Corporate Law the Company Law States and Essay

Excerpt from Essay :

Corporate Law

The company law states and defines the roles of directors within the company's daily activities and transactions. It provides essential fundamentals necessary for observance in a bid to curb unnecessary liabilities and conflicts arising in the process of balancing personal interests and ones fiduciary duties in a given company acting in any defined capacity. Directors' duties and; liabilities are explicitly elaborated in the company that entails the corporate acts, which are the operation framework of any given public or private company. The qualifications and disqualifications of the occupancy of a director's role are very important just as underlined in the corporate acts. A company director is endowed with a number of responsibilities and duties which he is expected to undertake in the capacity of directorship. Acting in good faith on behalf of the company is an issue that is also fundamentally highlighted because the duties and responsibilities bestowed upon the directors may put them in to situations that they may be forced to make certain decisions that their rationality is determinable later (Anderson, 2008).

A director is under certain obligations to observe that during the period of dispensing duties in the capacity of a company director, dishonesty, carelessness and ignorance should not be any option, but should work to safeguard the reputation as a company director to avoid going to prison (Anderson, 2008). . Competency is only achieved if a company director exercises an absolute understanding of the fiduciary duties and the standards imposed by the law.

Problems for Discussion

1. a) Roberta who is a managing director of the EY youth company which a profit is making company, decides to help Leonardo market and sell his soap on her own capacity. This is not in breach of her d9uties as the managing director of the EY company even if she is the majority member in Wonder Hair soap Pty Ltd. (WHS). By proposing that the EY and WHS enter into a long-term contract and demanding that the EY pay her a certain amount of commission on every sale made since she is helped EY identify the option, She absolutely breached her director's duties as owed to EY (Pennington,. 1973). Roberta has breached the fundamental rule of equity as identified in Phipps vs. Boardman (1967) 2 AC 123. This is in the consideration of the fact that she has let her personal interest and that of her duties as a director conflict. She holds shares and in fact, she is the majority member and shareholder in WHS in which she advise EY to into a long contract with. She failed to notify the board of directors of her personal interest in this contract. She therefore breached section 191(1) of the corporate act (Pennington,. 1973).

b) Roberta should have not been present at the board meeting during the time the possibility of entering into a contract with WHS was being discussed, that is, at least according to section 195 (1) of the corporate act, which categorical stipulate that, if the director had a personal interest, the director should, not b e present in the meeting, which means that the director's vote in case, is not allowed. However, section 195 (2), provides that Roberta can be allowed to be in the meeting during the discussion and vote, only if, i) she had notified the board of directors of her personal interest and material gain in WHS. ii) if the directors who do not have any personal interest are contented that that the interest shown by the director should not make her be disqualified from being present and to vote (Pennington, 1973). This can also be possible if the ASIC, under its discretion, in writing declare that the director may be present and vote as in line with section 195(3).

c) Roberta is the managing director of the EY. She has the responsibility bestowed upon her as a company director to exercise her discretion in developing and promoting the affairs of the company. If she is the one who proposed the contract issue, then there was no need for EY to go ahead, but rather, it would have been wise for EY to undertake the determination of the WHS prospects and its shareholding.

d) First, Roberta has breached her responsibilities and duties as owed to EY. This is in the context of possessing personal interest and material gain in the contract she proposes herself. Further, she has demanded a certain amount of commission paid to her in every sale made. As a result she has shown dishonesty and ignorance. The company may seek remedies in the context where, Roberta had personal interest and material gain from the contract between EY and WHS yet she did not declare it. Secondly, she duped the company into paying her a commission on every sale made despite the fact that she was the majority shareholder of WHS and most fundamental is the fact that she opted to breach her duty as EY managing director.

e) Consequently, the company as a statutory or general law should pursue the assets obtained by Roberta a result of the contract. Also profit made by Roberta may be made the company's accountability whether the company made profit or loss. Due to such dishonesty and may be ignorance, the company's board of director may file a lawsuit to charge Roberta, an issue that would land her into prison.

2. a) harry and Ian have definitely breached their fiduciary duties as the directors of No-Waste. Harry did not declare to the other directors the interest and the material gain he/she had on the Ace Computers. He actually breached section 191(1) of the corporations act which demands that a director with personal interest in company's transaction must declare to the so that they may determine whether he presents himself at the meeting and possibly take place in voting as in line with section 195 (2) of the act which allows the other non-interested directors to allow the interested director to vote and be present at the meeting of contract discussion (Pennington,. 1973). . Ian on the other hand has used the information relevant to the company to gain an advantage by entering into a contract with Top timber. This is a breach of his duties as a director to the No-waste.

No-waste has [has the claim to the profits made by Ian in his contract and the top timber. Consequently, he breached the stipulations of section 183 that prohibits the use of information by virtue of being at the director's capacities (Yorkton & Brown, 1968).

Clare and George may seek a court intervention to hear the matter. This is because, they have identified the dishonesty and incompetency propagated by other directors, in which case, Harry and Ian have undertaken (Australia & CCH Australia Limited. 2011). . The court should be able to amicably arrive to a solution that allows the transfer of shares since George himself is a co-director of the same company and has rights to transfer his shares but only under the blessing of the other co-directors.

b) After No-waste declining the possibility of a contract with the Top timber due to financial limitation and insufficient facilities, it would have been logical and lawful if Ian explained to the other directors his intentions to enter into a project with Top timber single-handedly, rather than doing it without notifying them.

3. According to section 183 of the corporate act, a company director is not allowed to use the information obtained by virtue of being in that position to make decisions that benefit only him/her. Her decision to advertise her parallel publication through XYZ is a breach of her duties as a company director of the XYZ (Australia & CCH Australia Limited. 2011). This is because, section 191 (1), demands that the director notify or give a standing notice to the other directors or board of directors of her personal interests. That notwithstanding she ought to have requested the company's permission to use the XYZ to advertise her own company. Because of this it is undeniable that Tina breached her fiduciary duties as an editor (employee) and as the company's executive director.

b) Tina has used the XYZ publication to advertise her own company mostly free of charge without incurring any cost of that promotion. Secondly, she has used her position as an editor and a director to lure other customers of the XYZ. Consequently, XYZ may demand that Tina undertake the remedy for these situations. The company is also allowed to pursue the assets owned by Tina as a result of the company and be accountable for the profits made by Tina (Yorston & Brown, 1968). The ASIC categorically underlines the fiduciary duties of a director. It is stated that the director must not inappropriately, by the virtue of the office or position tr8y to gain personal advantage or for someone or cause destruction to the corporation. Further, a director is not under any circumstance obliged to take advantage of the information…

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