Company Law

In order to prove the breach of section 184, the following rules and duties must have been violated. A director commits an offence if they are reckless or intentionally dishonest, and fail to exercise their powers and discharge their duties in good faith in the best interests of the corporation or for a proper purpose .As mentioned earlier Mr Palmer was reckless in decision making by waving loans and using the company assets for private benefits and the company suffered had to go in voluntary administration. The second offence that needs to the violation of section 184 is that when a director commits an offence if they use their position with intentional dishonesty or recklessly in order to directly or indirectly gain an advantage for themselves, or someone else, or cause detriment to the corporation. Mr Palmer acted as a shadow director and his nephew agreed with all the decisions the corporation made such as political donations and transferring funds to another firms owned by Mr Palmer that caused detriment to Queensland Nickel. The third offence is a person who obtains information because they are, or have been, a director of a corporation commits an offence if they use the information with intentional dishonesty or recklessly. As

•The Limited Liability Act was subsequently passed in 1855. This introduced the concept of general limited liability for shareholders i.e.their liability for the company’s debts, if it became bankrupt, was limited to the amount of share capital which they had invested. It was felt important that the company’s creditors should be aware of the limited liability status of the company, and the requirement for companies to have “limited” or “ltd” in their name dates from this time.

Relevant Law – Duties to prevent insolvent trading, Section 588G of Corporation Act, 2001, Insolvent trading prohibition and Section 180 duty of care, skill and diligence.

In many misfeasance cases against directors, those breaches maybe relatively uncontroversial. This draws into focus the question of whether the director has any common law or statutory defence, including the Duomatic principle and ratification by shareholders (CA 2006 S.239), available to a claim against him for restitution to the company. S.239(6)(a) preserves the Duomatic rule that if an informal unanimous consent is reached among voting shareholders, it is unnecessary to pass such ratification resolution through general meeting or written resolution. The first part will examine the scope and requirements of this rule to illustrate the validity of such assent. S.239(7) leaves the door open for rules of law, which refers to common law principles, to continue guiding ratification. It will be assessed how these rules impose limitations on the general ratification power conferred by s.239.

This research report documents the findings of an empirical study of judicial findings (of superior courts) relating to the duty to prevent insolvent trading. The duty to prevent insolvent trading is the most controversial of the duties imposed upon company directors.

▪ Discuss the facts of the case study. What facts are in dispute? What facts are agreed?

In addition (Chen-Wishart n.d), notes that a company is categorized as a legal personal and operates as distinct from its shareholders. Based on these statements, Betty had not right to act on behalf of Bechdo Pty Ltd and Bechdo has the capacity to sue Betty for acting contrary to the company constitution. Based on the case study, Betty had breach the contract which existed between her and the company laws. If an act carried is outside the objects for which the company was founded to as contained in the company’s memorandum of association which is this case is the company’s constitution, then the acts are deemed to be ultra vires. In other words, the acts are beyond the capacity of the organization. In addition, contracts which are deemed ultra vires are categorized as void (Palmiter 2009, p.59). This can be referenced to Ashbury Railway Carriage and Iron Co v Richie 1875. The doctrine of ultra vires which have deemed the contracts between Bechdo Pty Ltd and BB Ltd, Jillo Pty Ltd, and Con Development Ltd as void has been applied with the aim of protecting the interests of lenders and company shareholders. As noted by Chen-Wishart (n.d), ultra vires is necessary in protecting the interest of its shareholders who depend on objective clause of the constitution to limit the acts in which their money may be used.

Equitable principles for directors were developed from fiduciary duties applied to trustees through common law. A director has a fiduciary duty to ensure that no conflict of interest exists between him and the company. This common law principle “the no conflict rule” was established in Keech v Sandford.7 Upholding this, Lord Cranworth LC held in Aberdeen Railway Co v Blaikie Bros,8 “And it is a rule….no one....shall be allowed to enter into engagements in which he has, or can have, a personal interest conflicting, or which possibly may conflict, with the interests of those whom he is bound to protect.” This principle was encompassed in the Companies Act 2006:

Smith should have disclosed his share information with the board of directors and voted in favor of Johnsons Skyhooks Limited. Being a board of director of a competing company, he failed to execute his duty in good faith with best interest of the corporation. According to the act, he should be fined up to 5000$ and can go to jail for at least six months.

In relation to approving the ASX Announcements, the CEO breached section 180(1) of the Act by failing to ensure that the ASX Announcements were not misleading or deceptive. JHIL had also breached sections

In relation to James Hardie case, directors breached their statutory obligations, referred in the Corporations Act 2001 (Cth) s180, in terms of acting with care and diligence, good faith and the proper use of information and position.

Section 184 of the Corporate Act, imposes criminal liabilities on directors, which covers situations where directors are reckless, intentionally dishonest and cause detriment to the company. Directors have a responsibility to their company and shareholders, which is to honestly believe that they are acting in the best interest of the company and for a proper purpose at all time. In s 184(1) of the Corporations Act, directors must always act in good faith and for the best interests of the company. The good faith and interest provisions are civil obligations as well under s 181 of the Act. However, a director or officer will be committing a criminal offence if he or

The Directors and officers shall perform the duties enjoined on them by law and the by-laws of the corporation. They act as agents or representatives of the Corporation in carrying out its rights and obligations provided by law. Directors who directed the affairs of the Corporation in bad faith, gross negligence, and those involving a conflict of interest with their duty to the Corporation shall be liable to the Corporation, its stockholders & other persons. The Board of Directors are not justified to purchase the stocks.

Bea may argue that there is breach of the duty to act personally. As an extension of the duty to act personally, the trustees must not act under dictation of the beneficiary (Re Brockbank) and must make decisions personally. On the facts, it may be argued that the co-trustees was acting under the dictation of Andrew as he believed that mobile phones triggered cancer and wanted the shares to be removed from the portfolio. That facts state that the phone share were performing well so it seems unbeneficial to sell. It is unlikely that the $15,000 to purchase shares in the new Australian bank constitutes any breach without further information.

There is no clear framework of the rules that would cover the contingencies of a ruling to pierce the corporate veil Idoport Pty Ltd v National Australia Bank Ltd. The corporate Veil usually protects owners and shareholders from being held liable for corporate duties. Yet again a decision made by the court to lift that veil and would place the liability on shareholders, owners, administrators, executives and officers of the company without ownership interest. The purpose of this essay is to conduct an analysis on the concept of lifting the corporate veil and to review the different views on its fairness and equitability to present a better understanding of the notion, the methods used was throughout researching the numerous scholars views on the subject, case law and statutes examples, and the evidence provided by the empirical study of Ramsay & Noakes. When we discuss the lifting the corporate veil the first case that pops out is the case of Salomon V A. Salomon & Co Ltd, since the decisions of applying the corporate veil were first formed as a consequence of this case. The idea covers all of company law and distinguishes that a company is a separate legal entity from its members and directors. Furthermore, spencer (2012); have indicated that one of the core principles that followed the decision in Salomon v Salomon was the wide acceptance one man company’s. However In order to form a