Question 1
This case is under coverage of the company laws of Australia. Specifically, the case pertaining to Bang Ltd covers principles covered by the Corporations Act 2001. In this case, the directors have the authority to employ or reject the employment of Mary. This is implied in s198A of the Corporations Act 2001 pertaining to the powers of the Director. Specifically, the said legislation indicates that “the business of the company” has to be directly addressed by the directors. In this case the appointment of Mary in a very sensitive position in the company is considered a part of conducting business in the company.
In order to make the appointment possible, the directors must convene in a director’s meeting should take place. Under s248c of the Corporations Act, it states that any one of the directors could take the initiative in calling for the meeting, provided that “reasonable” notice is given to the other directors of the company. If by chance, one could not make it to the meeting personally, the directors have the option to allow the use of technology to enable the absent director acquainted with the meeting in real-time. (s248d) They could use the telephone or even videoconferencing to make the meeting possible. Since there is no constitution in the corporation, the directors will have to elect a chair that will facilitate the meeting along with the tenure in the said position. (s248E) Moreover, with the absence of a particular constitution, having two of the directors constitute a quorum for the meeting. (s248f) If they decide on a particular course of action regarding the case of Mary, then they have to vote on it. In case of a deadlock, then the elected chair should still have to cast his/her vote as a director. (s248g)
The discussions above have presented the power of directors in the company. In the same manner, the delegation of the decision making authority is presented with particular focus on the directors’ meeting procedures accepted in the Australian setting.
Question 2
This case is still under the coverage of company laws in Australia with particular reference to the duties and responsibilities of the directors. Moreover, the issues surrounding the case also pertains to the liability of the directors once they have incurred some form of breach among these stated duties in the Corporations act 2001. Looking at the case, the directors, in deeming that sending the machine by sea, appeared to have made a decision in good faith and in the best possible regard to the company in financial terms. For this reason, they are only acting on their fiduciary duty on the company as required by s181 of the Corporations Act 2001. This protects them from any possibility of being charged with a breach of duty particularly in the apparent lack of care and diligence as required by s180 of the Act. Their decision to put the transfer of the machine by sea is apparently a business judgement which offers them a safe haven from liability caused by any supposed breach of duty. In case of any charges, Bill will be exempted early on because he is protected by s588H as he is not part of the management at the time of the decision was made.
In the condition that the company could not meet any payables incurred by the acquisition of the machine, it appears that the directors of Plastic Ltd have engaged the company in insolvent trading. In this regard, the directors are liable of the company debts as they are in breach of s588G of the Corporations Act 2001. Thus, the burden of proof is left on the creditors to prove that the directors are indeed in breach of s588G of the Act. To some extent, the creditors must only prove that the company was insolvent when they have completed the transaction of the purchase of the machine. In the same manner, the creditors must also prove that there are reasonable grounds to presume that they expected Plastic Ltd was insolvent and that there was an apparent possibility of insolvency on the defendant. On the other hand, the Act has also indicated certain defences on these types of charges as seen in s588H.
Companies and organisations in Australia, particularly their leadership, are covered by law indicating their prescribed responsibilities along with the liabilities that are waiting for them once they have breached any of the established legislation in the state. In the case of Plastic Ltd, they would have to establish that there was a reasonable ground to expect that they would have been able to pay the creditors as there was an existing order of phone cases which basically is the reason of purchasing the machine.
II. Part B
Question Three
The case to be discussed here is covered by the Australian company laws pertaining to the rights of members and shareholders in a company as indicated in the Corporations Act 2001. Basically, the legal principles to be discussed in this part involve the alternatives that are available to the shareholders and members in making a change in the behaviour of the corporation through a change in policy. In the same manner, a discussion will be given on the methods pertaining to forwarding resolutions in the general meeting of the corporations will be detailed as provided by the Corporations Act 2001.
In the case of Harry and Wombat Ltd, there is an issue whether it is appropriate for the shareholders to decide on matters like environmental issues. Technically, individuals like Harry actually owns Wombat Ltd. However, their ownership of the said company is limited to a certain extent. To be specific, they have a limited legal claim on the activities of the company. However, regardless on how minute this legal claim may be, it could still engender change in the position of the organisation, in this case in terms of their policies towards the environment. Specifically, s9 of the Act claims that members could propose a resolution to the company forwarding certain issues that could affect the welfare of the shareholders and the company as a whole.
Based on the Corporations Act 2001, there are a couple of alternatives available for members to forward a resolution. One alternative is to present it in a members’ meeting. However, in the case of Harry and his colleagues, Wombat Ltd refused to carry out a members’ meeting. This is a breach of s249d of the Act which vehemently stated that the directors must hold a general meeting if at least a hundred members or 5% of the votes of the entire shareholders have requested it within the span of 21 days. In any case, assuming that Wombat directors would not budge, Harry would have to amass over 50% of the members and eventually go through with the meeting without the directors.
Another means of ratifying the proposal of Harry is to record and acquire the signatures and approval of all the shareholders in the company as stated in s249a. In this course of action, the resolution is approved the moment the very last shareholder have signed the circulated document. However, it must be emphasised that signed documents and a proof of notification in ASIC should be made to provide legal backing on the approved resolution.
Furthermore, the company since it is a publicly owned company is obligated by law to hold an annual general meeting (AGM). It is in this occasion that the members sand shareholders could forward their claims and questions towards the directors and other high ranking officers in the corporation. In the case of Harry, they could follow the provisions in s249n(1) of the Corporations Act 2001. Once the requirements in the said section are satisfied by Harry, the business indicated in the resolution is required to be heard and tackled in the subsequent general meeting as stated in s249o(1). In any case, the environmental concerns proposed by Harry will be tackled one way or the other by Wombat Ltd.
Question Four
The case involving Morris and Randy covers issues of interests in the company. For the discussions and recommendations below, the Corporations Act 2001 will be consulted once again. Specific legal issues will be taken into account like the duty of Randy as a director of Missile Ltd, the existing conflict of interest, and material personal interests. To begin with the discussions, the duties of Randy should be emphasised. Stated in s182 and s183 of the Act, there are restrictions on the part of Randy to use his position in the company to gain advantage for personal means. In the same manner, these provisions also restrict Randy from using the position to compromise the welfare of Missile Ltd. In this case, the existence of his connection with an apparent direct competitor, Lazer Inc, Randy’s position is hugely compromised and given doubt among the shareholders like Morris.
This shows that there is a possibility of conflict of interest on the part of Randy. Given that his position has already been decided on by the directors, then Randy must then withhold himself with reference to s195 of the Act. This means that his decisions and voting privileges must be inhibited such that further issues of conflict of interest will be laid to rest. This may only be the way that shareholders like Morris would be pacified.
To a certain extent, Randy’s acts of creating another company placed himself in a situation that appears to be marginalised. In any case, as a director of Missiles Inc, it is his legal duty to present an image of infallibility and accountability for the sake of the shareholders. Otherwise, he may be held liable in both criminal and civil charges if the shareholders proceed in doubting the leanings and actions of Randy.
Given that an interest is established on the part of Randy being the director of Laser Inc, by virtue of s195, he has the obligation to disclose his interests in the board of directors. In consulting the case of v (1998), having a material personal interest at these types of issues tends to highlight the possibility of bias and impartiality in making decisions with particular reference with the relationship of Randy with Lazer Inc.[1] At this point, the fiduciary duty of Randy is placed in a rather compromised position.
The discussions above have indicated the existence of directors governing a multitude of organisations. Thus, legislations like the Corporations Act 2001 to protect the interest of the shareholders and the corporation as a whole. Moreover, the discussion above also highlights the importance of accountability and disclosure on the part of the directors such that their duties in the organisation are not jeopardised.
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