Solution ACC2200
PART A
Courts all over the world have set precedence’s of treating directors as trustees which means in the performance of their assigned legal and corporate duties, they stand in a fiduciary relation to the shareholders of the company. A director as a trustee shall act in the best of his ability to benefit the company and not in furtherance of his own interest.
Each of the four directors of the company stand in a fiduciary position to the company and thus liable for their acts of omission and commission to the shareholders of the company. They did not take adequate safeguards while deciding to invest a relatively huge sum of $20 million in a completely new business venture.
Section 232(2) and (3) of the Corporations Act has provided the followings:
An officer including a director of a corporation shall be duty bound to act with honesty of intentions as well as actions while exercising his powers vested while discharging his duties. This has been well documented in the case of Australian Growth ResourcesCorporation Pty Ltd v. Van Reesma (1988) 13 ACLR 261.Arthur who has already acquired stakes in Weaves Pty Limited should have disclosed his position to the Board of directors of Chance ltd. He was in a position to influence the Board and thus acted with sufficient and provable dishonesty. He is liable to be prosecuted under s.233.
It has been an established fact that if certain business decisions are taken and they don’t serve any rational purpose for the betterment and furtherance of immediate entities future prospect then every officer of the entity who is a party to the decision would be held liable for the irrational act.
Arthur, Bill, Christine and David did not undertake a due diligence report and did not undertake a proper careful research before a new activity was undertaken. The business decision undertaken by them was in the interest of the company but it was not a rational corporate decision. None of the directors had any prior idea of the new
Courts all over the world have set precedence’s of treating directors as trustees which means in the performance of their assigned legal and corporate duties, they stand in a fiduciary relation to the shareholders of the company. A director as a trustee shall act in the best of his ability to benefit the company and not in furtherance of his own interest.
Each of the four directors of the company stand in a fiduciary position to the company and thus liable for their acts of omission and commission to the shareholders of the company. They did not take adequate safeguards while deciding to invest a relatively huge sum of $20 million in a completely new business venture.
Section 232(2) and (3) of the Corporations Act has provided the followings:
An officer including a director of a corporation shall be duty bound to act with honesty of intentions as well as actions while exercising his powers vested while discharging his duties. This has been well documented in the case of Australian Growth ResourcesCorporation Pty Ltd v. Van Reesma (1988) 13 ACLR 261.Arthur who has already acquired stakes in Weaves Pty Limited should have disclosed his position to the Board of directors of Chance ltd. He was in a position to influence the Board and thus acted with sufficient and provable dishonesty. He is liable to be prosecuted under s.233.
It has been an established fact that if certain business decisions are taken and they don’t serve any rational purpose for the betterment and furtherance of immediate entities future prospect then every officer of the entity who is a party to the decision would be held liable for the irrational act.
Arthur, Bill, Christine and David did not undertake a due diligence report and did not undertake a proper careful research before a new activity was undertaken. The business decision undertaken by them was in the interest of the company but it was not a rational corporate decision. None of the directors had any prior idea of the new
References: 1. Australian Corporations and Securities Legislation, CCH 2011, VOLUME ONE 2. Boros and Dun, Corporate Law, 2nd ed., OUP, 2010.page 145,243. 3. Austin & Ramsay, Ford 's Principles of Corporations Law, 14th edition, Butterworths, 2009,page 147. 4. Ramsey, Hanrahan& Stapleton, Commercial Applications of Company Law, 11th edition ,page 233. 5. Vickery, R and Pendleton, W, Australian Business Law: Principles and Applications, 4th Edition, Pearson Education, 2003 ,page 279. 6. Clarkson .Kenneth & Miller Roger, Business Law – Text and Cases, south western publication , 11th edition, 2009. 7. Beatty, Jeffery & Samuelsson, Essentials of Business law, Thomson press, 3rdedition , 2008. 8. Mann Richard and Barry Robert, Business Law, south western, 15th edition, 2008. 9. Vickery Roger and Flood Mary Ann, Australian Business Law – compliance and practice, Pearson Publication, 7thed ,2010