Breaches of Corporation Law by Retail Food Group: Potential Class Action and ASIC's Role

Running Head: BUSINESS LAW
Business Law
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Author Note

1BUSINESS LAW
Answer to first question
It has been seen in the case study that Retail Food Group may soon be subjected to a class action
from its shareholders with respect to allegations regarding misleading investors towards the
effects of the business model of the company to store owners. The class action may be covered
by any shareholder who has purchased the shares of the company between 2nd June 2015 and 28
February 2017. There is a belief that when an announcement has been made on 2nd June 2015
the company knowledge or had reasons to know that the business model proposed by them
would exploit the franchises. In addition there were also a few actions which the company had
indulged into since the announcement had been made, which would have surely had an impact
on the franchises and was a kind of information which would material affect the share price of
the company and was not available to the public. Under the Corporation Act 2001 (Cth) it is a
requirement of a listed company with the ASX under the provisions of section 728 to ensure that
no omission is made or any misstatement has been included in the prospects document. In
addition to this provision under the provisions of section 674 it is the obligation of the
organisation to continuously disclose any situation which would have had an effect on the price
of its shares according to a reasonable person and is not generally available to the public. There
has been a significant decline in the share price of the company as reports had been provided by
Fairfax media that the company was involved in a secret deal with one of its former director’s
Alicia Atkinson. In this situation also although nothing has been specifically alleged there can be
breach of duties by the directors under section 181 which provides that the directors of a
company have to act in good faith and for the best interest of the company. It has been further
identified that this deal with the company of which former director has not been disclosed in the

2BUSINESS LAW
Annual report of the company since the last 4 years. This situation may also lead to the breach of
disclosure obligations of a listed organisation. It has been further seen that because of this
situation the company has suffered significant losses and it had to close about 200 stores and
reported a loss of $87.8 million in the first half of 2018. The deal with the former director’s
company known as Exit 57 had been highlighted only when the latter collapsed financially last
year (Danckert, 2018). Where a loss to the company or shareholders has been identified due to
the breach of duties by the directors the corporate veil of the company may be lifted and the
directors may be personally liable with respect to the losses which have been incurred by the
shareholders of the company. In this situation it has been seen that the share price of the
company has significantly declined and as a result substantial losses have been incurred by the
shareholders who invested in the shares of the company. In case it is proved that the directors of
the company have violated any duty which was imposed on them by law in relation to the
company they may be liable for any losses with the shareholders have borne in relation to the fall
in share price of the company.
Answer to question 2
The matters which have been discussed above are primarily related to corporation law. The
organisation which investigates into such matters in Australia is known as the Australian
Securities and Investment Commission. This is an independent regulatory body which had been
brought to existence through the provisions of the Australian Securities and Investment
Commission Act 2001. Another organisation which may be concerned in relation to the situation
is the Australian Securities Exchange. The Australian Securities Exchange imposes corporate
governance principles for organisations which are listed with it in Australia (Lipton, Herzberg &
Welsh, 2018). Any company which does not follow the corporate governance issues provided by