Corp law Assignment final

Corp law Assignment final - Directors Duties Party Product...

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Director’s Duties Party Product Ltd or PP Ltd is a public company limited by shares. This is evident through the abbreviated Ltd at the end of the company name. Under Corporations Act s206A (3) a public company must have three directors and according to s9, a director is a person who is appointed to the position of the director. These requirements are being fulfilled as Kate, Carol and Pippa are the three appointed directors of PP Ltd. Thus, PP Ltd is a public company. This question gives rise to many issues concerning the validity of directors, i.e. Carol, Kate and Pippa, in issuing shares to avoid takeover and covering it up by saying it was to make the employees happy. The issue here is whether the directors have acted in breach of their legal obligations as company directors by misusing their power by not attending meetings, accepting bribe and not managing their duties of getting the reports audited. This question requires an evaluation of potential liability of Carol, Kate and Pippa’s breach of director’s duties such as duties to avoid conflict of interest, duty to act for proper purpose and duty of care and diligence and other statutory laws. Any reference throughout the assignment to a section is a reference to a section under the Corporations Act 2001. Director duties Directors are usually people with power and authority. Therefore, they are subject to legal duties and responsibilities under Corporations Law towards the company and not to any members or shareholders as individuals. Directors are subject to both common law (fiduciary duty) and statutory duties. The fiduciary duties owed by the company are: 1) duty to act (in good faith) in the best interests of the company 2) duty to exercise power for proper purpose 3) duty to avoid conflict of interest 4) duty to exercise care and diligence
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In addition to the fiduciary duties, statutory duties that are established for the directors by the corporations act overlap with the fiduciary duties. The directors of the Party Product Ltd, namely Kate, Carol and Pippa, have breached these duties in one or more ways. 1) Kate’s Potential Breaches Duty to avoid conflict of interest i) Statutory duty Kate is the director and accountant of PP Ltd. Her act of gaining benefit for herself from the cakes transaction would breach s182(1) as she improperly used her position to gain advantage for herself as seen in ASIC v Adler (2002) 42ACSR 80. In that case Adler used his position as the HIH director to gain a benefit for himself and his company – PEE. By accepting money, Kate has also breached s181 (1) (a) by not acting in the best interest of the company by seeking to gain a private gain for herself. This conduct would also be likely to incorporate her failing to act for a proper purpose: s181 (1) (b). It is difficult to determine whether the company entered into the contract because it was
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This note was uploaded on 11/09/2011 for the course BUS ECO 101 taught by Professor Nguyen during the Three '11 term at Monash.

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Corp law Assignment final - Directors Duties Party Product...

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