Analysis of Director's Duties under the Corporation Act

This report analyzes a case involving potential breaches of director's duties under the Australian Corporation Act. The primary issue revolves around whether Tony Stark, a director of Marvel Universe Pty Ltd, violated his duties. The report examines several key areas: the responsibilities of a director, including good faith, diligence, and care; the application of these duties to the case, considering Stark's actions in relation to a software offer and his involvement in a competing company, Endgame Pty Ltd; and the potential implications of his actions. The report also considers how the outcome might change if Stark had resigned before forming Endgame Pty Ltd and whether his actions as a director of Iron Man Pty Ltd constituted breaches. Furthermore, it explores the broader impact of director duties on corporate sector activities. The analysis incorporates relevant case law, including Howard Smith vs Ampol Petroleum Ltd and ASIC v Australian Investors Forum Pty Ltd, to support its conclusions. The report concludes that Tony Stark breached his director's duties in multiple ways, emphasizing the significance of these duties in promoting ethical corporate governance.

RUNNING HEAD: CORPORATION ACT
Corporation Act
Name of student
Name of the university
Author Note

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CORPORATION ACT
Issue:
The primary concern regarding the given case is whether Tony Stark has breached any
duty as a Director of Marvel Universe Pty Ltd.
The second issue about the given case is that whether the answer would different if Tony
Stark has been leaving his position of directorship before forming Endgame Pty Ltd.
The third concern regarding the provided case is whether Tony Stark has breached any of
the Director duties as he was in the position of a Director in Iron Man Pty Ltd.
The last concern regarding the provided case is whether the Director’s duties placed by a
company discourage or encourage the activities of the corporate sector.
Rule:
The enforced law of Australia provides several obligations and duties on various
employed individuals those perform any duties in favour of an organisation or a company of
Australia. The character of an individual particularly depends on the particular individual in the
company.
Responsibilities of a Director:
The main focus of the panel is to reward or appoint the head of the company of the
organisation. The formulation of the policies are done by them, and also they approve the
business plan that helps in setting the goal of the company. They help in planning for the annual
budget of the organisation and decides for handling the basic essentials for the positive running
of the company (Sheehy & Feaver, 2014) . The directors also carry the task for thinking about
the task of the management, and they monitor the outcome of the specified business. This

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statement can be supported by a case law of Howard Smith vs Ampol Petroleum Ltd UKPC 3,
AC 821, 1 NSWLR 68
Liability of good faith:
Directors must utilise their power, control and similarly they should carry out their duties
and responsibilities with the better interest and along with noble or decent faith for the
organisation wholly. The actual target of the duty of the director is to carry out their task in the
form of honest manner for running the business successfully as the panel believes. Additionally
the manner of director’s behaviour can be judged objectively regarding reference to be known as
a good director considering the good interest of the organization (Farrar, 2011). This statement
can be held by a case law of Greenhalgh vs Arderne Cinemas 1 All ER 512, Ch 286.
Acting with diligence and care:
The basic manner of behaviour that is required for performing a duty depends on the situation of
the company that also comprises the duty and position of the certain director. Any of the director
that comprises of administrative director should have distinct knowledge and skill for gaining the
highest standard. The board of Directors must utilise their control and power, and similarly they
should perform out their task with proper roles and responsibilities including care and also
diligence that a decent person focuses for, if they are chosen to act as a board of the directors or
panel under the conditional evidence (Keay,. 2014). Similarly if they carry out the task the same
as the role of a board of directors accompanying the same company or organisation. The
director's behaviour should not be considered due to a lack of experience and skill. Every
director should carry out a meeting themselves for achieving the objective at their lowest
requirement. Section 180 along with section 181 of the CA 2001 explains the duties of the
directors to act in a caring and diligent way, and s 181 explains the duty of a director to act with

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good faith and also purpose. If the directors breach their duties as explained in the above
mentioned sections can be held personally liable. The case law of ASIC v Australian Investors
Forum Pty Ltd [2005] NSWSC 1198 can be referred relating to the provided case.
For instance, a finance director lacking to act with sufficient diligence and care
concerning about the matter of finance or any other field related to funding may be held liable
under the provisions of breach of liability and duty, and a manner of behaviour from the non-
executive standard director may not be held liable for creating a breach. In a similar situation if
there is any presence of special category accountability performed by the board may be found
liable for the lack of care and laibility. In the mentioned case the court held that the board of
director may be liable personally for establishment of debt in the organisation’s name as the loan
that was sanctioned was found to be fraud.
Under section 180(2) of the CA, 2001 explains the rule for business judgment. This rule
for business judgment states that a director of an organisation can argue to prove that the panel or
the director have reached the requirement in manner of acting diligently and carefully which can
be clearly stated as duty of care. Any director can believe in the rule of business judgment if they
perform the judgment for decent faith and proper purpose (Varzaly, 2014). There should not be
presence of personal interest in the judgment matter. There should be point that the judgment
should be for the noble interest of the comapny. It should not be in the best interest of the
stockholders rather than it should on the better interest of the organisation or corporation (Coulton
& Taylor, 2004). The case law of ASIC vs Vines can be referred related to the provided case.

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Application:
MU Pty Ltd has a specialisation in the solution for education for the business market of
Australia. Dr Thanos approached for the board of the organization as he provided an offer for the
software package of academic material that is highly developed named as Hulk Academic
programme. He gave the offer to the organization at the rate of $5 million along with some
percent of gain in the coming consecutive 4 years. The board rejected the produced offer due to
the lack of organisation’s fund. The offer was due to the support of the development and research
division. In the given scenario the formulation of the strategies are done by the good directors,
and also they approves the business strategy that helps in setting the goal of the company. They
help in planning for the annual financial plan of the organisation and decides for managing the
basic essentials for running the organisation successfully. The directors also carry the task for
thinking about the presentation of the management, and they monitor the outcome of the
specified business. This statement can be supported by a case study of Howard Smith vs
Ampol Petroleum Ltd as in the particular case the court held that as the director's decision was
not for lawful purpose and has breached the duty for an improper purpose.
The director of the company (MU Pty Ltd) Tony Stark during the board meeting
supported the decision of rejection from Thanos. Tony Stark as the director of the company had a
discussion about the offer from Thanos with one of the associates named as Steve Rogers and as
a result they decided to develop a syndicate along with Dr Thanos and one of friend who was
interested in investing. As the outcome of the decision they choose Thor Odin the resident from
New Zealand for marketing and developing the software. A new organisation was developed by
the syndicate named as Endgame Pty Ltd. This newly formed organisation was being controlled
by Thor Odin, an existing company from Australia. The actual target of the duty of the director is

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to carry out their task in the form of honest manner for running the business successfully and
reaching to a higher standard according to the belief of the board. Additionally the manner of
director’s behaviour can be judged objectively for reference purpose to be recognized as a best
director considering the good interest of the organisation. This statement can be consulted by a
case study Greenhalgh vs Arderne Cinemas as the court said that the particular directors
should look for the organisation as a whole and should act in a fair way for the best interest of
the company.
On launching the software, the director of the company made contact with several clients
from MU Pty Ltd. He also contacted Anthony Man and Peter Parker. The outcome of the launch
was a huge success as the number of clients increased for the order of the software package.
Additionally on the conduct of two separately based occasion Tony Stark presented him as the
director of the separate organization Iron Man Pty Ltd for transferring $650,000 and $50,000 in
the name of his friend and also to himself for investing in the share of Endgame Pty Ltd although
Tony can be considered as the sole director of the Iron Man Pty Ltd. The board of Directors must
utilise their control and power, and similarly they should carry out their task with proper roles
and responsibilities including diligence and care that a decent individual focuses for, if they are
chosen to act as a board of the directors or panel under the conditional evidence.
Similarly if they carry out the task same as the role of a board of directors accompanying
the same company or organisation. The director's behaviour should not be considered due to a
lack of experience and skill. Every director should carry out a meeting themselves to achieve the
objective or goal at their lowest requirement. Section 180 along with section 181 of the CA 2201
explains the duties of the director to act in a caring and diligent way, and s 181 explains the duty
of a director to act with proper purpose and in good faith. If the directors breach their duties as

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explained in the above mentioned sections can be held personally liable. The case of ASIC v
Australian Investors Forum Pty Ltd can be referred relating to the provided case. In this case,
the court held that the additional share should not be issued for an improper purpose for
preserving the control of the organisation.
Conclusion:
(a) Firstly, from the above mentioned factors, it is concluded that Tony has breached the duties
of a director.
(b) Secondly, it can be agreed that the answer will be different if Tony as a director of Marvel
Universe Pty Ltd, would have resigned before forming Endgame Pty Ltd.
(c) Thirdly, Tony has breached his duty as a director of Iron Man Pty Ltd according to the duties
and responsibilities of a director.
(d) It can be clearly said that the director duties placed by the organisation or a company
encourage the corporate sector activities.

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Reference:
Farrar, J. H. (2011). Directors' Duties of Care: Issue of Classification, Solvency and Business
Judgment and the Dangers of Legal Transplants. SAcLJ, 23, 745.
Varzaly, J. A. (2014). The enforcement of director's duties in Australia: a functional and
empirical analysis.
Sheehy, B., & Feaver, D. (2014). Anglo-American Directors' Legal Duties and CSR: Prohibited,
Permitted or Prescribed. Dalhousie LJ, 37, 345.
Keay, A. (2014). The public enforcement of directors' duties: a normative inquiry. Common Law
World Review, 43(2), 89-119.

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