Employee Breach of Contract and Corporate Liability

This assignment analyzes a scenario involving United Company facing challenges due to an employee's breach of contract. Sally Swift, an employee who invented a chair using company resources, leaves to start her own business with the invention. The company must take legal action against Sally while exploring ways to recover losses and prevent future breaches. The assignment discusses contract law, corporate responsibility, and potential solutions for United Company.

Q 1.Analyze and discuss whether the ASX Listing Rules would permit the Proposal
for the capital rising in the report prepared by Jack Good?
Answer: - NO, Australian Stock Exchange (ASX) posting organization would not allow
Proposal for the capital ascending in the report arranged by the Jack Good. Jack Good needs to
raise the funding to expand the association. So he proposes to issue new offers. The report he
gets ready was great at one side yet it would not follow the all the rules of Australian Security
Exchange.
As per ASX posting rules requires an association needs to meet ASX showcase list. 1The
Company must fulfill least criteria, for example,
1. Must fulfill least standard of Structure, size, and number of an investor.
2. Securities must be the issue which is reasonable for new and existing security holder.
3. Investor premium must be exhibited before securities are quoted.
4. Financial information should be produced in accordance with Accounting and Auditing
reports.
5. Securities issue must be fair to new and existing shareholder.
Meeting criteria for listing
Admission criteria Requirement
1. Number of Shareholders
Minimum 400 investors
Or
Minimum 350 investors and 25% unrelated parties
Or
Minimum 300 investors and 50% unrelated parties
Profit
2.
Or
Assets
$1 million net profit over past 3 years+ $400000 net
profit over last year.
$ 3 million net tangible assets
Or
$ 10 million market capitalization
1 Module 5, ASX listings and rules.
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Continuous Disclosure
According to Australian Stock Exchange 2rule 3.1 general obligations on a listed company to
disclose material information timely in the market. Australian Stock exchange also required that
company should provide true information.
Periodic disclosure
In addition to disclosure the report ASX- listed companies are required to disclose periodic
information timely:-
1. Half yearly report
2. Quarterly report
3. Annual report
After investigation the reported plan by Jack Good I infer that he had not considered the
outcomes:-
Jack get the ready to report in which he orders investor in two gatherings that too is group A
who was the current investor and have a voting right and second is group B who was the new
investor and don't have voting right. As indicated by his proposition Group a gets 60% of any
profit announce and rest for Group B. He had not disclosed its financial report clearly.
At the point when United set up a budgetary report of 2016/2017 they find, there is sure
increment in cost of capital because of which there is ascending in the cost.
Jack shows a bogus report of benefit since he knows whether reveal the genuine figure of
benefit it might influence the cost of the organization's offer. So he misleadingly builds the
benefits of organization. By the late October share showcase ends up plainly mindful of United
organization has money related emergencies and the market cost of joined offer dives?
2 Module 6, ASX market integrity and corporate governance
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As expressed before United has recorded organization with Australian Stock Exchange so Jack
Good has not confronted any troubles for issuing new offers in advertising. Jack leads a
deceptive arrangement of corporate Act 2001 Australian Securities and Investment Commission
Act 2001. He had not unveiled this data to Australian Stock Exchange. This case is much the
same as Australian Wheat Board; it likewise exhibits a false yearly report.
To whom should the data unveiled:-
The organization needs to unveil just to ASX, does not have to reveal to the overall general
public. An organization must reveal in the development to the overall general public in
advertising after got recognize from ASX3.
Posting decides 19.12 have expressed that, once the director and investor must mindful of the
data, they should affirm that ASX would mindful with the data or not. If not then it is the duty of
director or investor to illuminate the ASX promptly.
For the recorded organization, Australian Stock Exchange recorded guidelines should
completely comprehend so as to proceed with a run. The organization would delegate one
individual who is organization secretary who specifically speaks with Australian Stock Exchange
on posting rules.
For this situation Jack and Company secretary, Kerry (organization secretary) conceals data
from ASX and precluded the section from claiming ASIC part in the organization. Organization
secretary is the one individual who chooses whether the data uncover or not.
Conclusion
Jack Good prepares the report for the welfare of company by issuing the share in a market but
he had not discussed the issue of new share with Australian Stock Exchange. If he discusses
earlier his report and gets various alternatives that are possible.
Australian Security Exchange prepares to give in- principle advice to the listed company on the
application of listing rules. Firstly it suggested that wavier is need or not, secondly, it can be
helpful in managing time.
3 Davidson A, 2011 disclosure obligations to the ASX and to your D&O insurer.
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Any advice given by the Australian Stock Exchange is confidential and not disclose to market.
Australian Security Exchange does not charge any fees for providing advice to the listed
company.
Jack Good had not discus with ASX about the issue of new share. He has to take the lesson
from the4 Australian Wheat Board, between 1999-2005 AWB faces the same problem. The
directors and other officers had not disclosed financial records timely in the market and present
a false report regarding their profits. After this director and other officer charged with the penalty
for hiding real report of mislead market.
Question:
(i) Advise the directors, the CEO and the CFO of any potential liability under the
Corporations Act 2001 (Cth) with respect to matters concerning the annual report.
Consider if any potential defenses are available.
Reply: - The Corporations Act 2001 (Cth)5 expressed that organization chiefs and alternate
officers of the organization have practiced their power and release their obligations with care
and determination. These obligations are:-
• Make the judgment in accordance with good faith
• Not to have an individual intrigue when making any judgment.
• Judgment is to the greatest advantage of the company
[s 181] chief and another officer must exercise their energy to make the judgment in compliance
with common decency for the welfare of enterprise and for the legitimate reason.
[s 182] they are disallowed from utilizing their position for the welfare of their own.
4 Geisker J, 2010, ‘ the AWB shareholder class action – lesson in continuous disclosure’
5 Corporation Act 2001 , ss 180-184
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[s 183] they are disallowed from utilizing their data from the organization in the welfare of claim.
[s 182] and [s 183] are likewise apply on the representatives of the organization.
Executives and the other officer had not taken after or rupture any of his obligation, they offer
ascent to the common commitment. They are additionally affable punishment arrangement; if
the court found any affable commitment then polite punishment arrangement is pertinent. In
common punishment arrangement; in the request of the court, a man needs to pay a Federation
fine which is up to $200000 and furthermore made a request the individual to adjust for any
misfortune [9.4 B]. The court may likewise exclude a man from overseeing partnership.
The corporation Act 2001 is also set criminal offenses where directors and other officers fail to
perform their duties or intentionally fail to perform their and duties in good faith, best interest and
proper purpose [s 184].
Common law duties
Each decision of the director can be taken against, what could have been done to the most
benefit of the company. The breach of duty may raise the company to Sue the director and take
legal action against them. Director may be the only person who acts on behalf of the company
for any injuries suffers by the people.
Under this section
A business decision has to take or not to take according to the business matter of the
corporation. If any breach of duty or any judgment found wrong then the director and the other
officers have to face consequences.
If directors and any other officers are found guilty in performing their duties then only 6 Civil
Penalty provision are awarded.
6 Penalty provisions: s3171E, s187 and s79.
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Note:-
1. Civil penalty provision (s 3171E)
2. The situation of director fully owned subsidiaries (s 187)
3. Define Involve (s 79)
Defense
Australian Security Exchange provides only defense to directors and officers that they do not
affect their personal liability. The only defense is provided in this case.
Conclusion
The director, the CEO and the CFO of the company have to perform their duties in the
prescribed manner of corporate act 2001. The director, the CEO and the CFO of United Chair
Limited company have breached their duty; they utilize their position and knowledge for their
own welfare in place of organization.
Australian Securities Exchange has some guidelines regarding how and when to present
reports; the director and other officer has to produce fair annual reports which have true
information about company financial position in the market. If they do any misleading or unfair
reports and present in the market then ASX charge them with the penalty such as they remove
their voting rights from a company and with fine.
(ii) Evaluate and discuss whether the company secretary behaved properly in
refusing to admit the ASIC investigator to the premises.
No, according to me Company Secretary had not behaved properly with ASIC investigator.
About Australian Securities and Investment Commission (ASIC):
It formed in 1991 as Australian Securities Commission but in 1998 it converted into Australian
Securities and Investment Commission. It is responsible for the consumer protection in
superannuation, insurance, and deposit taking.
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Market supervision has changed in 20107:-
Australian Security and Investment Commission assume responsibility to supervise trading in
the financial market. Now ASIC investigates, regulate and enforce market misconduct.
How ASIC supervise?
ASIC has responsibility for enforcement of market misconduct laws and investigates market
offenses. In past detecting and supervising market, misconduct has been the challenge for
ASIC but there will be the greater change in the expansion on ASIC. Centralizing the functions
may provide ASIC with a better regulatory tool and real time surveillance.
Australian Security and Investment Commission are different from Australian Stock Exchange.
ASIC has different guidelines on which it works. Its main purpose is to same guard the interest
of public who invested in stock market. It would analyze the financial statement of the company
and give proper advice to general people about the company. After getting supervision power it
becomes more powerful for supervising market miscount. If ASIC found any misconduct it
propose 3 states of penalty such as
1. Maximum $20000, which it covers breaches such as failure to disclose and retain some
information from the customer.
2. Maximum of $100000 which is for most serious matter
3. Maximum of $ 1 million.
Now, in this case, Australian security and investment commission has surveillance the market
condition of United Chair limited, that United Company is presenting a false report and directors
breaches their duty so, ASIC decided to check the united company report. ASIC send advance
notice the company secretary Kerry about the investigation. Because the Kerry knows about the
miscount they did by presenting the false report about profit. At the time of the investigation,
Kerry denied the permission to ASIC member in the office premises.
Kerry knows the future consequences what they going to face after ASIC make the report about
the United Company.
As we know company secretary is the only person who can only decide to whom the financial
statement of the company has to show or not. He takes the decision not to show the annual
report of a united company to Australian Security and Investment Company.
Conclusion
7 Redfern J, 2010 “How market supervision has change in 2010”
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Kerry thought he did right to deny the entry of ASIC, but he did wrong decision by denying the
entry of Australian Security and Investment commission. If he grants the permission to the
member of ASIC, they save them from the future problems face by the company. After getting
the supervision power in 2010 ASIC become more powerful.
(c) Consider what rights the company, United, may have against Sally Swift and
further, how the company can protect itself from this type of incident in the future.
Sally Swift; the chief designer and inventor of United Company. Sally Swift has an employment
contract of 5 years with United Company. Sally recently invented an innovative chair for the
health department. He was working on this project since last year.
MD of United Company got to know that sally already gets the patent of this chair with his own
name.
What does Patent8 mean:-
A patent gives an exclusive right to an owner to publically show his invention. This right was
given by the government for some time period.
In Australia, it was for 20 years.
Patent gives a right to the patentee to prevent his/her invention from use other people or
exploiting. Generally, a new and useful invention can be patent. Improvement or modify in the
old invention cannot be the patented.
That cannot be patented:-
• Artist creation
• Plans
• Schemes
• Principles, theories
A patent must be applied within the 12 months of applying provisional application. Another
person can oppose the grant of the patent within the 3 months of applying paten form. If no
oppose are there then the patent will then be granted.
8 Module 4, management knowledge and information.
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Here,9 sally invented the chair when he was working in the United Company, and manufacturing
it in the company manufacturing plant in Melbourne. Sally invented this chair for a company but
a when the chair invented Sally made resignation and open his own company Chair, which
claims to revolutionary change in the world of nursing care.
Sally breach his contract with United Company, as he uses the company plant, material for own
purpose. He made wrong information about the work completed to the company MD Lidia.
United Company id suffering from the bad situation, they plan to recover all the loss from the
invention of this chair. Lidia wants to patent the chair, that time he got to know about the fact
That sally already patents that chair by his name.
At the time of Sally join the office there may be the contract made between Company and the
Sally. The contract has some criteria which have to follow by both the company as well as the
employee if any one breach with that contract they have to pay the loss which occurs due to the
breach of that contract.
Here Sally breaches the contract by resigning the company. Sally made his resignation after
An immediate effect, because of his resignation company has to suffer a loss because sally also
takes the company invention with him.
According to the law, this time sally has to pay the damages faces by the company because of
him.
What is the breach of the contract mean?
A contract is made between company and his employee which include all the information about
employee such as:-
• Time period of contract
• Salary
• Facilities
• Fine etc.
9 Corporation Act 2001
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If anyone breaches contract whether company or employee, they have to pay the damages to
whom that face the loss by this breach. Legal action has to take again to whom who breach.
Here, in this case, sally breaches the contract by using company premise and material for their
profit. In the contract, it is stated earlier that from the time of joining of an employee his time and
any invention he did in a company is considered to be a company’s property employee has no
right to it. Sally made his invention in office premise by using office material and takes this
invention with him by his name.
Note: after joining as an employee in an organization it is our duty or responsibility that we
dedicated our self to the company for which we working. Our work or invention is for the welfare
of the company.
What action may United have against Sally?
United take Sally to the law of court against the breach of contract and demand compensation
against the loss they face due to his cheating.
The company can protect itself from this type of incident in the future:-
The company should make a contract with clear objective and rules. They have made a team
who time to time checked employee’s status what they have done or doing. If any employees
want to leave office then he has to give his resignation one month before leaving with an
authentic reason for leaving.
If any employee had not followed the rules made or written in a contract the company has taken
legal action against them. United company was already facing the difficulties and share price is
also plunging. After this incident that Sally Swift take his invention of innovative chair started his
own business and give resignation, company’s other option of recovering from loss caused by
the share market has been closed
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Conclusion:
United company does blind faith on his employee. After, what the sally swift did with company
United chair limited have to take a strong action of making some new rules and also make some
protection against breaches.
At the time of employment contract, they have to mention about the penalties which were
imposed by or on after the breach of any contract and also make a rule regarding job role of
each and every employee.
Conclusion of whole assignment
The director and other officers of the company want the growth of the United company, the
company is facing difficulties so that they do trust on the report of issuing share in market
prepared by Jack for issuing new shares in the market Jack present the false report of profit to
ASX.
They plan to recover all the loss from their new invention of an innovative chair for nursing but
the inventor of chair Sally Swift take his invention patented by his own name and start his
business of chairs.
References
A, R.F.a.C. (2010) Blood, Toil, Tears and Sweat: The Battle of Sidamo, Melbourne.
ASX corporate governance council (2014) ', Corporate Governance Principles and
Recommendations'.
corporation act (2001).
J, G. (2010) The AWB shareholder class action, Australia.
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T, D.J.a.D. (2011) Director liability in corporate infringement of intellectual property.
ASX (2015) Lighting the way forward for business growth, ASX Listings.
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