Corporate Law: Ardent Leisure Limited Risk Management Report

This report provides a comprehensive analysis of the Ardent Leisure Limited case, focusing on the legal and ethical implications of a fatal accident at Dreamworld. The report examines the failures in corporate governance, specifically highlighting the breach of Principle 7 of the ASX principles regarding risk management. It explores the duties and liabilities of the board of directors, including their responsibilities for safety management and the potential consequences of negligence. The analysis delves into the roles of shareholders and directors, emphasizing their duties of care and diligence, and the potential penalties for breaches of these duties. The report also discusses the financial risks associated with such failures and the importance of proper risk management to protect the company's reputation and financial stability. The case underscores the critical need for effective corporate governance and risk oversight to prevent accidents and protect stakeholders.

Running head: CORPORATE LAW
Corporate Law
Name of the Student
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Table of Contents
A......................................................................................................................................................2
B.......................................................................................................................................................3
C.......................................................................................................................................................5
D......................................................................................................................................................7
Reference.........................................................................................................................................9

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A.
The Board of Ardent has alleged for the fatal accident and subsequent crisis the company
has met with a tragic accident at dream world where a number of patterns have died due to the
failure of one ride and it is criticized against the operator and owner of Ardent Leisure Limited.
Now several questions has been asked and identified about the safety management of the
company because they have been failed to identify and control the risk which cause the accident
in the dream world1.
The corporate governance process establishes framework which includes rules,
relationships systems and a method which is organized and monitoring by the particular
Corporation2. It is the duty of the government that process on the mechanisms which helps the
company to establishes the elements of corporate governance. Therefore it should be proper and
a good Corporation which always helps the promotional investor confidence and it is included on
the ability of ASX3.
According to the principal 7 in corporate governance provide the application of
recognize and managing risk management. It will also help to control the roles and process of
risk oversight and management and internal corner. The principle 7 defines where that liability
and obligation of the board has implied on the establishment through the implementation of
annual review of the risk management system4.
1 Hanrahan, P., Ramsay I., Stapledon G., Commercial Applications of Company Law. Oxford 18th edition 2017
2 Latimer, P, Australian Business Law CC, 2017 Edition.
3 Ali, Searat. "Corporate governance and stock liquidity in Australia: A pitch." Journal of Accounting and
Management Information Systems 15.3 (2016): 624-631.
4 Hanrahan, P., Ramsay I., Stapledon G., Commercial Applications of Company Law. Oxford 18th edition 2017

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In addition if any risk or defects has identified due to the failure of internal control
system then the corporate governance will make liable the board authority of the company.
Therefore it is the duty of the company that they will operate and monitor the unit control and
investment appraisal which is related to the financial controls of the capital expenditure5. The
capital expenditure process on the annual budgets appraisal has the due diligences which are
important sustainability requirements of the company. In the risk management system the risk is
included with various kinds like liquidity risk, credit risk, cyber risk, operational risk, fraud risk
and security risks who are directly make the effort on the authority of board members6.
Therefore the quality and integrity of personal set and ethical standard manuals in the risk
management process help to deal with the business risk lines and helps to control the
management system7. Therefore it can be stated that Ardent Leisure Limited is become liable for
their affiliate risk management system and here only the principal 7 in corporate governance can
help to control the safety issues which not only help to control the risk management but also
provide proper securities to the employees of the company. Now the duties applicable for the
Ardent Leisure limited who must apply the principle and ethics for controlling the safety
management and prevent the race through the application of ethics in the risk oversight and
management and internal control8.
B.
The directors are playing one of the important roles in the boards where in this case study
it has been found that they are also liable for the failure of board. Therefore both the company
5 Latimer, P, Australian Business Law CC, 2017 Edition.
6 Ali, Searat. "Corporate governance and stock liquidity in Australia: A pitch." Journal of Accounting and
Management Information Systems 15.3 (2016): 624-631.
7 Hanrahan, P., Ramsay I., Stapledon G., Commercial Applications of Company Law. Oxford 18th edition 2017
8 Harris, J. Hargovan, A. Adams, M., Australian Corporate Law LexisNexis Butterworths 5th edition, 2015.

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and the directors have breaches the elements of principle 7 of the ASX principles of good
corporate governance. The Australian securities exchange is included in the corporate
governance which establishes the facts of principal 7 on the recognisation and managing risk in
the risk oversight and management and internal control. The company has processed by the
board and their members where directors are also part of them9. If the directors can found liable
for any accidents due to the responsibility of the board then this will be stated the facts of breach
the terms of principal 7 of the corporate governance10. They hold the legal responsibilities which
should define according to the conduct of the business and the statutory responsibilities of the
financial statements according to the corporate governance. When the breach will be identifies
and he fines and penalties also provided according to the Corporation Act. In that case the board
should take over the duties according to the rules and conditions of the company. The takeover
panel decision and policies are also important which are included in the principle 7 of the
corporate governance according to the situation of the facts11.
Under the liability of the directors they should look after the company and the Managing
authority. When a business is formed the board of directors made the organization it is processed
every business and risk policies where those are maintained by the corporate governance.
Therefore when it will be found that the natural risks are involved with legal obligations then it
affects the business and those policies of the company12. If the board of the directors fails to
manage such obligations and due to some consequences they breach the constitution of corporate
governance. Therefore according to the case study Ardent Leisure Limited is also failed to
control the risk management system where the directors also involved and they must work
9 Latimer, P, Australian Business Law CC, 2017 Edition.
10 Hanrahan, P., Ramsay I., Stapledon G., Commercial Applications of Company Law. Oxford 18th edition 2017
11 Ali, Searat. "Corporate governance and stock liquidity in Australia: A pitch." Journal of Accounting and
Management Information Systems 15.3 (2016): 624-631.
12 Latimer, P, Australian Business Law CC, 2017 Edition.

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according to the risk management. The board authority and the directors of this company have
breached their duties and it also established the legal consequences for failure to control the
safety management and cause several damages. Therefore now the risk management committee
will continue on the duties where they must looks for the damages and control the risk
management system according there Ethics of conduct13.
If according to the corporate governance the directors breach with their duties then the
ASX also take legal actions against them for violation of the rules of Corporate governments if it
is proved that the directors are also involved in the failure of risk management then according to
the corporate governments they need to pay the damages along with the board authority’s14. The
parties who got affected by the failure of risk management they should be compensate regarding
the breach and risk issues15. Therefore first the board will accommodate and review the issues
where board and directors both are related with the failure of safety and risk management16.
C.
In Companies there are shareholders who buy the shares of the company out of the share they
get the benefits. Directors are also the shareholder of the company along with the membership of
the board authority. For being a director and along with the shareholder of the company they
have several duties for the company. According to the corporate governance it also described
that the director are bound to follow their duties of care and diligence which are the part of the
code of conduct. Therefore they are bound to act according to the constitution of corporate
governance where they must not breach their duties of care towards the company. It is also
13 Ali, Searat. "Corporate governance and stock liquidity in Australia: A pitch." Journal of Accounting and
Management Information Systems 15.3 (2016): 624-631.
14 Harris, J. Hargovan, A. Adams, M., Australian Corporate Law LexisNexis Butterworths 5th edition, 2015.
15 Latimer, P, Australian Business Law CC, 2017 Edition.
16 Hanrahan, P., Ramsay I., Stapledon G., Commercial Applications of Company Law. Oxford 18th edition 2017

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included that due to the negligence by the directors, the company must not face with any
financial harm which affects the financial stability of the company.
According to the corporate governance the general law of Duty provides the duty of care by
the directors who are bound to follow the reasonable care after every issues of risk management
in the company. Therefore the directors should take the proper duty of care where financial
stability and employment hazard securities and safety of the employees are included along with
the proper care of the company. If it faces any issues regarding the risk management then the
action will be taken. The duty of care never get impose with the general obligations where the
company must not act or impose any contravene with other acts or legislations of share holders
or the director of the company17. It is also ensure that the degree of skill required needs a proper
measurement for every objective of issue regarding the duty of the director. The statutory duty of
duty of care defines the degree of care and diligence of an individual person who will act of the
duty of the directors of the company18. Therefore the constitution of the company is formed
according to the corporate governance where it’s never fail to apply the legislations for the issues
where it breach the terms but in some cases if the constitution is failed to perform according to
the rules and if it shows that the both company and the director has breach the duty when it will
be treated according to the constitution of corporate governance. However if the directors has
found with the guilty of the breach of duty of care then they can use defense as per the business
judgment, rule, relation, defense and reliance difference19.
17 Harris, J. Hargovan, A. Adams, M., Australian Corporate Law LexisNexis Butterworths 5th edition, 2015.
18 Latimer, P, Australian Business Law CC, 2017 Edition.
19 Ali, Beekes, Wendy, Philip Brown, and Qiyu Zhang. "Corporate governance and the informativeness of
disclosures in Australia: a re‐examination." Accounting & Finance 55.4 (2015): 931-963. Searat. "Corporate
governance and stock liquidity in Australia: A pitch." Journal of Accounting and Management Information Systems
15.3 (2016): 624-631.

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Now as per the case study Ardent Leisure Limited has faced a tragic accident and there are
several people has been affect with the reputation of the company along with the several people.
However due to this accident the company has failed on their reputation and the director has
been found to breach the duties. Not only for the board of the members but the other
shareholders and the directors held equal rights of duties for the safety of the company20.
According to the corporate governance if the company being liable for any damage or other
risk factors and they found guilty due to the duty of care along with the director then they can be
find with the penalty provisions21. When a director breach the duty of care according to the Sec-
180-180(1) of Corporation Act (Cth) can outcomes the negative representation which directly
affect and damage the reputation of the company where it also effect towards the business22.
Therefore it is important to prove the damages regarding the breach of duty of care and if it is
proved that the director are liable for the issues then they are also comes under the penalty
provisions23. Sec- 1317(E) of the Corporation Act defines the penalties of the breach of duties
where the financial penalties will be claimed from them. Financial risk is one of the risky issues
in risk management because when any duty of the corporate governance has been breached then
it will directly affect the company where they can face the financial risk which is one of the
critical risk issues in the risk management program24.
D.
20 Beekes, Wendy, Philip Brown, and Qiyu Zhang. "Corporate governance and the informativeness of disclosures in
Australia: a re‐examination." Accounting & Finance 55.4 (2015): 931-963.
21 Harris, J. Hargovan, A. Adams, M., Australian Corporate Law LexisNexis Butterworths 5th edition, 2015.
22 Ciro T, Symes C, Corporations Law in Principle LBC Thomson Reuters, Sydney, 9th edition 2013
23 Latimer, P, Australian Business Law CC, 2017 Edition.
24 Beekes, Wendy, Philip Brown, and Qiyu Zhang. "Corporate governance and the informativeness of disclosures in
Australia: a re‐examination." Accounting & Finance 55.4 (2015): 931-963.

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The board of Ardent has been arranged due to the major accident and subsequent prices
because many people has died and due to the fatal accident the operator and owner Ardent
Leisure Limited has critically criticized for failing according to their duties. Therefore there are
several issues has been arises on the basis of the allegation toward the board members of the
Ardent Leisure Ltd. The allegation of the people is that they are failed to manage the safety
issues and monitoring the risk hazards25.
In the corporate governance the good corporation always cooperates with the promotional
investor confidence which is one of the important parts to provide the ability on the ASX. The
principal 7 in Corporate Governance describes the reorganization and manages risk where
companies should establish such rules and monitoring system of risk oversight and management
and internal control26. According to the case study, the directors and the company are the part of
the board. Therefore if the Board failed to manage the risks the company and directors both are
breaches the Principles 7 of the ASX principles of Good Corporate Governance27. It is the
duty of the board that they will maintain and control every hazard in the corporation. The
directors are the member of the board and shareholder of the company28. They are bound to
perform several duties under the corporate governance. They are willing to function according to
their duties of care and diligence and must not breach the duties. Their negligence towards
director’s duty never makes any financial harm to the company. When anyone breach the duties
then as per the Corporate Governance then according to the damages they are bound to pay the
compensation to the parties who are affected for the breaches and risk issues . The Board will
25 Beekes, Wendy, Philip Brown, and Qiyu Zhang. "Corporate governance and the informativeness of disclosures in
Australia: a re‐examination." Accounting & Finance 55.4 (2015): 931-963.
26 Ciro T, Symes C, Corporations Law in Principle LBC Thomson Reuters, Sydney, 9th edition 2013
27 Davenport, Shayne, and David Parker. Business and law in Australia. Law book Co, 2012.
28 Ciro T, Symes C, Corporations Law in Principle LBC Thomson Reuters, Sydney, 9th edition 2013

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accommodate the whole issues with the board members along with the directors and the
company29.
29 Ali, Searat. "Corporate governance and stock liquidity in Australia: A pitch." Journal of Accounting and
Management Information Systems 15.3 (2016): 624-631.

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