LAW202 : Corporation Law - Research Essay - Assessment Answer

December 01, 2018
Author : Sara Lanning

Solution Code: 1IJG

Question: Corporation Law Assignment

This assignment is related to ” Corporation Law” and experts at My Assignment Services AU successfully delivered HD quality work within the given deadline.

Corporation Law Assignment

Case Scenario/ Task

Who are directors of company? W hat are their duties of directors under Australia

Corporation Law?

• Give a short history of the evolution of director’s duties and responsibilities.

Please enumerate their duties and responsibilities today. Are their duties the

same in proprietary companies and public companies?

• Explain the consequences should directors contravene the law and the remedies

available.

• What do you see in the future direction of director’s duties in Australia?

• Please cite relevant case law and the statutes in your answer and provide

proper references.

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Solution:Corporation Law

Corporation law is a field of law that relates with contract law and commercial law. Corporations are formed and operated with the help of the corporation law. Each state has laws that are bound to govern the members of each corporate sector. The legal entities that are often created under the laws of the state are known as corporations (Bowen, 2013). The laws may differ with each state and also corporations may take different structures and also be used as an example of the state culture and/or the organizational culture altogether. The rights and obligations of those under the corporation law are considered thus taking a legal directive towards the requirements of each of those people that are assessed for the positions. Corporation laws enhances corporate social responsibility and also increases the degree at which corporate citizenship is put to work. Just like contract law, corporation law has a written agreement when it comes to decision making and solving legal matters (Idowu, Capaldi & Zu, 2013). The level at which corporation law has taken over the corporate sector in Australia is high enough to deal with the issue of gender disparities and diversities along with breaking the glass ceiling for the female gender. The report will analyze on the role of directors in accordance to corporate law and also create a picture of the evolution of the same. The various duties and responsibilities will be analyzed with relevance to corporation law. The main focus will however be with regard to governance and how it is affected by corporation law on various levels (Tricker, 2015). Directors are the main contributors when it comes to company growth thus the analysis of how they function, along with the purpose they serve in several corporations with regard to specified duties and responsibilities and also the various generalized roles within certain organizations in Australia.

Directors of a Company and their duties in Accordance to Corporation Law

A director of a company is one whose responsibility is to manage the business activities of the organization. In every organization, the comp-any must function by protocol and therefore there requires an organized staff for the same. The duties that are aligned are relevant to the interests that the company has either in an external scope or even in an internal perspective. In each company. The minimum number of directors is always one (Meyerinck, Oesch & Schmid, 2016). This is the minimum legal number which applies to small companies. Large companies will in most cases have several directors working together to manage business activities. The directors in a large company are most of the term referred to as the board of directors. Directors within the company have to be aware of the ownership of the assets being that of the company. The director also has no business paying the company’s debts and also they are not in a position to use the company’s money for their personal benefits (Knepper et al, 2015). Company directors are not obligated to treating what the company owns. The ownership may range from asset, funds and also property. In this case therefore, a director works as a separate entity in comparison to the company and there are always rules to be followed in order to fully achieve the targeted purpose of the company. Directors fall into several categories and are given the titles in accordance to the characteristics they display within the company. It also is determined by the duties and responsibilities that they take up within the company.

Following the above description of who a director is within the company, the difference between being a director and a member within a company is established. Members of a company are normally those with a common ownership of the company and a group of them are referred to as shareholders. The directors, unlike the shareholders, have no legal ownership but rather work under the company’s management to see over the various business activities of the company (Frankle et al, 2015). The director has to therefore be considerate of the company’s purpose and act in accordance to the company’s best interest in all areas. There are seven main general duties of a director in accordance to the company Act 2016. The first duty is to act within powers (Armstrong, Core & Guay, 2014). Each company has their own constitution that lays down the rules and regulations that are mandatory to being followed by the directors. The reasons as to why the directors are to exercise their powers under the organizational constitution is dependent on the nature, structure and culture of the company.

Another duty is to ensure that the director’s activities are inclined towards the factors that would help in the growth of the company. The director must consider the consequences in this case of every decision made that is bound to affect the company in the long term, either positively or negatively.The other duty is that the director controls the decision making process within the organisation without depending 100% on subordinate advice or help. The director is responsible for being a role model and pace setter in the company. The director does this by showing reasonable care, skill and diligence. The director is able to support these characteristics by being well informed and knowledgeable on the issues that concern the company (Chan, Daniel & Young, 2014). The other duty requires that the director be able to balance the needs of the company with their personal interests. This allows them to also exercise their duty of declaring interest in any proposed transactions.

Evolution of the Directors’ Duties and Responsibilities

The corporation law that was in scheme during the time when the commonwealth legislation was active had been found to be very unconstitutional. The factor that brought this to the realization of the corporate sector is the Wakin case that had taken over the national statute that had been in operation for the past years. The corporation law did not make any constitutional impact to the case and being a nationwide recognized litigation, the statutes that were brought forward had to be supported by a firm and certain act. There came the decision to therefore increase the rate of the corporation law by increasing a few aspects in the Commonwealth that would allow it to confer power towards various jurisdictions (Hiller, 2013). The Council of Australian Government operated accordingly in order to dissolve the financial challenges and other difficulties that faced the various organizations. The operation led to a more united and cohesive status among the states, territories and the Commonwealth government. The duties and responsibilities of the directors were introduced as a result of the Act and also the general law. The reason for this is due to the prevalence of the Australian cases being a source of common law (Marshall & Ramsay, 2012). The laws that were generated as a result covered a corporate point of view and worked in favor of the various organizations that were developed basing their statutes on strict constitutional guidelines, rules and regulations.

The duties and responsibilities of the directors have however changed over the years and show an increased strategic structure with different statutes in both the public and proprietary companies (Huggins, Simnett & Hargovan, 2015). According to the corporations Act 2001,a proprietary company must have a minimum of one director and a public company must have a minimum of three directors. The proprietary company director must originally come from Australia. In today’s organizational constitution a proprietary director must be up-to-date with what the company is doing. Another duty is to make an assessment of the company’s business performance and ensure that in the case that it involves a large amount of money; the action proposed does not violate any laws concerning the company’s funds.

Consequences that follow Directors who Contravene the Law and possible remedies

In the case that the director breaches the Civil and Criminal provisions of the Corporations Act 2001, the company may fail and be unable to pay debts as a result of the directors’ illegal phoenix activity (Iannarelli & Shaughnessy, 2014). The other consequence that comes from this breach is that creditors are denied access to the company’s assets too. Contravening of a law comes from the directors’ inability to perform their duties. Once a director is not able to perform their duties, they are guilty of a criminal offence and may be penalized a $200,000 amount or be imprisoned for a minimum of five years or even suffer both consequences. The same large amount may also be paid to commonwealth as a court order. In the case that the company experiences any form of damage or loss, the director has to rightfully compensate. The director may even suffer bigger consequences from contravening the law such as being prohibited from managing a company. There are however remedies to the consequences that the director faces (Elyasiani & Zhang, 2015). The most common remedies in this case involve excusing liability which includes the errant director convincing the court on their actions being completely honest and reasonable. Once the court is convinced that they are not guilty of any intentional breach, they dissolve the actions against the director. The other remedy involves dismissal whereby a director is removed by ordinary resolution and their rights are not affected in any way.

Future Direction of Directors’ Duties in Australia

The Australian law shows a very strict and firm nature. The nature of the director’s duties and responsibilities is governed by constitutional Acts and are therefore easy to govern. The future governance of the companies under directors will be at the level of the company’s management or even higher, following the relevance that the restrictions bring about. This means that the directors in a company may be capable of taking up higher roles in the future and also create much more stringent requirements for the advancement to their level of experience.

Relevant Case Laws and Statutes

There are cases at which the court was able to forgive directors for breaches of the Act. A good example is the Hall v. Poolman case of 2007 (Gallant, 2014). The case involved a liquidator leaving the creditors without a return at all. The claim that had been brought up was struck out as the court rejected both contentions and was in favor of the liquidator. The case is a good example of forgiveness by court due to the directors’ convincing testimony of their honest and reasonable actions. A different case is that of the James Hardie litigation (Austin, standen & Reynolds, 2012). This was in 2009 and involved ASIc v. MacDonald. There were fraudulent statements made to the liquidity of the MRCF. The case was relative to victims that had been exposed to asbestos and the company had to compensate the victims in every way. This case is a result of the incapability of the company directors to act with care and diligence. The case laws are an example of the various responsibilities that govern the actions of the directors within a company.

Conclusion

Corporation law exists as a result of corporate social responsibility and the need to have a company comply with both internal and external regulations. The cases that involve the directors being negligent are an indicator of poor corporate responsibility and also poor corporate citizenship. Corporation law is a reliable way to bring out the best in a company by ensuring that the guidelines and rules that have been laid down are relevant to the objectives of the company.

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