Business Laws 1 Question 1 Issue Whether Heritage Pty Limited is liable for the actions of Mary? What actions can be taken by the company by the Heritage Pty Limited? Rule As per the (s 180) of theCorporations Act2001, the following are the duties of the directors mentioned in the act: 1. It is the duty of the director of a corporation to exercise his/her powers for the best interest of the company (Sartori, 2016). 2. The director of the organisation should give an independent judgement for the benefit and the interest of the organisation. 3. The judgement of the director must be in good faith which does not involve any personal interest of the directors of the organisation (Harris, 2016). 4. The judgement taken by the director of the corporation should be within the best interest of the company. According to section (s 181) of theCorporations Act2001, the decision of the director of the corporation must be in good faith and for the best interest of the organisation. The director of the corporation has the duty and responsibility to take such decisions in the best interest of the corporation.
Business Laws 2 According to the section (s 182) of theCorporations Act2001, the director of the corporation should not misuse his/her powers in order to gain personal advantage or advantage to such persons related to the directors of the corporations (Austin and Vrisakis, 2017). As per the section (s 183) of theCorporations Act2001, the director’s duty is to protect the sensitive information of the business. The director of the corporation should not misuse such sensitive information in order to gain personal benefits and personal advantages. Such duty is still applicable to the director of the organisation he/she decides to leave the organisation (Klettner, 2016). As per the section (s 184) of theCorporations Act2001, the section defines the criminal liability of the directors of the corporations, if they commit the offence with dishonest and reckless intentions which are not for the best interest of the organisation. The director of the organisation is also liable if they fail to exercise their power and perform their duties for the best interest of the organisation (Hanna, 2017). As per the section (s 187) of theCorporations Act2001, the section is applicable to the directors of wholly owned subsidiaries where the director of the corporation who commits such offence with dishonest intentions which are against the interest of the corporation or the director of the organisation is misusing his/her power to gain personal advantage from any transaction of the organisation or to gain advantage from the assets of the organisation. The section also states that it is the duty of the director of the corporation to protect the sensitive information regarding the business of the corporations. It is the duty of the director of the corporation to protect such information and not to gain personal advantage from the usage of such sensitive information (Chia and Ramsay, 2015).
Business Laws 3 As per the section (s 191) of theCorporations Act2001, the director’s duty is to to provide full disclosure of the information and the basis of a judgement given by them for the benefit of the organisation to the shareholders of the organisation. The above such provisions may give rise to civil obligationsto the directors of the corporations, the court of law may order the director of the corporation to pay penalty to the Commonwealth of $ 2,00,000 or may order the directors to reimburse for the losses of the company and the court of law may also order a prohibition to the director to function or to act in the managing position of the corporation. The following are the liabilities of the directors: 1.To repay for the debts of the company if the company becomes insolvent. 2.Any loss incurred by the company upon the breach of duties as the directors of the company (Schultz, 2016). 3.The director of a corporation would be personally liable if any personal guarantee given by the director on behalf of the company.
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Business Laws 4 Case Laws ASIC v Adlerand 4 Ors [2002] NSWSC 171 It was held by the court of law that the corporation named HIHC has illegally provided $ 10 million to PEE. Such financial assistance was given with an intention to obtain shares in HIH. Hence the court has given the judgement that Rodney Adler is responsible under a section of 180,181,182 and 183 of theCorporations Act2001. Fodera Pty Ltd v Shearn[2011]NSWSC 479 According to the case law, the court has ordered the sole director of the company to pay the compensation and all the cost which has resulted in the loss of property to the corporation. The court of law in its judgement also stated that the director of the corporastion did not act in the best interest of the company. The court also stated that the director of the corporation should prepare proper and effective financial statements for the benefit of the company.
Business Laws 5 Analysis As per from the above case study it can be noticed that Mary who was an equal shareholder and director along with Peter and Paul of the Heritage Pty Ltd. It can be observed that the company has its own common seal. It was mentioned in the constitution of the company where any contract above the value of $ 50,000 must be done on the basis of prior approval of the board of the corporation. It was observed that Mary has made a contract on behalf of the company worth $ 1,00,000 with Canberra Van Rentals & Sales Pty Ltd where the company has to deliver 3 armoured vans to Heritage Pty Ltd. However, it can be noted that Mike the salesperson has warned his boss Roger regarding the current position of Heritage Pty Ltd and his boss sided him up saying that they will earn incentives with such sale to the company. Hence it can be noted that the Heritage Pty Ltd is not liable for the payment of armoured vans and according to the case law ofFodare Pty Ltd v Shearn, it can be understood that Mary misused the position and powers given to her. It can be observed as per the case law ofASIC v Adlerand 4 Ors that Mary did not perform in good faith and for the best interest of the company. It can also be noted that Mary misused her position by withdrawing gold and billions from the storage of No Worries Storage Ltd by writing fake sign of her colleague. Hence theHeritage Pty Ltd has the right to file the case under section 180,181,182,183 and 184 of theCorporations Act2001. It can also be noted that the Canberra Van Rentals & Sales Pty Ltd has also the right to sue Roger and Mary to claim compensation for pursuing such order irrespective of the prior information by Mike to Roger. However, the court of law may cancel such contract as such contract was made between Mary and the Canberra Van Rentals & Sales Pty Ltd, it can be noted Mary acted beyond her powers hence such contract is not ratified by the Heritage Pty Ltd.
Business Laws 6 Conclusion According to the above analysis it can be observed that Mary acted beyond her powers given by the company hence Mary is liable for her actions as she did not work for the best interest of the company hence Mary is liable and can be punished under the section 180,181,182 and 183 of theCorporation Act2001. Mary is also responsible for the misconduct done by her for taking the gold and silver bullions with the permission of the board hence the court of law may punish her with such misconduct. It can also be noted that Roger irrespective of getting a warning from Mike, he pursued with such order hence the Canberra Van Rentals & Sales Pty Ltd has the right to sue Roger and Mary regarding such contract.
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Business Laws 7 Question 2 Issue What actions must be taken by Peter in citations with relevant laws? Rule The following are the duties of directors of the company which are mentioned below: 1.To have Honesty, care, and competence:According to the section (s 181) of the Corporations Act2001, one of the basic duties of the director of the coorporation is, to be honest with the company. In other words, the directors must be honest with maintaining the financial records of the company and the directors should ensure the solvency of the coorporation. The directors of the company should work in the best interest of the corporation, in case the directors against the interest of the corporation the Australian Securities and Investment Commission has the right to prosecute such directors working against the interest of the company (Bottomley, 2016). As per the ASIC, the following are the basic roles and responsibilities of the director of the company: a)The basic role of the director is to understand know what the company is doing. b)The director of the company should know about the different courses of actions which are going to affect the profitability and performance of the company. c)The director of the company should have an active involvement in the meetings of the company (Whincop, 2017). d)The director of the company should always review and question the working of the staff of the company
Business Laws 8 e)The director of the company should seek help from professional individuals such as lawyers, auditors, and management consultant which will provide valuable advice for the consistent development of the company (Smith and Rönnegard, 2016). f)To have proper planning regarding future operations and investments of the company. g)To review the performance of the employees constantly (Patel, 2015). 2.To have a regular check on the solvency of the company:One of the prime duties of the directors is to ensure the solvency of the company. The directors must ensure that the performance of the company is good, if the company is not performing well then it is the duty of the directors to take serious actions which help the company to perform well in future (Andrew, 2016). The directors of the company should also ensure that the company is using fair business tactics and provide tough competition to its competitors (Besher and Furusten, 2019). The following liabilities can create a serious implication for the directors of the company: a)The prosecution did by ASIC. b)Arousal of personal liability and debts of the company. 3.Toworkwithskill,careanddiligence:Asperthesection(s180)ofthe Corporations Act2001, the director’s duty is to exercise his/her powers in the good faith. Such exercise of powers should be made for the best interest of the corporation (Barker, 2016). It should also be noted that the director of the corporation should not have any personal interest in any transaction done by the corporation. Any judgement takenbythedirectorofthecompanyshouldbedulycommunicatedtothe shareholders; apart from such judgement, the director of the corporation should also explain the intention behind such judgement. It should also be noted that such judgement should be taken for the best interest of the company (Oehmichenet al, 2017)
Business Laws 9 Case Laws: Cassegrain v Gerard Cassegrain & Co Pty Ltd. [2015] HCA 2; 254 CLR 425 According to the above case law, it was held by the court that the director of the corporation did not act on the best interest of the company as the directors misused their powers to sell the shares to two other companies whose director is the wife and other company's director is the daughter of the director. Such shares were being sold at a lower value than the market hence the court cancelled such transaction and held the directors responsible for breach of duties for the best interest of the company. R vByrnesand Hopwood - [1995] HCA 1 It was held by the court of law that the director has breached section (180), (s181) and (s 182) of theCorporations Act2001. The main purpose of the director was to gain personal benefits from the transactions of the company. Forkserve Pty Ltd v Jack (2001) 19 ACLC 399; [2000] NSWC 106 It was held by the court, that if any corporate opportunity is presented by the director of the company, than it is the duty of the director of the company to not to gain personal advantage until the company decides to pursue and such information must be duly informed by the director the board as well as stakeholders of the company.
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Business Laws 10 Application As per from the above case study it can be noted the company named Sparkles Ltd, who deals in jewellery has given a contract to Peter Jones (who runs a stationery business) for the period of three years. It came in attention of Peter that Roger who owns 65% of shares of the company has entered into a contract and such contract has been ratified by the board to sell a stone of $ 1,00,000 to the nephew of Roger at $ 5,000 and Roger is also about to sell rube to his niece worth $ 40,000 at $ 8,000. Peter complained such matter to company secretary of the company where he got a reply that it was the board's decision to source stationery from Office Pax Limited and the board will be taking no actions against Roger for such dealings with his niece and nephew. However, as per the case law ofR vByrnesand HopwoodPeter as a shareholder of the company has the right to complain about the conduct ofSparkles Ltd to ASIC as Roger has breached the section (s 181) and (s 182) of theCorporations Act2001. It can be observed that Roger has not worked for the best interest of the company where the facts can be relatable in case law nameForkserve Pty Ltd v Jackwhich is duly discussed above. Peter can also sue the company for such breach in contract done by the company.
Business Laws 11 Conclusion As per from the above case study, it can be concluded that Roger is liable for a breach of section (s 181) and (s 182) of theCorporations Act2001. It could be observed that Roger has a personal interest with the transaction done by the company regarding the sale of stone and future sale which is to be done to his niece. It can be noted that the stone worth $ 1,00,00 was sold at $ 5,000 to his nephew which was also not in the best interest of the company. It can also be noted that Peter was given a contract for three years regarding the supply of stationery to the company. Hence Peter has the right to complain to ASIC regarding the conduct of the business to ASIC and Peter has also the right to sue the company in the court of law.
Business Laws 12 References Andrew. K, (2016).Director’s Duties. United Kingdom: Jordan publishing Limited. ASIC v Adlerand 4 Ors [2002] NSWSC 171 Austin,R.P.andVrisakis,M.,(2017).PersonalFinancialProductAdviceunderthe Corporations Act.Company and Securities Law Journal,35(8), pp.503-532. Barker, R., (2016). The Duties and Liabilities of Directors—Getting the Balance Right.The Handbook of Board Governance: A Comprehensive Guide for Public, Private, and Not-for- Profit Board Members, p.249. Besher, A.R. and Furusten, S., (2019). New International Rules for Corporate Governance and the Roles of Management and Boards of Directors. In Managing Hybrid Organizations (pp. 321-332). Palgrave Macmillan, Cham. Bottomley, S., (2016).The constitutional corporation: Rethinking corporate governance. New York: Routledge. Cassegrain v Gerard Cassegrain & Co Pty Ltd. [2015] HCA 2; 254 CLR 425 Chia, H. and Ramsay, I., (2015).Section 1322 as a Response to the Complexity of the Corporations Act2001 (Cth). Fodera Pty Ltd v Shearn[2011] NSWSC 479 Forkserve Pty Ltd v Jack(2001) 19 ACLC 399; [2000] NSWC 106 Hanna, M., (2017). Timing is Everything: When Should a Security Be Valued for the Purpose of s 588FA (2) of the Corporations Act 2001 (Cth)?.Insolvency Law Journal,25(2), pp.73- 89.
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Business Laws 13 Harris, J., (2016). Barbarians at the gate? Activist investors and s 249N of the Corporations Act 2001 (Cth).Company and Securities Law Journal. Klettner,A.,(2016).CorporateGovernanceRegulation:Thechangingrolesand responsibilities of boards of directors. New York: Routledge. Oehmichen, J., Braun, D., Wolff, M. and Yoshikawa, T., (2017). When Elites Forget Their Duties:TheDouble‐EdgedSwordofPrestigiousDirectorsonBoards.Journalof Management Studies,54(7), pp.1050-1078. Patel, M., (2015).Illicit outflow of capital from South Africa eliminated by statutory duties placed on directors: case note.De Rebus,2015(556), pp.48-49. R vByrnesand Hopwood- [1995] HCA 1 Sartori, J., (2016). Termination payments under the Corporations Act 2001 (Cth)-Some issues.Company and Securities Law Journal,34(3), pp.221-237. Schultz, A., (2016). Finding the Right Remedy in Minority Shareholder Oppression Law: A Transnational Analysis of Solutions in Closely Held Corporations.Transnat'l L. & Contemp. Probs.,26, p.499. Smith, N.C. and Rönnegard, D., (2016). Shareholder primacy, corporate social responsibility, and the role of business schools.Journal of Business ethics,134(3), pp.463-478. Whincop, M.J., (2017).Corporate governance in government corporations. New York: Routledge.