ASIC v Adler: Court Decisions on Directors' Duties and Corporation Act

This report provides a comprehensive analysis of the ASIC v Adler case, focusing on the breaches of directors' duties under the Australian Corporations Act 2001. The case involved improper conduct by directors, including misuse of company funds and failure to act in the best interests of the corporation, leading to significant financial penalties and disqualification. The report examines the court's decisions, specifically referencing sections 180, 181, 182, and 183 of the Corporations Act, which address the duties of care, diligence, good faith, and proper use of position. The analysis highlights the relevance of the case to the development of Australian corporate law, emphasizing the importance of directors' responsibilities in protecting shareholders and ensuring fair business practices. The report concludes with a summary of the penalties imposed and the implications for corporate governance, underscoring the legal consequences of failing to uphold directors' duties. The case serves as an important precedent for maintaining ethical standards and preventing corporate misconduct.

CORPORATION LAW ASIC
Vs ADLER

TABLE OF CONTENTS
Analysing the court decisions for corporations act................................................................3
Relevance to the application and development of Australian corporation law......................5
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................8

Analysing the court decisions for corporations act
The court's decision was based on breach or directors duties which was in accordance
with the case which belongs to various irresponsible and unfavourable acts made by directors of
such corporations (Director’s duty to prevent insolvent trading, 2013). The issue has been risen
due issuing the unsecured shares without consideration of all the professionals in the firm. Here
in this case HIHC has made tee payments for 10 million dollars to PEE Pty Ltd which is
controlled and executed by Adler who is the trustee of AEUT. He was also the non- executive
director of Adler Corporation Ltd and this organisation is shareholder of HIHC. However, after
the payments for such loan has been received by PEE than they become trustee of AEUT as well
as PEE them applied to 4 million dollars of share of HIH from share market and sold if for 2
million dollars of loss (Jones, 2016). Therefore, after such transactions PEE also applied for the
unlisted shares in communication and technology companies on behalf of Adler Corporation
which is amounted to 4 million dollars. Thus, such investment are of total losses and then AEUT
has provided 2 million dollars to Adler.
Therefore, the court has decided to penalised the directors as well as charged penalties
and punishments to the directors on the basis of Corporation act 2001 as per the section 180,181,
182 and 183. Thus, these sections were lies over the punishments (Brown and Lawrence, 2017).
The court has also charged them with the monetary penalties as well as band Adler and williams
for 20 and 10 years to act as a director in any organisation. There has been actions against them
for the monetary penalties such as 450000 dollars has to be paid by Adler, 450000 dollars from
Adler corporation Ltd. 5000 dollars from Fodera and 250000 dollars from Williams which has
to be made by them as well as it can be said that the total of such penalties such as 7986402
which were to be paid by Adler, Adler corporation Ltd and Williams to HIHC (Case Summary
ASIC v Adler, 2017).
Hence, it can be said that, the decision of court is adequate as it helps in making the
proper jurisdiction as to ban directors due to irresponsible acts and do not pay attention of their
duties and job (Chung, 2017). To manage the investment schemes, Federal registrar of legislation
has presented various laws and acts to secure the fair trade practices in the national boundaries.
By facilitating Corporation Act 2001 the motive is to preset the fair business as well as proper
legislations. There penalties were charged over them as to make payments to the shareholders

and investors of these firms as well as overcome with the losses. However, these all transactions
such as purchase and sale of shares as well as monetary transactions which were out of the
consideration of directors of such organisations (du Plessis and De Koker, eds., 2017). The
information of such transactions which were not into consideration of all the director and the
investments committees and it can be said that Adler as breached his duties as to be HIHC's
officer.
Section 180:
In accordance with the section 180 which helps in determining the duty to act with care
and diligence presents that the officers in an organisation are capable to performing the
operational exercise in the premises (Legg, Day and Emmerig, 2017). This section lies over the
jurisdiction over the company's circumstances as ell as the occupied business has the same
responsibilities as the director or office of the company in accordance with the section 180(1)(a)
and (b)1.
Section 181:
Therefore, in terms with section 181 which lies over the duties of directors and acts in the
good faith for a proper purpose. These says that the directors and officers in the firm must
perform their job and utilise their power in Bona fide for the best interest and the proper purpose
with intention of good faith (Winter and Moffitt, 2017).
Section 182:
It can be said that, Adler has the good faith in the organisations with his existing power
and discharging duties for the interest of company which is due to the transaction was held
between HIHC and PEE. On the other side it can be said that Adler has misused his power,
authorities and rights as to satisfy his personal interest. In terms of Improper use of position and
power Adler has been found making transactions to satisfy his personal motive (Coggins, Teng
and Rameezdeen, 2016). In terms of acquiring the shares of HIH which is in context with helping
the company to make the rise in the market value or share value of organisation. In terms with
PEE Adler has misused his position as being a director such as acquiring the shares or capital
investments at cost price without obtaining independent valuation of Alder corporation Ltd.
1 Duty to act with care and diligence

Thus, he is capable of the information that the both of these organisations is having maximum
cash flow obstacles and they will go to be collapse or having cessation. On which he was failed
to make the disclosure of such terns actions to the other members and take the advantages of his
personal interest.
Section 183:
It is clearly stated in this section and the act that a person cannot misuse the power,
authority and make transactions on behalf of the organisation if does not act as a director,
employee of the officer. Therefore, it can be said tat such individuals do not have right to make
any legal transaction as well as operational decisions on behalf of entity (Foerster and et.la.,
2017). As well as the contracts or agreements made by them must be considered as unlawful and
inadequate.
Relevance to the application and development of Australian corporation law
By considering the case of Adler and ASIC which in turn determines that there has been
breach of responsibilities and duties of directors in the organisation which in turn results in the
losses and insolvency of the corporations. Therefore, in accordance with the Section 9 of CA2
2001 (Corporations Act 2001, 2017). It describes that a person will be appointed as the director
of a company as to make operational decisions such as purchase and sales of shares as well as
make the necessary investment in the operational activities on behalf of his position and post. In
accordance with the courts decision to ban the directors which in turn helpful in becoming the
adequate example for the society as to perform the duties and responsibilities in the correct
manner. Therefore, it can be said that a person can only make transactions on behalf of the
company who is in the board of directors. In this case Adler Corporations has made various
transactions and payments to various companies. The main duty of a director is to protect the
shareholders or investors from risks such as fraud over which the director utilise organisational
assets in their personal motives and interests (Chen, Ramsay and Welsh, 2016). It can be
mismanagement by directors such as making the in competent financial decisions on behalf of
organisation. In this case Adler has made such unlawful decision such as purchasing the share for
4 million dollars and sold it at the loss or 2 million dollars.
2 Corporation Act 2001

Therefore, it can be said that the these are the responsibility of director in terms with
making the payments of its shareholder as well as did not make any discussion over such
transactional activities to BOD members. In accordance with this case Adler is the active
Director of HIH as well as officer in the wholly owned subsidiary of HIH which fulfils the
criteria of the section 9. Whereas, he was not properly appointed as the directors of such
subsidiary organisation but is liable to make transactions on behalf of organisation because he
was in the role and the acting as the director of this corporation.
In accordance with the chapter 2D of CA 2001 which is lies over the duties and
responsibilities of the directors, officer and employees has the 13 sections which in turn helps in
analysing the adequate jurisdiction. This also facilitate the rule and regulations which are need to
be performed by the directors in terms of making the operational activities in organisation. So the
court's decision to ban these individuals from acting as director in any organisation is quite
favourable and lawful as it is the adequate decision. In terms of penalising the director on behalf
of making breach of their duties as well as not informing other members in the company is the
irresponsible act (Jones, 2016). They will have to be penalised for making operational
transaction such as purchase and sale of shares as well as attaining the losses from such
transaction which will be inadequate, improper as well as non profitable for corporations. They
do not use the name of organisation on behalf of their personal motives.
Hence, in accordance with the Court decision the motive is to make the adequate
payment to the capital investors such as shareholders, investors as well as punishing te director
as to misuse their power and position. Alder and other members are responsible of such unlawful
acts as they have to make the payments for such penalties and unlawful acts. In terms of
purchasing the unsecured shares, shares from stock market as well as selling them on the losses it
can be said that it will be personal motive of such director as well as the improper acts done by
them (Brown and Lawrence, 2017). These are the responsibilities of directors to inform,
communicate as well as make co-ordination to facilitate the proper transactions of business.
Therefore, it can be said that they are liable to make payment of such penalties and they have to
be punished to have ban over their position power to act as a director.

CONCLUSION
In the present report there has been discussion based on the case of Adler, Williams and
Fodera the board of directors as well as the breach of their duties were determined. The report
has reflected decision made by Court and the jurisdiction presented to pay penalties over such
directors. Therefore, it can be said that they will have to make payments for the penalties such as
Alder and Alder Corporation have to pay 450000 Dollars for each. Fodera and Williams have to
make payments of 5000 dollars and 250000 dollars. Further it can be said that all together they
have to make the payments for 7986402 to the HIHC. It is due to the losses has to be faced by
HIHC. In these regards as well as the business as to suffer from losses of having transactions of
shares at losses therefore, it will be the financial loss of this company which in turn have to be
overcome and the paymaster has to be made by directors. These individuals have to be punished
for improperly using their duties and power which in turn making the improper transactions on
behalf of organisation. They have to be charged as per the rules and regulations in Corporation
Act 2001 in sections 180,181, 182, 183.

REFERENCES
Books and Journals
Brown, A. J. and Lawrence, S. A., 2017. STRENGTH OF ORGANISATIONAL
WHISTLEBLOWING PROCESSES–ANALYSIS FROM AUSTRALIA.
Chen, V., Ramsay, I. and Welsh, M. A., 2016. Corporate law reform in Australia: An analysis of
the influence of ownership structures and corporate failure.
Chung, S., 2017. Equity-Based Compensation for Executives and Firm Performance: Evidence
from Australia (Master's thesis, University of Sydney).
Coggins, J., Teng, B. and Rameezdeen, R., 2016. Construction insolvency in Australia: reining
in the beast. Construction Economics and Building. 16(3). pp.38-56.
du Plessis, J. J. and De Koker, J. N. eds., 2017. Disqualification of Company Directors: A
Comparative Analysis of the Law in the UK, Australia, South Africa, the Us and Germany.
Taylor & Francis.
Foerster, A. C. and et.al., 2017. Keeping Good Company in the Transition to a Low Carbon
Economy? An Evaluation of Climate Risk Disclosure Practices in Australia.
Jones, S., 2016. A Cash Flow Based Model of Corporate Bankruptcy in Australia. Journal of
Applied Management Accounting Research. 14(1). p.23.
Legg, M., Day, J. and Emmerig, J., 2017. Corporate law: High court of Australia determines
extent to which class members are bound by class action judgment. Governance
Directions. 69(2). p.114.
Winter, B. and Moffitt, M., 2017. Corporate law: Absence of adequate risk assessments result in
$1 million fine. Governance Directions. 69(3). p.174.
Online
Case Summary ASIC v Adler. 2017. [Online]. Available through
:<https://www.lawteacher.net/free-law-essays/company-law/case-summary-asic-v-adler-
law-essays.php>.

Corporations Act 2001. 2017. [Online]. Available through
:<https://www.legislation.gov.au/Series/C2004A00818>.
Director’s duty to prevent insolvent trading. 2013. [Online]. Available through
:<https://www.dundaslawyers.com.au/directors-duty-to-prevent-insolvent-trading/>.