Australian Securities and Investment Commission v Sino Australia Oil and Gas Limited (in liq) [2016] FCA 934

Running head: CORPORATION AND BUSINESS LAW
Corporation and Business Law
Name of the Student
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CORPORATION AND BUSINESS LAW
Introduction
For the purpose of this assignment the case of Australian Securities and Investment
Commission v Sino Australia Oil and Gas Limited (in liq) [2016] FCA 934 is been selected.
The reason behind choosing this case is that, it occured three years back and it deals with the
provisions relating to the breach of director’s duties. This case was decided in the favour of
ASIC and Sino was penalised with a fine of $80000. The decision also included a suspension
of the director extending to a period of twenty years from being appointed as a director in a
corporation, which registered under the ASX. The penalties were awarded owing to the
decision delivered by the court in which it was held that the organization has breached
several provisions contained in the Corporation Act 2001 by involving in illegal affairs and
the directors connected to the company violated the provisions contained in section 180(1) of
the Act by influencing or failing to prohibit the company in commission of actions of same
nature. In the present case, the ASIC claimed that the director encouraged the company to
involve into such conduct for his not being properly acquainted with the English language
and also his lack of knowledge regarding the requirements relating to disclosure compliance
of which is required in Australia.
In the present case, the defendant company was a holding company in Australia
belonging to an organization, which has its head office in Australia. The problem relating to
the company arose when the company effected its registration under the ASX on the date of
December 12 2013, during which it has raised 13.6 million approximately relating to a public
hearing. The prospectus issued by the company did not in comply with the requirements
relating to disclosure under the Corporation Act. In case, the prospectus was issued
complying with the provisions of this Act then it would have made an impact in the price of
the shares materially in the conscience of a reasonable person. Further the organization

CORPORATION AND BUSINESS LAW
involved in an affair, which is deceptive or misleading or is probable to mislead or deceive.
The director also made an attempt to transfer the holding in cash of the company to its
entirety, which amounted to around $7.5 million in China. However, his plans turned out to
be a failure as the ASIC obtained an injunction to seize the company’s bank account.
A liquidator has been appointed by the court to the company for the purpose of the
liquidation of the same. The court also delivered a decision that the organization breached the
provisions contained in Section 674(2), 728(1)(a), 728(1)(b), 728(1)(c), and 1041H, of the
Act through its actions. The court also held that while encouraging the organization to
involve in such conduct the director himself breached section 674(2) and section 180(1) of
the Corporation Act.
DUTIES BREACHED
The director of the company was alleged by the ASIC to have violated the provisions
of section 180(1) of the Corporation Act. The provisions contained in this section requires the
directors to exercise due diligence and a certain amount of care, which would have been
maintained by a person of reasonable conscience in similar situation while exercising their
duties under the name of the company. The allegations were made focussing on the fact that
the company was compelled to involve in the aforementioned conduct which are a breach of
the provisions of the Act (Smith 2016).
The director effected the company to violate the provisions contained in section
728(1)(a) relating to omission and misstatement in a document. The prospectus made a claim
of the company to have patents relating to oil and gas technology, which actually failed to
hold at the time of the issuance of the prospectus and this amounted to a misstatement
(Hargovan 2017).