Directors Responsibilities
Issues, Law, application, Conclusion
Scenario 1
Directors Responsibilities代写 The general law and s 183 and 184 of the Act prescribe the use of power by company directors.
Issues 1
The general law and s 183 and 184 of the Act prescribe the use of power by company directors. They have the opportunity to have access to highly sensitive and often confidential materials relating to the company. Directors are placed at a very privileged position than any other ordinary members. The access to this information allows the director to use sound judgment to make informed decisions for the interest of the company. Directors Responsibilities代写**格式
But it can be tempting to the director to use the information for personal benefits. The law recognizes that directors can use corporate information gained from their position to their advantage other than that of the company. The problem is addressed by having directors responsible for the proper use and application of the information gained from the company. The breach of this duty can be detrimental to the company even if the detriment does not occur.
Case Law Directors Responsibilities代写
In section 182 (1) of the Act, directors are barred in their position and company information for personal gains. The decision in the Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134 demonstrated a strict equitable rule that a director could not pursue an investment opportunity that is learned through being a director. On the same grounds, a director’s interest in pursuing a business opportunity is measured by the information gained from the company regardless of whether the company intends to exploit the opportunity or not. Directors Responsibilities代写**格式
The court referenced Green v Bestobell Industries Pty Ltd [1982] 1 WAR 1 to state that whether the company would not have secured the contract is not relevant. It was ruled that G used the knowledge about hospital construction from B ltd. The ability of B ltd to get the intended contract was not material in the decision. In Industrial Development Consultants Ltd v Cooley [1972] 2 All ER 162 the court ruled in favour of the company because Cooley was contracted instead of the company. Directors Responsibilities代写**格式
Another case SEA Food International Pty Ltd v Lam (1998) 16 ACLC 552 the court used the test to determine whether the action taken by the director is related to the nature of the company operations and its future expansion. If the link between director undertaking is linked to the company’s future development. Then the director is in the breach of duty of not to use company information for personal gains.
Application Directors Responsibilities代写
About the case, Austen used Coronation Pty Ltd information about investment opportunity in New South Wales to decide on whether to take up an investment opportunity of buying NSW Mills Pty Ltd. His decision to take up the risk was incited by inside information from Coronation Pty. The company board had discussed the feasibility of New South Wales before and hence fronted an investment interest in the region. Also, NSW Mills Pty Ltd deals with construction materials just like Coronation Pty Ltd in which Austen is a director.
Conclusion Directors Responsibilities代写
Austen went ahead to purchase the company with anticipation to make profits even if he was aware of the company’s plan to expand in the future. His action amounted to a breach of duty that bar him not to use his power and company information for personal gain. Thus, he is liable damages to Coronation Pty Ltd.
Scenario 2
Issue 2
Company directors are charged with the duty of care and due diligence. Section 180 (1) seeks to bring balance between protection of company interests and making risky decisions. It stipulates that directors must discharge their powers and duties with rationality and care to avoid damages to the company. Directors Responsibilities代写**格式
Also, section 180 (2) recognize business judgment rule where a director makes decisions regarding care and due diligence for the best interest of the company. But the choices may not be the best decisions. Notably, the application of business judgment rule presumes fulfillment of duty of care and diligence. However, section 189 provides defense for failure to apply reasonable care on ground that the director acted on a reliable and trusted source or delegation.
Case Law Directors Responsibilities代写
According to Re City Equitable Fire Insurance Co Ltd [1925] Ch 407 case, the court ruled that one director can rely on qualified and skills of a director to make an informed judgment with some assumptions. However, in case Daniels v Andersen (1995) 13 ACLC 614 a Co (AWA Ltd) the court ruled on contributory negligence. The ruling held that directors have roles to inquire about information provided by delegates. The inquiry should not be limited to one’s knowledge and experience. However, they are exempted from liability if the information is from trusted sources like other directors.
Application Directors Responsibilities代写
About the case, Dicken was responsible for risk control and hence took charge of relationships between the company and its insurers. Therefore, he was a trusted and warranted person to perform the duty. Dicken had powers to delegate the task of reviewing the insurance policy to Gaskell. Gaskell was just an intern working as a clerk. In this case, the delegation was not trusted and dependable to on duty of care and due diligence. Thus, Dicken still owes the company the duty of care and diligence. However, Dicken believed that Gaskell was qualified and warranted trusted information and went ahead to sign the policy that failed to protect the company’s flammables against fire.
Conclusion Directors Responsibilities代写
Therefore, according to section 182 and 189 and about case laws, Dicken was liable to the company because he failed to take due care and diligence in reviewing insurance policy. Dicken could not invoke section 189 because he had no reasonable ground to believe that Gaskell was reliable and competent. He was bound to inquire Gaskell’s recommendations on IGT proposal before signing. Otherwise, if Dicken had time to look at the policy, he would have been able to notice the clause.
Scenario 3
Issue 3 Directors Responsibilities代写
Directors must retain unfettered discretion and disclosure of interests. The affairs of the company need to be considered objectively. The decisions made should be for the best interest of the company. As such, a director should not place themselves in situations where they have or may have personal interests which conflict or may conflict with those of the company. Directors Responsibilities代写**格式
Section 181 of the act stipulate that directors cannot use their position and power to enter in arrangements that fulfill the wishes of a third party. In cases of any conflict of interest, a director is required to make disclosures or ratification to relief from liability. A breach of unfettered discretion can be condoned if the director had advance authorization. Otherwise, an injunction can be issued as a remedy according to section 1324.
Case Law Directors Responsibilities代写
In Hospital Products v United States Surgical Corp (1984) 156 CLR 41 case, the ruling was that the director have fiduciary duty to the company and hence had to enact what they consider will serve the interests of the shareholders. Therefore, is a director commit to do something for the benefit of the company and in the process realize. That it is not serving the interests of the company, one is entitled to the discretion and not even the court should interfere to compel the director do that what he/she believe is detrimental to the company. Directors Responsibilities代写**格式
Additionally, a director can have relief from liability as it was held in Furs v Tomkies (1936) 54 CLR 583 case under the common law. The shareholders have to be adequately informed without misrepresentation of facts for the consent of contract to be valid as ruled in Southern Cross Mine Management Pty Ltd v Ensham Resources Pty Ltd [2005] QSC 233 case. Directors can disclosure of interest to avoid liability.
Application Directors Responsibilities代写
In this regard, Wickham had power and position to act for the interest of Coronation Pty Ltd. He had the duty to retain unfettered discretion and make disclosure of interests. Email correspondence with his son signaled a situation that could result in fettered discretion. Assuming that the employee did not saw the printout, his son put him in a position he could wish him to have quality and affordable services. Wickham had the duty to disclose this conflicting interest to the shareholders. The promise to use his power to authorize his son take corporate car and stay in client’s accommodation was not for the best interest of the company but to serve the happiness of his son.
Conclusion Directors Responsibilities代写
As such, by the application of section 181, Wickham used his position and power to enter and try to fulfill the interest of a third party. This was a breach of duty to have unfettered discretion and disclosure of interest. If he disclosed, Wickham could have relieved himself a liability of acting for his interests instead of those of the company. Fortunately, since the actual breach did not happen, Wickham can enforce his duty of disclosure and hence receive injunction to refrain from the conduct.
Scenario 4
Issue 4
Like any position of trust, directors are refrained from misusing their position and powers. They are supposed to exercise powers for a proper purpose as envisioned in section 181 of the Act. A proper purpose is the one motivated to serve the interests of the company. Therefore, any action by a director vested on it becomes acceptable and appropriate use of powers. The directors may then be liable for equitable compensation, rescission of contract, account profit and injunction. Directors Responsibilities代写**格式
An action by a director that uses power and position to fulfill things other than interests of the company is improper. It can be labeled as a failure of the director to adhere to the fiduciary duties towards the company. If the critical benefits to the organization are missing in the action, it then turns to be improper.
Case Law Directors Responsibilities代写
The application of law is evident in Howard Smith v Ampol Petroleum Ltd [1974] AC 821 case. The legal suit emerged when H ltd received shares from M Ltd, and A ltd went to court to bar the issue. At that time, A ltd is the shareholder at M ltd was at the bid to take over the company by buying shares in the market. The directors claimed they were raising additional capital which was rejected by the court. M ltd had enough capital, and it was apparent that the sole reason for the issue of share was to reduce A’s control and hence make it lose in its takeover bid. A similar ruling was made in Whitehouse v Carlton Hotel Pty Ltd (1987) 5 ACLC 421 case. Directors Responsibilities代写**格式
Therefore, it is crucial to measure the motive of directors which can either be proper or improper. In so doing, “but for test” is applied. In Whitehouse v Carlton Hotel (1987) 5 ACLC 421 case were several motives that incited issuing of shares. An improper issue of shares is the one that but for the presence of impermissible purpose would not have occurred. Meaning that were it not for the wrong motive, the issue of shares will not happen.
Application Directors Responsibilities代写
In the case scenario, directors of Coronation Pty Ltd were well aware of the looming takeover by Westbuild Pty Ltd. The company was controlling 40 percent shares, and hence Coronation directors were losing the control to it. The directors of Coronation issued $10 million to Greybrck Pty ltd, but for Westbuild Pty Ltd increasing share control, they would not have issued them.
Conclusion Directors Responsibilities代写
According to section 181 and law cases, directors of Coronation Pty Ltd exercised power for improper purpose. When they issued shares to block a rival company from gaining voting control. If Westbuild Pty Ltd did not have 40 percent of shares, directors would not have issued the shares to Greybrck Pty ltd. The main intention was to lock the Westbuild Pty Ltd from its takeover bid by neutralizing its shares. Therefore, the issue was invalid.
References Directors Responsibilities代写
Howard Smith v Ampol Petroleum Ltd [1974] AC 82.
Hospital Products v United States Surgical Corp (1984) 156 CLR 41.
Daniels v Andersen (1995) 13 ACLC 614 a Co (AWA Ltd).
Furs v Tomkies (1936) 54 CLR 583.
Green v Bestobell Industries Pty Ltd [1982] 1 WAR 1.
Industrial Development Consultants Ltd v Cooley [1972] 2 All ER 162.
Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134.
Re City Equitable Fire Insurance Co Ltd [1925] Ch 40.
Southern Cross Mine Management Pty Ltd v Ensham Resources Pty Ltd [2005] QSC 233.
SEA Food International Pty Ltd v Lam (1998) 16 ACLC 552.
Whitehouse v Carlton Hotel (1987) 5 ACLC 42.
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