The Case of Australian Securities and Investment Commission - Essay Example

The Case of Australian Securities and Investment CommissionIntroductionPaul, Kim and Karen are directors of the Sunset Industries Limited(SIL) and are involved in various issues that need to be determined by the Australian securities and investment commission(ASIC) whether they have breached any of the directors duties under the Corporations Act 2001.IssuesThe issues in the cases about Paul, Kim and Karen in the texts involve the following scenarios; Paul suggested that Properties One Pty Ltd (PO) should be the consultants for their company SIL to investigate the most appropriate place for a new power plant in Toowoomba region.

Whilst doing this Paul did not inform the other directors that his wife was a director and a major shareholder at PO. Paul also hired the Security One Pty Ltd (SO) on the basis that it had a nice website instead of doing a thorough background check on the company to find out if it was a registered company, the management and even the track record of the company. The other issue is that Kim informed Judy the sister-in-law about SIL proposal and she went ahead to buy shares at PO. Karen’s issue is that she entered into a contract with Conveyers Australia Ltd after she was informed by the Chief Financial Officer that the prices of coal would go up by 25% because of the cold weather but she ignored as she only saw it as a short term issue and used it to benefit herself.

LawAccording to the Corporations Act (2001) of ASIC, directors are officers of a corporation and are supposed to oblige to the duties they are entitled to in section 9 CA. “Section 182 states that a director must not improperly use their position to gain an advantage for themselves or someone else; or cause detriment to the corporation.” Paul broke this law by suggesting the PO Company to be used by SIL to promote the company of which his wife is a major shareholder and a director. Additionally, Paul breached section 180(1) which stated that “directors must exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would in that position.

” Paul used his power to hire the security firm that was not registered and hired the firm based on the fact it had an attractive website therefore leading to theft in the company. Kim and Karen improperly used their powers in order to make a selfish gain. “Section181 stated that directors must exercise their powers and discharge their duties in good faith in the best interests of the corporation and for a proper purpose.” Karen had interest in the subject matter of the company and hence when she got the perfect opportunity used it to make a selfish gain.

Karen broke the regulation according to section 588G because she did not prevent the company from incurring debts while it is insolvent which is a civil penalty provision.ApplicationThere is evidence that Paul, Kim and Karen breached the directors’ duties under Corporation Act 2001 since they did the opposite of what the laws state. Paul failed to inform the other directors about the wife being the major shareholder of PO firm and also being a director in the same firm, thereby disobeying the law by not declaring his material personal interest indirectly.

Kim and Karen disobeyed the law by failing to discharge their duties in good faith since they wanted to benefit themselves.Conclusion ASIC found no evidence in the cases about Paul, Kim, and Karen about breaching the directors’ duties in the Corporation Act but according to my opinion, Paul breached his duties as a director by hiding some information from the others and improperly using the information from Google to hire a security firm that was not warranted to contract with them. Kim and Karen also breached their duties by failing to discharge duties in good faith.

ReferenceTurner, C., Gamble, R., French, B., & Muurlink, O. (2012). Business law for managers. Pyrmont, N.S.W: Thomson Reuters (Professional.