MA506 Company Law Assignment Sample
Here’s the best sample of MA506 Company Law Assignment, written by the expert.
Introduction
This project has focused on the case study of ASIC v Adler in Australia. Before entering into the main discussion, it is better to highlight the main case study in a brief. Adams (2018) has stated that Adler was a non-executive director worked in HIH. Williams was the Director and CEO. He has arranged almost 10 million dollars from the subsidiaries of HIH with the help of Fodera to meet the requisition of Adler. Obviously they were aimed to make some profitable business. However, Adler was the owner of a company namely Pacific Eagle Equity Pty Limited (PEE). PEE has bought the share of HIH which worth 3.9 million dollar. Thus, every one becomes ensure that the money was lent for the development of the business of Adler. Gradually, ASIC took various steps against Adler. Even, allegations have been raised against Fodera and Williams too. Now, this project has pointed out and discussed some of the main issues in this case.
Discussion
First of all, it should focus on the inappropriate behaviour of Adler which has been found in the case. Datt (2018) has opined that being a manager, controller and owner of various companies, the person was expected to make a state declaration of the purpose of lending money. Even, the usages of money should be cleared and accurate. It is not right to use the money for the development of own company. The act of Adler is against the Corporations Law of Australia. The shares of HIH were being sold at low price. During the time of August to September, AEUT has become convinced by Adler for buying various investments on behalf of the company. This is was wrong deed Therefore, it is of Adler as he just used the name of the company and has tried to buy such shares which were not included in internet and technological corporations.
Therefore, it can be said that no clarity or honesty was there in the plan of him. Du Plessis, Hargovan & Harris (2018) have added that gradually, AEUT has lost three investments which worth a high amount. After that, Adler has used PEE for making some unsecured loans and the total amount of it was 2 million dollars. However, ASIC has alleged later that those loans were disadvantageous to the corporation of AEUTS. That is why, the organisation has decided to take steps against them. Williams, Fodera and Adler have been alleged for contravention of the transaction associated party. Even, it should be noticed that the assistance of financial status as well as the duty provisions of the Directors related to the Corporation Act has also been contravened.
The case is very important as it has reminded the responsibilities and duties of directors with a business firm. From this case, it can be said that the directors were not supposed to serve their duties in a proper manner. Hill & Conaglen (2018) have discussed that the directors in the company have not performed their proper duties in accordance to the law. The raised issue was about the 10 million dollars which has been carried by one of the subsidiaries of HIH to another corporation and Adler was the only owner of it. The main fault was that the entire transactions have been carried out without the consent of any board members whereas, the approval of board members are required in such transactions.
Cassim (2017) has added that even, the HIH’s interment committee did not issue any disclosure too. The loan amount was being transacted without maintaining proper documentation. Therefore, the forms of security issue have not been mentioned too. Even, after the completion of the payment, no directors of HIH have been noticed it. Different sections of Corporation Act have been contravened by Adler. The responsibilities and duties have been breached and it was included the duty to act with diligence and care. The directors should comply with the Corporation Act section 180. They must make the business decision with proper faith. Even, they should not mix it with their personal interest. However, in this case, Adler has used the amount for his own help.
Other than that, Peden (2017) has included that they should keep the faith and the amount should be used for the improvement of the company. Therefore, section 181 has been breached by the directors of the company. Even, Adler has no proper disclosure about the money. He was intended to save his personal interest. Other than that, Adler has breached with his another duty to acquire the three unlisted investments on technologies of PEE. Besides, the duty was not being positioned properly; therefore it was being breached too. The conduct has also been breached by Adler as the share cost of his benefit has been supported more. On the other hand, Williams is also guilty as he has used his position in a wrong way because he should investigate the requirement of 10 dollars properly before permitting the money.
Apart from that, Chitimira (2017) has argued that the information related to the company has also been misused there. According to section 183, no member of an organisation has the permission to misuse the information related to the company so they can get some advantages. Most importantly, it must not result any detriment of the firm. In the discussed case, Adler has breached the section as he used the information for the benefits of his own company. In is related to the investing guidelines and committee procedure. He was quite sure that the way in which HIH has invested the money would be profitable for his corporation. While focusing on the directors, it must be said that they have breached to take proper action against the act which is prohibited. It was their duty to act properly in accordance to the act indicated by law. It would help the company in a smooth running.
The decision of tribunal has taken the decision to ban Adler in spite of serving for twenty years as a director. The obvious reason was the violence of legislation which has been directed by the act. It is obviously an appropriate punishment for him. Several sections have been breached by him. Not only Adler, these sections should be obeyed by the directors as well as other staffs of the firm too. de Koker & du Plessis (2017) have opined that breaching of Corporation Act should be considered as a punishable offense because it is liked to disobey the legal terms which should be followed by the people in a mandatory basis.
Adler and Williams have contravened the sections which have outlined all the responsibilities as well as duties of directors inn a company. Bottomley et al. (2017) have mentioned that According to the Supreme Court, Williams has no capability to serve as a director of a firm. Thus, he has been accused to disobey the sections 181 as well as 182 of the Corporation Act. The decision of the court was highly important as it has been taught that no one in future would breach the act. This decision should be considered as an example for other directors of different firms. It would help them to make cautious about the result of not obeying the act.
As Muscillo & Dawson (2016) have stated that the Corporation Act should be respected properly. Especially the people those are the directors of various organisations should not use the information for their own interests. The court of law has ensured that each of the people should follow the legal system and they should run their companies in accordance to it. In case of violation of the law, high penalty should be charged on them. Besides, the case has indicated a lesson for everybody. As discussed earlier that the directors of the companies should take a lesson from it that these sections should not be disobeyed while taking any decision or performing any activity on behalf of the firm.
Here it can be seen that Adler has used his position in a wrong direction. He was desperate enough to spend or misuse the ten million dollars for the benefit of his new company. On the other hand, the directors of the company were equally guilty as they do not take special care about that transaction. Rather it can be said that they have indirectly encouraged him to do this wrong act. Viven-Wilksch (2015) has said that over trusting can hamper the profitability level of an organisation and sometimes it may encourage the crime as well. Similar incident happen in the discussed case too.
Batrouney (2016) has suggested that section 182 in Corporation Act has included a protection part for the directors for making the business decision or judgement. It means the directors of the company have full right to take proper care against the activity of Adler. As it has been mentioned earlier that it is a criminal offence, then the penalties should be discussed here. Section 184 has indicated that a dishonest or reckless director who has contravened the sections like 183, 182 and 181 or the overall Corporation Act should be punished under criminal offense. The person should be charged for imprisonment for up to five years. He or she would be fined up to $200,000. Even, sometimes, both the penalties can be applied to him/ her.
Adams (2018) has suggested that no financial assistance can be found in case of disobeying the Corporation Act. Financial assistance refers to the situation while a firm supports other party for acquiring some shares in the holding or own firm. Granting of security is being referred to the most common financial support. However, it is clear that it is such an offence where no financial support can be got. It should be taken seriously by all the people those are the owners or the directors of the companies.
As per my opinion, the directors of the company should be more cautious as they would not get any financial support in such a case also. After going through the entire case, I can say that it is a complete case of fraud. Adler is directly involved in it. On the other hand, Williams and other people are partially involved in it. Being in an important position of the company, Williams should investigate properly that why Adler was taking such a huge amount. This is true that Adler has mentioned that the amount was taken for the company. However, it was not true and the amount was taken for his own newly started venture. Therefore, it would definitely be considered as a punishable offence. On the other hand, other directors or the board members of the company should also investigate about it.
However, I have learnt several facts from this incident. First of all, I must say that all the transactions should be checked and investigated properly. Especially, the directors should clear all the doubts before permit a transaction. Most importantly, misusing of position may bring profit initially, but ultimately it would cause a huge penalty. The Australian Corporation Act is very strict in this case. No fraud would be encouraged by it. Other than that, it is better to gain knowledge of Corporation Act before starting a business. It would help to be saved from both the attempt of fraud or being cheated.
Conclusion
The overall discussion has been made on the basis of the mentioned case study. The offence is about to disobey the Corporation Act. This discussion can be considered as a lesson for the owners of other companies and the directors also. It should be remembered that this kind of offence should be considered as criminal activity and strict penalty should be charged against the person.
References
Adams, M. A. (2018). Chartered secretary: Three pillars of corporate governance. Governance Directions, 70(6), 302.
Batrouney, E. (2016). Are the legal risks faced by company directors in Australia intolerable?. Victorian Bar News, (159), 68.
Bottomley, S., Hall, K., Spender, P., & Nosworthy, B. (2017). Contemporary Australian Corporate Law. Cambridge University Press.
Cassim, R. (2017). The launching of delinquency proceedings under the Companies Act 71 of 2008 by means of The derivative action–Lewis Group Limited v Woollam 2017 (2) SA 547 (WCC). Obiter, 38(3), 673-688.
Chitimira, H. (2017). A Comparative Synopsis of the Enforcement of Market Abuse Prohibition in Australia and South Africa. African Journal of Legal Studies, 9(1), 46-77.
de Koker, J. N., & du Plessis, J. J. (2017). Analyses, perspectives and jurisdictional overview. In Disqualification of Company Directors (pp. 1-30). Routledge.
Du Plessis, J. J., Hargovan, A., & Harris, J. (2018). Principles of contemporary corporate governance. Cambridge University Press.
Hill, J. G., & Conaglen, M. (2018). Directors’ Duties and Legal Safe Harbours: A Comparative Analysis.
Muscillo, M., & Dawson, L. (2016). Avoiding defective disclosure in IPOs. Governance Directions, 68(8), 480.
Peden, E. (2017). Civil and criminal liability of directors and officers of sporting clubs. Commercial Law Quarterly: The Journal of the Commercial Law Association of Australia, 31(1), 12.
Viven-Wilksch, J. (2015). The adventures of good faith: can legal history and international developments provide guidelines for Australia?. Alternative Law Journal, 40(2), 89-92.
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