A company is usually established by individuals or Directors (officers included) in this case so as to run it in appropriate manner in order to make maximum profits. For this to happen, it is for the company (Pandora Diamonds and Gems Pty Ltd in our case) to enter or make contracts with outsiders like Kaplan Bank Ltd and Space Solutions Pty Ltd as far as our case is concerned. The contracts made by the company with other outsiders are usually done by Directors who are, most often than not, act as representatives of that mentioned company and be able to be liable by the acts of its Directors as stated in s126.
Directors acting on behalf of the company during any contracts are usually in a crucial position of trust within that company, and therefore, the vast array of legal duties will stretch out on their shoulders for holding that position. Due to this hot position, it is easier than not, for their powers to be abused in different ways. Directors have been known to abuse their powers in office for their personal gain. For example, Directors have been held liable for inappropriately using company’s funds in making their personal secret profits.
In such cases, the corporate law comes into play (the Common Law and the Corporations Act 2001 (Cth)) and Directors or any other officer who recklessly breach specific duties and obligations should be prosecuted in the court of law. So for the purpose of liability, the common law and the Corporations Act 2001 (Cth) have been laid down so as to minimize the risk of wrongful behaviors by company’s Directors. In this paper, I will discuss the responsibilities, liabilities and duties of a director(s) in a company and give examples how Directors of various companies have been accounted or held responsible for infringing Corporations Act 2001 (Cth) laws.
The Term Paper on Registration Contract Company Pre Law
... and 132 of the corporations act have been successful in changing the common law view of companies entering into contracts while they remain unincorporated. ... the name of the man who intended to be a company director. By the time that the goods were delivered to the ... Fairchild (1975) 1 NZL R 529 at 542. In some cases that involve writings which were completed by promoters, the courts ...
Directors’ Duties
Since companies are usually established and managed by directors and a number of officers, these directors have that ostensible authority, collectively, to represent that mentioned company and not as an individual Director. As I am going to talk about it below, some individual directors (Andrew and Brian in this case) have been known to enter in to some kind of contract with outsiders (other companies) and not collectively as board of directors, as allowed under s201J and s198D of the Corporations Act 2001 (Cth).
Directors, in most cases, have contravened these sections of the Act because they have their own material personal interests outside the company and have disowned their “duty to act honestly and in good faith to the best interest of the company” as per Part 2D.1 of the Corporations Act 2001 (Cth).
Directors can only avoid the civil or criminal penalties for breaching the Corporations Act 2001 (Cth) only if they fully understand their liabilities and duties (Sievers, 1997 and Cassidy, 2006).
Some of Corporations Acts laws, which directors need to be watchful for, in order to avoid contravening Corporations Act laws, are and not limited to:
1. Act in good faith and honest for the best interest of the company.
2. By considering company’s interests ahead of their own.
3. Avoiding conflicts of duty and interest.
4. Duty to avoid insolvent trading by the company
1. Duty to act honestly and in good faith to the best interest of the company
As far as s181 of Corporations Acts 2001 (Cth) is concerned, any director including Andrew and Brian in our case, have to act “in good faith and in the best interest of the company (Pandora Diamonds and Gems Pty Ltd)” (see Darval v North Sydney Brick and Tile Co (1988) 6 ACLC 154) and not for their personal intentional purposes. In our case, before resigning, Brian set up his own jewellery business so that he can engage in a lucrative business of supplying jewellery to his new friend Victor after resigning from Pandora Diamonds and Gems Pty Ltd. Brian, under Corporations Act 2001 (Cth) s.184, may have infringed the statutory duties that are found in ss.181-183, and therefore liable for civil or criminal penalties as per Corporations Act laws (Sievers, 1997 and Cassidy, 2006).
The Business plan on Management Ability Business Company Corporations
With the growing number of corporations taking over small businesses, and the belief that becoming a proprietor is associated with being wealthy, one must decide which type of business to become involved with. There are several differences between these two types of business. A corporation is a business organization having a continuous existence independent of its members (owners) and power and ...
2. Duty not to improperly use the position of a director to gain any personal benefits
As contained in s182 of the Corporations Act 2001 (Cth), directors must demonstrate their powers for the required purposes so that companies like Pandora Diamonds and Gems Pty Ltd for example can benefit and those directors who violate s180 of the Corporations Act law Sbe penalized or disqualified in the court of law as was illustrated in the case of Mills v. Mills (1938) 60 CLR 150 (Cassidy, 2006).
In our case, the exercise of power by Brian to secure some personal advantage by starting his own jewellery business, is considered as an ‘improper purpose’ because it is not within the purpose of benefiting Pandora Diamonds and Gems Pty Ltd, but to himself (see Mills v. Mills (1938) 60 CLR 150, Biala Pty Ltd v. Uallina Holdings (No 2) (1993) and ASIC v. Adler (2002)).
Eventually, Brian will be responsible for any financial benefit he might have received as the head of Pandora Diamonds and Gems Pty Ltd (see Queensland mine Ltd v Hudson (1978) 18 ALR 1) (Cassidy, 2006, p. 251).
3. Avoiding conflicts of duty and interest.
The conflict of interest is a matter for all board of directors that does not only affect specific directors in the company. According to section 182 and 183 of the Corporations Act, any misuse of director’s position just for the disadvantage of the company and for the benefit of the director is generally forbidden by the law (see Aberdeen Railway Co. v. Blaikie Bros (1854).
If some sections like s191 to s195 of the Corporation Act is analyzed further, it details some important rules on how Directors (Brian included) are supposed to disclose or declare to the board of directors, if there is any personal interest that is related to the affairs of the company. This is required so as to ensure that the honesty and integrity of directors are thoroughly observed (Cassidy, 2006).
The Research paper on Company Case Study of Technics SL Ltd
BackgroundThe company that I have chosen to look at is Technics SL Ltd, a subsidiary company of Technics Ltd, which is now owned by Panasonic. Technics main purpose of business is home entertainment systems but Technics SL Ltd concentrate their efforts toward turntable production. They currently produce 2 products, the SL1200MK2, SL1210MK2. (Appendix 1)•Technics announced the world's first direct ...
As far as our case is concerned, Brian may have violated s181 of the Corporations Act, for he did not declare or disclose to the board of directors that he has some interest of starting is own business as required under s191 (3) and he may be prosecuted in the court of law for not declaring his interest.
4. Duty to prevent insolvent trading by the company
Corporate regulators have tried many means to make sure that there are no companies that can trade while insolvent by imposing higher level of liability on directors. As per s588G of the Corporations Act, civil penalties and personal liability on directors have been imposed on them if in case a company incur a debt and is declared insolvent.
An example of a case where directors were liable for the company’s insolvency was that of Commonwealth Bank of Australia v Friedrich. Here, Maxwell Eise who was a director was fined millions of dollars for causing the company to undergo insolvency. The court argued that Maxwell Eise (Brian and Andrew in our case) had breached s588G of the Corporations Act and was liable for debts incurred by the company because his failure to prevent it.
If in case directors of companies like Pandora Diamonds and Gems Pty Ltd have acted criminally and believed to be dishonest, in which may harm the company because of their self personal advantage, ASIC with the assistance of Australian Federal Police, criminal investigation can be conducted and tough procedures has to be followed when collecting evidence that will be use to determined as to whether a prosecution should go a head. And if the case is found to be more serious, it will be handled with the Commonwealth Director of Public Prosecution; otherwise the lower courts will deal with these kinds of cases.
All in all, directors should carefully study, understand and appreciate their duties and responsibilities that they are subject to as company bosses. Being a director of a company is not an easy task because there are several fiduciary duties that need to be adhered to.
The Research paper on Principal-Agent Problems Are Caused by Insufficient Oversight by Company Directors
Some theories try to put in place “the best way” to solve all the problems that present to the organizations. These studies suggest to us the following question. Do different interests from the operators cause the organizational issues? Through the expertise of the governance theories we will discuss the issue that exists between the owners and the managers of companies (Principal-Agent). This ...
