Law Assignment - Australian Case - Corporations Act - Assessment Answer

January 15, 2017
Author : Ashley Simons

Solution Code: 1GDJ

Question: Law Assignment

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Company directors are required to abide by the law that has been placed within the country. For example, the Australian government has laid down laws that help in controlling the activities of directors, of various companies. Failing to abide by these laws will constitute a breach on their part. The Director’s duties refer to a series of common or statutory law that are primarily owed by the directors. This forms a central part of corporate law within the country. However, these duties are owed to the corporations and not individual people within the company. For example, in Australia, the directors have the obligation to act in good faith and the best interests of the company. This shows that their loyalty should lie on the company and not the individuals (Lowry, 2009). However, some Directors fail to meet these requirements under the law. This may result in some legal action against them.

Case Introduction

The Australian Securities and Investment Commission (ASIC), is the government appoint company regulator in Australia. ASIC launched a civil case against ANZ Banks for activities that took place between March 2010 and May 2012. This legal action was taken against the Banks Treasury and Global Markets Division. During this period, the bank help a prime position in the bank swap reference rate (BBSW), which was administered by the Australian Financial Markets Association. ASIC is accusing ANZ Bank, for using their large market position to influence the interest rates. This move benefited the bank while at the same time became a significant disadvantage to its clients. In this case, the Bank was only looking after its interests in the transaction dealings. The regulator argued that the Directors of the Bank were in breach of their duties. The law clearly states the activities that should be done by the Directors of companies in any given situation (Shapiro, 2016). Also, the law states the actions that are not expected of Directors in any particular situation.

However, ANZ bank came out to defend itself, indicating that the regulator had misunderstood it. The bank stated that it was well within the law while conducting the operations it conducted during the specified period. According to ASIC, ANZ Bank operated in a manner that created an artificial price for the bank bills on separate days, amounting to 144 days. ASIC claims that the bank’s behavior caused a financial detriment in the industry. ANZ Bank stood its ground and denied all these allegations. This resulted in the legal case that saw the two bodies engage in court battles for a prolonged period. The bank is accused of trying to benefit itself by manipulating the prices of the bank bills in a bid to raise more revenue at the expense of its clients.


The Australian Government has implemented some laws that are used to regulate the manner in which the Directors of Companies are conducting themselves. All the actions of the Directors are supposed to be in the best interests of the company. The Directors do not have an obligation to any person. Therefore, a Director should work to ensure that they are in a position to become more successful by the day. However, the Directors of ANZ Bank engaged in an action that only saw them benefit at the expense of the bank and its clients. The company exists because of the clients. These are the people who bring continued businesses to the company. Therefore, a Director should work to ensure that their best interests are observed. The purpose of the regulator is to ensure that all company Directors engage in fair business practices. Directors in companies have the following duties and responsibilities:

  1. They have a duty to exercise their powers and responsibilities in good faith and the best interests of the company.
  2. They have the duty of refraining from using their positions within the company to gain a personal advantage for himself or herself or someone else.

  • They have a duty not to use the information they possess about the company for the wrong purpose. This refers to information that has been gained because of their position within the company (Johnson & Ricca, 2011).

Directors have a duty to exercise their powers with due are and diligence that a reasonable person would have.

In this case, the directors of ANZ Bank had gone against the duties and regulations they are to abide. The directors of the bank were in breach of their duties and responsibilities. The behavior of the directors caused an artificial increment in the prices of bank bills. This would eventually benefit the directors. This action constitutes to using their positions for their benefit without considering the effect it will have on the company and other people as well. This is a breach of the duty that they should nod not engage in unfair practices of using their position for their benefit. Directors are supposed to observe and respect the rights of other people as well as the people and should not have a selfish character. The behavior portrayed by the directors of ANZ Bank clearly describes the selfishness that was possessed by them. All their actions should be geared towards the benefit of the company and the stakeholders. Their positions should be used to influence any decision of activity. They only serve as agents whose responsibility is to manage the company and its operations (Shaner, 2010).

For example, a case of ASIC v Adler and Ors was rule din favor of ASIC. Adler and Ors was found to have contravened four sections of the corporations act. The company conducted some transactions without the presence of any board member. This is against the corporation act that has been laid down in the country. Furthermore, this information was not disclosed to any of the board members (ASIC v Alder and Ors, 2011). Adler was the sole director that conducted the transactions. He used his position for his selfish gain.

A case of ASIC v Vines was rule in favor of ASIC as well. Mr. Vines was found guilty of failing to conduct due diligence on his part. He provided misleading information to the Board of Directors because the information provided was not adequate. This was a violation of sections 190-195 of the corporation act (ASIC v Vines, 2011).


As the case went through Australia’s legal system, it was decided that the ANZ bank is fined a total of 50 million dollars. ASIZ had presented in court a wide range of evidence documents that showed why it believed that ANZ Bank was involved in the practice. This decision was arrived at after a long legal battle between ASIC and ANZ Bank. ANZ Bank pleaded not guilty and denied these allegations in the strongest manner. However, punishing this company in this manner would show the seriousness of the regulatory body towards maintaining a fair business environment for all companies. Also, the move will discourage all similar behaviors that are likely to erupt in the future. This decision expresses concern to other companies within the market that their directors should always engage in fair practices. The decision had an influence on the Corporation Act within the country. This decision worked on upholding this Act and ensuring that the law of the land is duly followed. The case went further to provide and interpretation of the law and the actions that are not allowed under the law.

This formed the basis of the actions that the law does not condone. People within the field of directorship are now aware of the actions that were done by the directors of ANZ Bank. It becomes clear that their actions were prohibited by law and consequences shall be suffered if someone was to break them (Dravis, 2010). Having this lesson within society helps to govern the business industry by providing a guideline of what is expected of all directors. The example of these directors was used as a benchmark for all directors within the country. The regulatory body also used this to pass a strong warning to other companies of the consequences they risk to face if they are caught with malpractices within their companies. Also, ANZ Bank will not be in a position to engage in such a practice again.


Directors form the image of a company. Therefore, they should conduct themselves in the fairest and just manner. When people in the market look at a company, they look at the directors and use this information as a basis for their judgment, opinion or view about the company. For this reason, it is important for the directors of a company to engage in fair and just practices. The directors of ANZ Bank engaged in unfair business practices by using their position within the company and the information they know to manipulate the interest rates on the bank bills. This caused them to rise, which resulted in an excellent revenue stream for them. The directors benefited alone and no third party was involved in the practice.

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