Assignment Help brings you Corporations Law Case study solution, that involves resolution of 2 case study under the followances of Australian Legal Structure.
Facts – Corporations Law Case study resolve under the facts about business law. Company named Design co Pvt Ltd was established by Ian and May. They both are the only shareholders and directors of the company. The company was dealing in products of children. The products are utilized by the children for preparing models which can later be tinted. The focal design upon which the company is operating is originated by Ian and is worth $15,000. After some time the business fell into financial crisis. The directors are of the view that the company may be liquidated and thus the design which is the valuable asset of the company may take over by the liquidator.Thus, the directors donated the same.
The present activities of the directors raised one important issue.
Issue – whether the acts of the Directors of donating the design is a breach of duties of directors under the Corporation law Act 2001.
Every company is operated by several persons; it may be its employees or officers. However, the foremost responsibility that is enshrined is upon the Director of a company. A person is called the director not because he is holding such post but the responsibility he is undertaking. In Australia, a Director is governed by both the provisions of the Corporation law Act 2001 and the common law. [Company Secretary ]
Thus, in order to submit and deal with the raised issue, it is necessary that the responsibilities of the director must be accessed both under the Corporation Act 2001 and the English law/Common law.
The Corporation Act 2001- Statutory Law for Companies in Australia
Various responsibilities are provided and enacted in Australian law by the Australian Government in the Corporation Act 2001. These enactments are provided in Part 2D of the statue.
The first provision is section 180 which considers that every director while furnishing his responsibility should act diligently and with extreme carefulness. The diligence and carefulness of a director is authenticated by the fact that is acting in good faith and every action is in favour of the company. [AUDA]
The next important responsibility is of good faith as per section 181 of the Corporation Act 2001 and is analyzed in R v Byrnes. It was provided by the courts that every director when undertaking responsibilities should act in such a way so that their actions are not done with dishonest intention and that the acts are for the benefit of the company and are proper in its purpose. [Dermansky P, 2006]
Further, the position of a director is of grave confidence and there are several information or company secrets which are with the knowledge of a director. The corporation Act 2001 has framed provisions through section 182 and section 183 by which this position and confidential information of the company is not deceived by the director. It is thus imposed responsibility of a director that his position and information that is acquired by him should be utilized for the company and its benefits and not for own ill motives. However, at times if there is some benefits that is acquired by the director then he can do so only if the company is aware of the same as per section 191-195 of the corporation act 2001. [PWC]
All the responsibilities that are given above are very important for a director to fulfil. Any non-fulfilment or irresponsibility is nothing but breach of the legal provisions of the corporation act 2001 and make a director responsible for the same.
Apart from the corporation act 2001, another area of law where there are few responsibilities that re given is the common law and which should be flowed by the companies and its directors with full force.
The officers are responsible t work in the benefit if the company and the actions should be governed in honest belief as given in Whitehouse v Carlton Hotel Pvt Ltd. Whether the officers or the directors of a company are working in the best interest or are in honest belief while undertaking the task for the company can be judged as per the circumstances of the cases and thus the duty of good faith cannot be objective in nature and scope. In Walker v Wimbornet it was submitted by the court that any collision of officers interest and company interest is inevitable in the company and it is always the company’s interest that should be focussed upon. The exact judgement of the officers actions should always be governed by the analyse of a normal cautious persona and is submitted in Charter bridge Corporation Ltd v Lloyds Bank Ltd & Farrow Finance Company Ltd (in liq) v Farrow Properties Pvt Ltd. In Kinsela v Russell Kinsela Pvt Ltd it was given that the creditors are very important persons associated with the company and thus every action of the officers should always be after concerning the interest of the creditors. [PWC]
In Mills v Mills it was given that at all times the interest of the company should be the prime responsibility of the officers of the company [Behan Legal]. In Statewide Tobacco Services Ltd v Morley it was given by the courts that diligence and carefulness should be the two goals that should always be in the mind of the officers of the company while fulfilling his responsibilities. The actions of the officers should not be biased and is held in AWA Ltd v Daniels. The officers has the fiduciary responsibility imposed by the common law and must be furnished with all care and is held in Phipps v Boardman & South Australia v Clark. [MCP]
Application of the law upon the facts of the case
Ian and May are the directors and thus are the most important officers of the company. Their actions hold not be guided by self interest. However when they donated the design on the context that they may lose the same if the company went to liquidation is an action which is not conduced in the best interest of the company. Thus, they are in breach of their responsibilities both under the Corporation Act 2001 and common law under section 180-183 of the Act and in breach of fiduciary duty under common law.
It is submitted that the director who is the governing officer of a company must always act diligently and govern the interest of the company so that his position and the position of the company can be secured at all time.
Facts – A Company named Sailors Pvt Ltd has two shareholders/ directors (Andrew and Belinda) and is mainly concerned with boating equipments.
Andrew is also the shareholder and chairman of Buildsplus Pvt Ltd. The main activity of this company is the development of the property. Buildsplus is in requirement of a loan for an amount of $1.5 million. But, there is nothing to gave as a surety.
In such circumstances, Sailors Pty Ltd become the surety for Buildsplus Pty Ltd for the amount. In doing so Andrew forged the signatures of Belinda. The loan was taken from a bank that is regular dealing with Sailors Pty Ltd and is aware that no property development business is undertaken by Andrew and Belinda. But the loan in-charge is not aware regarding the same. Buildsplus Pvt Ltd default in payment and now Bank wants to recover the money from Sailors Pvt Ltd.
Explore the Australian Property Law
Issue– the main issue is can Bank recover the money from Sailors Pty Ltd when default in payment by Buildsplus Pty Ltd was made?
Every company is governed by its officers. In Brick and Pipe Industries pvt ltd Occidental Life Nominees Pvt Ltd it was submitted that it is the responsibilities of a director that categorized a person as a director. The director who is the main officer of a company is the guiding force which runs a company. In The position of a director is such that normally all the decisions, contracts, agreements and responsibilities are conducted by the director on behalf of the company and is held in Equiticorp Finance pvt ltd Bank of New Zealand. But the only requirement is that the officer (including the rector) should be authorized to do so. The officer should not exceed his authority while undertaking any tasks on company’s behalf as such tasks is not binding upon the company. In Hely-Hutchinson v Brayhead Ltd it was submitted that the role of the officers is thus very important in a manner as it runs and functions for the company law. [Hanrahan, Ramsay & Stapledon, 2001]
The main issue that normally arises is that what is the situation when an obligation is undertaken by the representative of the company who is mainly nit authorized to do so. That is, legal sanctity of the contracts which are established on the basis of lack of authority. The basic principle is that whenever any obligation is established with the company by a party then the company is only obligated if a contract is entered by the representative of the company who has authority to do so. But the situation has been reversed in Royal British v Quandary after considering the position of an outsider who enters into obligation with the company’s representatives on the basis of honesty, trust and fiduciary relationship. The case establishes the world known principle of center management. It was stated in Morris v Kanssen that when an outsider forms an obligation with the company, with the agent of the company and that agent is not authorized to establish such obligation then the company is only accountable to such obligations when the outsider was acting in a trust and honest belief that such agent has the authority to formulate obligations on companies behalf. Teh concept was also submitted in Ruben v Great Fingall Consolidated & Northside Developments Pvt. Ltd v Registrar-General and the court submitted that only when an outsider is honest, he can obligate the company to fulfill the contracts so established. [Chapple & Lipton, 2002]
This common law principle is found in the Corporation Act 2001 under section 128-130 [Hanrahan P et al, 2001]. The foremost task is that an outsider should company with section 128 of the Act when the provisions of section 128 is done , then an outsider can make a company binding on such contracts which are entered by an agent who is deprived of authority. This cans be done under section 129 of the Act. But, the application of section 128 & 129 is only possible if the outsider is acting honesty. If the outsider is aware t