Business Law Report: Analysis of Corporate Law Violations and Actions

This business law report provides an analysis of two key scenarios involving breaches of the Corporations Act 2001. The first scenario examines a director's failure to act in good faith and his involvement in insider trading. The report outlines the relevant sections of the Act, including sections 181 and 1043A, and applies them to the case of Fassbinder, concluding that the directors of Port Hotels can bring a suit against him. The second scenario addresses a breach of director's duty and insolvent trading. The report discusses Nicholas's failure to adapt to market changes and his continuation of trading despite the company's insolvency. The report references sections 180 and 588G of the Act and recommends liquidating MNS and holding Nicholas liable for his actions. The report follows a structured approach, including headings, issues, rules, applications, and conclusions for each question, providing a clear and concise legal analysis.

Running head: BUSINESS LAW
Business Law
Name of the Student
Name of the University
Author Note

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Table of Contents
Question 1..................................................................................................................................2
Heading..................................................................................................................................2
Issue........................................................................................................................................2
Rule........................................................................................................................................2
Application.............................................................................................................................2
Conclusion..............................................................................................................................3
Question 2..................................................................................................................................4
Heading..................................................................................................................................4
Issue........................................................................................................................................4
Rule........................................................................................................................................4
Application.............................................................................................................................4
Conclusion..............................................................................................................................5

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Question 1
Heading
This problem is based on a Director’s failure to carry out his duties in good faith and
indulging in insider trading contravening the provisions of the Corporations Act 2001.
Issue
To advise the directors of Port Hotels in context to the action that they may take
against Fassbinder.
Rule
Section 181 of the Corporations Act 2001 ensures that a director must exercise his
power and discharge his duty in good faith for a proper purpose and for the best interest of
the company.
Section 1043A of the Corporations Act 2001 prohibits insider trading. This provision
prohibits a person who is an insider in a corporation to communicate or share any relevant
financial products (mentioned under Division 3) to another person or corporation.
Contravention of the above provisions would attract penalties under section 1317E of
the Act.
Application
In this case Fassbinder has contravened his duties as a director. he did not act in good
faith for a particular purpose or for the best interest of the corporation. Being the director of
Buildenbust he had the knowledge that Buildenbust’s issued capital is $2 and it had no
capacity to complete the project along with the fact that it had outstanding debts in the
market. Knowing all of it, Fassbinder did not stop Port Hotels from assigning Buildenbust to

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do the renovation work. This clearly denotes that Fassbinder had not acted in good faith for
Port Hotels.
In addition, Fassbinder being the director of both the companies, indulged in insider
trading by letting buildenbust take up the renovation work of Port Hotels' resort even after
knowing that Buildenbust had no capacity to complete the project along with the fact that it
had outstanding debts in the market.
Conclusion
Therefore, the directors of Port hotels can bring a suit against Fassbinder for
breaching his director’s duty as well as for insider trading.

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Question 2
Heading
This comprises an outline of a report to ASIC for explaining the breach of the
provisions of the Corporations Act by Nicholas.
Issue
To find out the breach of the provisions of the Corporations Act 2001 committed by
Nicholas.
Rule
Section 180 of the Corporations Act 2001 enables a director to exercise his powers
and discharge his duties with care and diligence like any other reasonable person would do in
the same position.
Section 588G of the Act prohibits a director to indulge in insolvent trading. This
provision applies to trading while a company incurs a debt and becomes insolvent for that
reason. Insolvent trading is said to have taken place when a director continues to trade even
when his company has become insolvent.
Application
In this case, Nicholas would be held liable for breaching his Director’s duty of being
careful and diligent towards the company for he did not adapt to changes with the growing
demand of solar hot water systems in the market which would have benefited the company.
He misused his position as well, by threatening Grace and Roc. In addition, he would be
charged for insolvent trading for he continued trading even when the company was unable to
pay the rent and clear payments to its creditors.

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Conclusion
Therefore, as a liquidator it would be advised to liquidate MNS and hold Nicolas
liable for insolvent trading as well as for breaching his Director’s duty.