Corporate law question answer hint
Question no.1 hint
Director’s duties
Duty of care skill diligence section 180
Case applied – (a) AWA v Daniels
(b) Daniels v Anderson
Discuss the court of appeal decision what must directors do to comply with their duty? List the things Explain difference between executive and non-executive directors
Is the duty the same for both?
Format letter
Dear ASIC
The purpose of this letter is to advise whether there have been any breaches of corporation ACT 2001 (cth)
1st well tells us who are director 3 managing director executive, non-executive director. Explain who owes director duties. Common law-duty of care skill of diligence. Brief explanation – s180(1) (business judgement rule as a defence……..), Duty of care, skill and diligence. (Don’t write in IRAC form. This is your research part)
Conflict of in-front
Common law + Section 182-183
Relevant case
Duty of disclosure (Public Company)
Remedies (Common law, Civil + Criminal law)
Breach of director’s duty (Conflict of interest)
Breach of fiduciary duties
In last part of letter
You have good reasons to take action against these director and to seek remedies as discussed
Question no.2 hint
Issue
What Rodney’s legal remedies
Rules
Directors duties, Discuss the common law and section dealing with director taking a corporate opportunity refer to a case with IDENTICAL FACTS.
Removal as directors (pty co, rule)
Discuss remedies – majority shareholder are wrong does who will not bring action.
S-232
S-236 (Statutory derivation action)
Most common examples of Conflict of interest
Diversion of business opportunity. Green V bertobell Industries pty ltd (1982) 1 ASIC 1.Cook V Deeks {1916} 1 AC ssaMisuse of company funds :- Paul A Davies (aust) pty ltd V Davies
Secret profits:-Regal (Hastings) Ltd V Gulliver
Member remedies, directors/ Majority stakeholders Vs members minority shareholders
Statutory remedies
The minority oppression remedy: S232 (empower the ASIC and any member of the company to apply to the court….) What oppressive means eg of oppressive –Exclusion from management : Fenuto pty Ltd Vs Bosjak Holding pvt Ltd.
Derivate action : S236-237
Unlikely the company itself will bring action
Serious question
Statutory injunction : s1324
Winding up the company : S461
Directors act in their own interest
Application
What have lily and morris done wrong?
Bonus
Cars
Set up new company to direct business
Personal action (s232)
Rodney wants to protect $100,000.00
Excluded from management
He is affected shareholders. S233 remedy-winding up
S236
Rodney needs “leave” of the court
Serious question to be tried
Directors/majority shareholders not likelyto defend company against wrong does.
Can seek repayment to co, of bonuses profit from diverted contract.
Can seek injunction to stop payment of bonuses.
Conclusion
Question no.3 hint
Definition of solvency sec 95A,
Section 95A of the corporation act 2001 (cth) states
ISSUE
Is the company insolvent, if it is, what must bill and bob do?
RULE
Insolvency definition
A person includes a company……..
Under section 588G, a director has a duty to prevent insolvent trading.
A director face civil and criminal liability for breach of section 588G. This can include civil penalties under subsection1317E(1)
Reason why they were worried?
Voluntary administration, winding up / Liquadition (the options available to the directors include)
Liquidation is a drastic option-shouldn’t be the 1st option if the company Is viable
Sect 435A of the act states that “the object of {Voluntary administration} is to provide immediate winding up of the company.”
The aim is to rehabilitate the company s435A. 3 option —-s439C
End the administration
DOCA (Deed of company arrangement) explain
Place company in liquataionWhat happens with voluntary administration
Moratorium (explain)
Director’s guarantees
Deed of company Arrangement or any other options
APPLICATION
There is no income just outgoing. This means the company is insolvent
CONCLUSION
They should appoint an administrator
