Business Law Assignment - Directors' Duties and Shareholder Rights

This assignment delves into key aspects of business law, primarily focusing on the roles and responsibilities of company directors and the rights of shareholders. It examines the legal implications of directors' actions, particularly in the context of the Corporation Act 2001 (Cth), and explores scenarios involving potential breaches of duty, such as insolvent trading and misuse of powers. The report analyzes the concept of a derivative action, allowing minority shareholders to take action against directors when their actions are prejudicial to the company's interests. The assignment references specific sections of the CA and provides a comprehensive understanding of corporate governance, shareholder protection, and the legal framework governing business operations. The assignment is designed to provide a clear understanding of the legal issues and practical applications within business law for students.

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

1BUSINESS LAW
Answer 1
As per the details provided via the facts in question 1 Gary will be considered as the director of
the company. This is because of the application of section 9 of the Corporation Act 2001 (Cth).
The section defines a director as an person who controls the functioning of the business. in the
given situation it is clear that Gary is controlling the functioning of the company as the directors
mostly follow his decisions and he has the role of purchasing equipments for the company even
where he is a retired director. Thus Gary is a director of the company.
All directors are the agents of the company as stated by the provisions of section 125 of the CA.
Thus they have the right to bind the company to any contract being the agents of the company.
Thus in the given situation as Gary is the director the company will be bound by the contract in
relation to the equipment purchase. In addition as per section 124 an act is not invalid if it is
contrary to the constitution. Thus the restriction of purchasing over one million will also not
make the contract invalid.
The directors of the company will not be liable personally because of the provisions of limited
liability. However in certain situation they can be liable personally which such as the breach of
section 588G (3). This is when the directors have involved in insolvent trading intentionally.
However, here no intentional insolvent trading has been done so Gary cannot be sued personally.
In case the company thinks it has become insolvent it may apply for the appointment of an
administrator or a liquidator under the CA.
Answer 2

2BUSINESS LAW
In the given situation the minority shareholders can make a derivative action claim against the
directors of the company which has been provided via the provisions of section 232-234 of the
CA. It has been provided by the provisions of section 233 of the CA that in case the directors of
the company are taking an action which is prejudicial to the management of minority
shareholders of the company an action can be made by such shareholders of the company. Under
section 233 only the minority shareholders can ask the court to issue an injunction which the
court would pass if it is satisfied that the actions taken by the directors are prejudicial to the
interest of the minority shareholders of the company. It is also provided by the provisions of
section 181 of the CA that the director of the company has to act in the best interest of the
company and for a proper purpose of the company. Here the facts provide that the directors of
the company have misused their powers which is not for the proper purpose of the company.
Thus in this case it can be sated that the majority directors are also in breach of the duty of good
faith and proper purpose. It can be concluded that the minority members can take a derivative
actions against the directors.

3BUSINESS LAW
References
Corporation Act 2001 (Cth)