same. Therefore, it was alleged that he had failed to act in

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