Directors Duties

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

Section 180 says that a person must perform his duties with care and diligence that a director of a company in same position and situation would perform. In this case, the board member negligently made a financial report and was shown profit instead of loss. Harvey one of the directors could not show the errors in the board while James who is also a non-executive director did not ask any questions regarding the

In the case Pastizzi Café Pty Ltd v. Hossain (No 4) NSWSC 808 (28 July 2011) there is a relatively straightforward conflict involving five principals (three individuals and two corporate entities) in which a number of legal issues come to the fore. Briefly, the events in question occur over the span of nearly five years and involve a partnership between Deborah Ross, Leonard Ross and Miraj Hossain to own and manage Pastizzi Café Pty Ltd. Though the case is straightforward, the events are somewhat convoluted--in sum, Ms Ross is guarantor of the start-up costs and in April 2007, Ms Ross and Mr. Hossain receive $1 share in the new company, Mr. Ross, for other legal reasons, does not receive a share (Pastizzi Café v Hossain, 3,4). Eventually, Mr. Hossain and his company, Talukder Enterprises Pty Ltd make the claim that Mr. and Ms Ross are making all management decisions, but that this is illegal since he argues that Mr. Ross is not a partner, shareholder or director. Mr. and Ms. Ross vehemently disagree. (Pastizzi Café v Hossain, 4, 5). Further, Mr. and Ms Ross argue that Mr. Hossain agreed in a meeting on 12 November 2010 to sell his third of the partnership, and there arose a question as to the value of the business. (Pastizzi Café v Hossain, 5). On February 7, 2011, Mr. Hossain locks both Mr. and Ms. Ross out of the restaurant and establishes his own business on the property. Both sides seek damages.

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.

According to the pro and contra Section 203D and 203E of the Corporations Act as above, most judges and scholars agree that the procedure of removal directors as stipulated in the Corporations Act provides fairness treatment for the directors who may be removed. However, they still strongly argue whether the Section 203D is mandatory or not. Moreover, they questioned the existence of Section 203E since it eliminates flexibility for companies to make decision particularly in the emergency situation as explained above. Therefore, in order to provide broader perspectives about the relevancy of Section 203D and Section 203E, it is necessary to compare the procedure of removal directors in the Australian legislation with the

According to UK Law, the directors should act in good faith in the interest of the company, and exercise care and skill in carrying out their duties. The Company Law Reform Bill (2005) defines, in section 154-161, the directors’ duties as follows:

          Title III of the Sarbanes-Oxley Act is Corporate Responsibility. It creates many new obligations for CEOs, CFOs, and other senior executives. Title III requires that CEOs and CFOs must certify that they have reviewed annual as well as quarterly reports and that they contain no untrue information, material omissions, or misleading information. CEOs and CFOs are now responsible for establishing and maintaining internal controls, plus reviewing their effectiveness within 90 days prior to financial reports. They must disclose any deficiencies or possible fraud. The CEO and CFO are required to give back any bonuses or sale of company securities, if the company must restate financial statements due to material noncompliance or misconduct. High-ranking executives are also now banned from trading company securities during pension fund blackout periods. Lawyers are now required to report any evidence of violations of securities law or obligations to either the CEO of the company or chief legal counsel. If a person violates the law and their conduct demonstrates an unfitness to serve, he or she can be banned from being an executive of a company (Sarbanes-Oxley).

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.

Bennett, 47 N.Y.2d 619 (N.Y. 1979) states, “the responsibility for business judgments must rest with the corporate directors; their individual capabilities and experience peculiarly qualify them for the discharge of that responsibility.” In other words, the court will allow some leeway in their corporate decisions due to their background and experience so the business judgment rule will apply. This case presents a three-person select committee that serves on behalf of the entire board of directors to handle special litigation for this corporation. A shareholder’s derivative action was brought against four of the board of directors in which this special litigation committee decided to terminate it. The shareholder’s felt this was unfair since the three-person committee is not a full representation of the board and the shareholders therefore, they should not be able to make those decisions. The three-person committee is unaffiliated with the 15 member board to keep decisions of the corporation fair. The court of appeals found no evidence proving the three-person committee was not unable to represent the full board and is protected by their decisions under the business judgment

The removal of a director by the board in the FDC case creates legal and ethical issues, which ultimately led to the onset of commercial issues. Despite the legal, ethical and commercial issues, this case is strongly indicated that there are some problems in the mechanism of removal directors stipulated in the Corporations Act 2001 (Cth) (“Corporations Act”) S 203D and S 203E. This indication is underpinned by some cases in the Australian court in which directors are removed also by the board. Therefore, this paper will analyse the legal, ethical and commercial issues regarding with the removal of FDC’s director, discuss the problem in the procedure of removal directors stipulated in the legislation, and compare other regulations in the common law and civil law countries. Finally, drafts of new mechanism of dismissal directors will be provided in this research to reform Section 203D

Section 9 imposes the concept of a director, a person that is appointed to the position of directors, act as a director or who instruct the director to act. In the case of “Kangaroo”, Ralph is the CEO of the company, chief executive officer, who in charge of managing the company’s daily business and may be conferred with any of the power that the directors can exercise: S.198 C. Russell is known as CFO, chief financial officer is a corporate officer primarily responsible for managing the financial risks of the corporation. Whereby, Anton is stated to be a chair person, who exercise the procedural control over a meeting. Furthermore, Matt, Mike and sally are the non-executive directors who are not involve in the daily management but bring the independent

This case is related to the duties of directors of a company. The duties breached by them in a non-profit entity. This action brought by the ASIC( Australian securities and Investment Commission) towards non-executive chairman, the chief executive officer, the chief financial officer, and five other non-executive officers of the Centro Properties Limited.

As per given case, Simone is an overseeing executive of Youth Unlimited and needs to expand piece of the overall industry of organization. Simone assembles another organization with Taina and pushes the offer of that organization instead of Youth Unlimited ltd. One client caught Simone on in the act when Simone gets lost from his own particular organization's items on the grounds that he knows her. For this situation, Simone ruptures the obligations and takes commission from Youth Unlimited. He sue against Simone to corporate controller, ASIC.

PART B Question 1 Ben is a graphic designer and shareholder in Snowzone Pty Ltd (“Snowzone”) a profitable graphic design company. He holds 200 of the 1,000 issued shares. The other 800 shares are divided equally between the other 16 graphic designers in Snowzone. Two of these other 16 graphic designers are the directors of the company. Ben did not support the election of these directors but a majority of the other shareholders voted for them. The company has paid dividends to the shareholders from time to time but not for the last 3 years. Snowzone uses computer hardware supplied by Nicola Pty Limited. The 2 directors of Snowzone, Larry and Ron, are in fact shareholders in another computer hardware supplier, Zabriski Pty Limited, and they, together with some of the shareholders of Snowzone favour a change in the hardware supplier to Zabriski Pty Limited. The directors accordingly call an extraordinary general meeting so that the shareholders can vote on a change of the hardware supplier. Ben has consistently voiced his opposition to a change to Zabriski Pty Limited. Ben has also recently begun