The Australian orporations Law - Case Study Example

MРАNIЕS АND РАRTNЕRSHIР LАW АSSIGNMЕNT by Student’s Name       Code+ Course Name Professor’s Name University Name City Date Introduction The Australian corporation’s law governs companies and partnerships at both the interstate and federal level. The law focuses on the formation of companies and the roles and duties that directors and shareholders have to play (Davenport and Parker 2011, p22). Other matters regulated by the corporation’s acts include takeovers, duties of officers as well as fundraising. The issues facing AHVG Company can be resolved by looking at provisions as per the Corporate Act 2001. These issues include registration of the company, duties of directors as well as contracts. The corporation law states that by creating and registering a company, one sets up a legal entity for which they have to be responsible (Latimer 2012, p 78). This means that the shareholders and directors of a registered company are liable for all the transactions the company gets involved in. In AHVG case, Jack, Jill, Yuen and AH are potentially responsible for the company’s contracts and transactions. Who is potentially liable for the contracts arising? As pointed out in the introduction, the setting up and registration of a company means that the company is a legal entity and that its owners should be responsible for it. In AHVG case, Jack entered the contracts on behalf of the company even before its registration. Being one of the directors, he was expected to enter into fair contracts. The corporation act 2001 (section 801) points out that and other officers are required to discharge their duties diligently and with care. Any business decision made by the director should be done for a proper purpose and in good faith. Additionally, the law requires the directors not to harbor any feelings of self interest when making the judgments. Apart from that, they are required to believe that the decisions they make are to the best interests of the company. Jack’s decision to lease out the renovated building from AH as well as buy the entire stock of wine from AH are openly in favor. The quoted prices are very high, an indicator that Jack seeks to benefit himself as well AH. The fact that Jack entered into the contracts before registration of the company means that he should be held liable for the issues arising from them. Additionally, the contract decisions were solely made by him without the involvement of other shareholders. The corporations act 2001 (s 182) prohibits directors from using their positions inappropriately or in any manner that will result to added advantages to themselves or any other entity. Section 191 points out that directors have a duty to make full and true disclosures of information within their knowledge to make it possible for shareholders to make the right decisions (Tomasic, Bottomley and McQueen 2002, p56). The fact that Jack did not provide information to other shareholders before going into the said contracts means that he did not provide crucial information to shareholders, a fact that could have seen different decisions being made. This shows that he should be held liable for any losses that would arise from the contracts. Is Yuen Right in his accusation about Jack? Yuen accuses Jack of breaching his promoter duties to AHVG. It’s clear that Jack’s decision to enter into the contracts would benefit the other parties while increasing the costs incurred by the company. Jack is unfair and self centered in his decision to enter into the contracts. The corporation act points out a number of criminal offences a director can be accused of if they are reckless or dishonest in their decisions. Jack’s failure to exercise his duties in the best interest of the company and in good faith means that Yuen is right in his accusation that it is possible for the issue to be taken to the courts of law. Section 184 of the corporations act points out that criminal offences are created when an officer intentionally or recklessly misuses his position for their own self gain or for the benefit of another entity. Additionally, it is a criminal offence for an individual to take advantage of his position to misuse company information or resources. As a company director, Jack was under an obligation to fully understand his roles and responsibilities. To be successful in his position, he had to show high levels of competency which comes with understanding of his roles and duties. The business judgment rule points out that a director avoids any personal liability as a result of their decisions if their judgment is informed, honest and rational. It is clear that Jack’s judgment was not honest and rational and is to be blamed for any losses that would arise. Yuen decision not to ratify the contract is right and his accusation that Jack failed to meet his side of the obligations is also right. Being a director for both AH and AHVG places Jack in a position of self interest. Yuen calls for him to resign as director will certainly remove him from this compromising position. The corporation act also requires directors to inform other officers of any personal interest that may arise and which is related to the matters of the company. Jack fails to notify other officers of the potential self interest thereby should be accused of failing to act appropriately in his position as a director. Conclusion The corporation act regulates the formation, registering as well as business transactions a company may enter in. Additionally, it spells out the duties of company officers including directors and also regulates partnerships. The law points out that decisions made by directors should be honest, rational and to the best interest of the company. Jack’s decisions are not to be best interest of the company, meaning that he is potentially liable for the contracts. Additionally, he made the decisions on behalf of the company in such a way that he cannot avoid any personal liability arising from the judgment as pointed out by the business judgment rule. Yuen accuses Jack of breaching his promoter duties to AHVG. It’s clear that Jack’s decision to enter into the contracts would benefit the other parties while increasing the costs incurred by the company, a fact which shows that Yuen is right in his accusations. Jack is unfair and self centered in his decision to enter into the contracts References list Davenport, S. and Parker, D. (2011). Business and law in Australia. 1st ed. Pyrmont, N.S.W.: Thomson Reuters (Professional) Australia. Latimer, P. (2012). Australian business law 2013. 1st ed. North Ryde, N.S.W.: CCH Australia. The Corporations Act 2001 Tomasic, R., Bottomley, S. and McQueen, R. (2002). Corporations law in Australia. 1st ed. Leichhardt, NSW: Federation Press. Read More