Universal Property Group Pty Ltd Business - Assignment Example

Name: Institution: Professor: Course: Date of Submission: Questions and Answers Question 1 A) i. What is the Company ABN? The ABN for Gremmo Homes Pty Ltd is 71 096 910 995 ii. What type of company is Gremmo Homes Pty Ltd? Gremmo Homes Pty Ltd is an Australian Proprietary Company, Limited by shares iii. What Document was registered on 13/7/2010? On 13/7/2010, the company registered document 1F0287382 which had changes to the company details. B) Universal Property Group Pty Ltd Business This company got involved in mortgage loan in which it lent out money to investors apart from being a house construction company so that vendors could acquire their desired houses for business activities. However, the company practiced unconscionable conduct for its own benefit at the expense of other lending companies. ASIC’s Concerns about Universal Property Group Pty Ltd Following the unconscionable conduct practiced by this company, ASIC accepted an enforceable undertaking from the company as a result of investigations into such bad business habits. In this enforceable undertaking, Universal Property Group Pty Ltd agreed to a program in which vendor finance borrowers entitled to this company would seek compensation in the event of unconscionable conduct. Some of the concerns by ASIC included: Whether the company made enough investigations as to the borrower’s or any guarantor’s fiscal position The company’s reliance on borrowers’ view points concerning their financial positions as well as its inefficiency to prove such allegations Whether the borrowers understood terms and conditions within which their vendor finance loan operated Unconscionable Conduct This is a term used in Trade Practice Act under which it refers to unfriendly or unfair characteristics by a stronger party towards a more vulnerable one. This is done by imposing perverse conditions or concealing of terms so that there is a fiscal benefit by the stronger party at the expense of others. Question 2 Main Disclosure Requirements of Listed Companies under the Corporations Act 2001 The current corporations Act 2001 has laid down a wide range of requirements for listed companies to accomplish particular in the sector of financial reporting. Under this Act, all publicly ran companies operate equally regardless of them being for-profit or not-for-profit. This is laid down following the fact that any firm that gets capital from the public as well is compelled to make sure all shareholders and stakeholders can access the data on investment. On the other hand, the main concern of the not-for-profit companies that are limited by guarantee likely to notably affect the demand for extensive fiscal reports by shareholders. In such cases, members in general invest just ostensible amounts of funds into the corporation (Fu, 2010, p. 88). The corporation Act 2001 which has approximately 11000 firms listed by limited guarantees and have no power to offer shares to members. As a result, every member in the company has an obligation to pay an amount specified within the company’s rules and regulations (Latimer & CCH Australia Limited, 2010, p. 176). This is only applicable in the event a company goes into liquidation. However, these corporations listed have to provide a yearly report that involves a director’s report, pecuniary report as well as auditor’s report. This report has to be distributed to members within 21 days before the annual general meeting or alternatively four months after elapsing of the pecuniary year. The ASX listing Rules The ASX has a number of rules laid down to govern all companies that have been listed. These corporations must ensure that such rules are adhered to meet a number of requirements and consequently qualify to be listed under ASX. Among the many rules, the most imperative ones include: Constant disclosure in which companies are compelled to provide information to the ASX in case there is alleged information most likely to impact on the share prices. The companies must have well stipulated rules governing how novel share matters have to be implemented The companies must show how share registries as well as CHESS registration have to be maintained. The ASX Corporate Governance Principles and Recommendations Companies listed under the ASX have principles that must be adhered to following recommendations made to them. Such principles and recommendations include: Lay a solid foundation for management and oversight. In this case, companies have to set aside positions for the board as well as senior executives in which case disclosure is paramount. The board should be structured to assure value and functionality. This implies that a huge number of board members should be independent directors. Promoting ethical and responsible decision making is vital to these corporations. This calls for companies to establish a code of conduct which must also be disclosed. Most importantly as well, companies must safeguard integrity in fiscal information provision. This means that the board has to put in place an audit committee which in the same way must be structured with individuals different from those within the executive directors. Timely and balanced disclosure is imperative to the companies under the ASX. Written policies are laid down in which case they are designed to assure compliance with the rules of listing within the ASX. Question 3 a) In Frank’s case, he has breached the ASIC Act 2001- Section 12DA which covers the misleading and/or deceptive conduct. It is clear from this section that a person must not in trade or commerce engage in relation to financial services that is misleading. The penalty for this offense lies under the Corporation Act 2001- Section 1311, schedule 3 in which Frank will have to pay 50 penalty units or imprisonment for 1 year, or both. b) In this case where an auditor has been sent a notice to produce some specified book on a company for ascertaining and ultimately fails to comply, the auditor would have breached the Australian Securities and Investments Commission Act 2001- Section 30A. Such notice is subject to subsection (2) of the ASIC in which an Australian Auditor may receive a written notice to provide specific information or books to a particular member of staff within stipulated timeframe (Latimer & CCH Australia Limited, 2010, p. 252). Failure to do this like Susan has refused is subject to a penalty of 100 penalty units or imprisonment for 2 years or both as stipulated in the ASIC Act 2001- Section 63. c) Greg who is an auditor has been charged with not retaining audit working paper which indicates that he has breached the Australian Securities and Investments Commission Act 2001- Section 30A. Such notice is subject to subsection (2) of the ASIC in which an Australian Auditor may receive a written notice to provide specific information or books to a particular member of staff within stipulated timeframe. Failure to do this like Susan has refused is subject to a penalty of 100 penalty units or imprisonment for 2 years or both as stipulated in the ASIC Act 2001- Section 63 (Howells, 2010, p. 99). d) In this case where ABC Pty Ltd has failed to set up the register of members, the company has contravened the Corporations Act 2001- Section 169 of the Register of members. When this happens, the penalty is well stipulated under the Corporations Act 2001- Section 1311 of the general penalty provision. If the company if found guilty according to the law, schedule 3 of the section 1311 in the Corporation Act 2001 whereby the company will be penalized 10 penalty units. Question 4 Carr v Resource Equities Limited  New South Wales Court Of Appeal Parties Leon Phillip Carr (First appellant) Nigel Charles Purves (Second appellant) Resources Equity Limited (First respondent) Richard John Thomas (Second respondent) Judges Spigelman CJ Macfarlan JA Sackville AJA Lower Court Judicial Officer McDougall J Counsel A Martin SC (Appellants) R Newlinds SC / J Giles (First respondent) D Studdy SC / N Furlan (Second respondent) Solicitors NRG Legal (Appellants) Blakiston & Crabb (First respondent) Piper Alderman (Second respondent) Judgment by Spigelman CJ From the case, it is noted that the appellants, Mr. Carr and Mr. Purves, were directors of Resource Equities Limited (REF) which is the first respondent. Similarly, Mr. Thomas, the second respondent, served as a director of the REF. their terms of service in this company overlap between January 2001 and March 2005. In the initial hearing of the case in the lower court, REF accused Mr. Carr and Mr. Purves of breaching the director’s duties as stipulated in Sections 180, 181 and 182 of the Corporations Act 2001. In addition, the two had breached their fiduciary duties at a time they were directors of REF. In his ruling, lower court judge, McDougall J found them guilty of breaching their duties based on four issues: In the first place, they had overpaid director’s fees at the rate of $33,000 per year for each director which summed up to $368,500. The two as well went against their statutory and fiduciary duties through investments of equity and loans in the fox transaction. Within a period of one and half years, there was a release of $2,547,000 following this investment yet the company only received $1,865,000 which indicated a loss of approximately $700,000. In the third incident, the two were accused of facilitating the sale of shares in the Asia Iron before distributing approximately $858,000 to shareholders. However, the manner in which this money was distribute was unlawful and therefore His Honour, McDougall J found the appellants guilty of breaching their statutory and fiduciary duties. Lastly, the appellants were accused of causing REF to pay some legal cost concerning proceedings in the Supreme Court of Western Australia. Similarly, costs were incurred in the appointment of an administrator in addition to issuing of REF shares to Cosmos E-C Pty Ltd which would aid the directors in maintaining their control of the company. Following these four transactions, the appellants pleaded not guilty through submission of detailed written documents done by Mr. A. Martin SC, a defendant of the appellant in this court. However, neither did he sign the submission nor elaborate on them orally. On the contrary, he addressed the court orally on co-ordinate liability of Mr. Thomas. It is clear that this evidence was not enough and therefore His Honour rejected the appellants’ evidence. As a way of defending himself, Mr. Carr asserted that he had done additional work after being called upon by the company and this had to be compensated according to the corporation’s constitution. This still was rejected by His Honour in addition to rejecting attempts to reconstruct the work alleged to have been accomplished by Mr. Carr. The Fox Transaction A review of this case reveals that Fox was a company whose main investment was an Eftpos system under development. REF entered into partnership with this company through offering an initial subscription of $200,000 to attain 20% of the capital and then advance to $1.44 million. At a later stage, the proposed trust did not materialize and hence REF attained the direct beneficial interest of shares in Fox Company. During the hearing of this case, McDougall J made findings in relation to conflict of interest involving Mr. Carr and Mr. Purves. There were no substantial written submissions in relation to the Fox transaction which set out a range of factors and issues lacking detailed analysis (Howells, 2010, p. 110). As such, it is noted that the REF director did not go against his statutory duties as well as fiduciary duties. It is hence evident that appellants could have been excused following the section 1318 of the Corporation Act 2001. In addition, the written submission indicated that any loss was caused by the final cost which fell below the initial investment and therefore the appellants were not involved in the transaction. Asia Iron Proceeds In relation to this case, the appellants argue that there was no loss realized by REF since the company will be liquidated and finally its creditors paid. The only problem is that the money has been paid off to shareholders earlier than it had been anticipated. Following this, McDougall J asserted that such an action of distributing to shareholders had an impact on the REF Company making it insolvent (Tomasic, Bottomley & McQueen, 2002, p. 62). He added that in case there was a loss in this transaction, REF did not respond timely in seeking to restore payments from shareholders and therefore the appellants should not be accused for the amounts paid to shareholders. On the part of the appellants, they put forwards that their release is founded on section 1318 whereby: They were ignorant of breaching the law and understood well that they were acting within the company’s interests on reasonable grounds that they gave effect to the lawful desires of shareholders. There was no discrimination to the company since it is still on the upwards trend and therefore profits made would be used to pay off its creditor as well as be distributed to shareholders. Lastly there was no discrimination since at the time distributions were made, the company was till solvent. However, His Honour made a final judgment regard REF in which he says payments being made through litigation as well as expenses of voluntary administration by directors, Mr. Carr and Mr. Purves were all accomplished against the bounds of duty. Despite the fact that there were written submissions provided during the hearing, these submission were in a narrow compass. According to the appellants, the judgments were prejudiced based on the proposition that the matter of shares in REF to Cosmos was a deception (Howells, 2010, p. 112). Contributions Overpayment With respect to contribution made in this case, it is notable that the pending shareholders’ declaration that confined directors’ remuneration to $200,000 is valid. It has though been discovered that the board had resolved on 26th February 2003 in which they limited directors’ compensation to $1,000 per month. As such, the decision by these directors did not impact positively on what REF had initially reached upon (Tomasic, Bottomley & McQueen, 2002, p. 98). As a result of Mr. Martin not leaving behind written submission, it is difficult to establish that an oral submission ever existed during the hearing in the lower court. However, the written submission that can be referred to so far is that which concerns Mr. Thomas. Worse still, this could not be of much importance in proving the innocence of the two directors. According to the evidence provided, it was found that Mr. Thomas did not in any way receive overpayments since the money paid to him was in reasonable amounts. Nevertheless, payments made to Mr. Carr and Mr. Purves could be regarded as overpayments since there is no evidence of them working overtime. Contrary to this, some breach of duty can be linked to Mr. Thomas who only consolation is in section 1318 on the basis of acting reasonable. He has worked hard to reach an agreement with the REF. Fox Transaction The initial hearing of this case reveals that Mr. Thomas had gotten involved in the Fox Transaction in which case the appellants wanted him to pay the damages by one third. This however has been pressed forward on grounds that he falls among the three prominent directors of REF. Following the fact that Mr. Thomas was a strong supporter of the REF’s investment in Fox, it is one fair ground that McDougall J rejected claims for contribution as well as a breach of duty on the part of appellants. In this case, the evidence offered by Mr. Thomas was sufficient enough given the two appellants had been assigned specific duties during the transaction. For this reason, it is reasonable to rule that Mr. Thomas was not guilty apart from his over-trusting of the appellants. He in this regard breached his duty where he failed to be independent minded in the Fox Transaction. Out of this evidence, it can be agreed upon that the transaction had self interests as an incentive. Alleged Breach of Duty A close examination of the written submission does not hold sufficiently to accuse Mr. Thomas on the breach of duty. Such submissions only stated that Mr. Thomas got involved in the Fox Transaction in which case a lot of assumptions were taken instead of actual prove. On the other hand, Mr. Thomas had substantial prove that the appellants especially Mr. Carr had been assigned the task of liaising with the PDF Registration Board during the investment into the Fox Transaction. On the other hand, Mr. Purves worked on fiscal due diligence. However, such duties were not done and hence they are the ones who breached their duties (Tomasic, Bottomley & McQueen, 2002, p. 79). This case brings out clearly that the appellants did not leave their appeal from the ruling of McDougall J that each had breached their duties. The oral statement however focused on the matters of contribution into the Fox transaction. Bibliography Tomasic, R., Bottomley, S. & McQueen, R. 2002. Corporations law in Australia. Sidney: Federation Press. Howells, G. 2010. Handbook of research on international consumer law. New York: Edward Elgar Publishing. Latimer, P. & CCH Australia Limited. 2010. Australian business law 2011. Sidney: CCH Australia Limited. Fu, J. 2010. Corporate Disclosure and Corporate Governance in China. Sidney: Kluwer Law International. Read More