Is the Amendment to the Constitution Valid - Case Study Example

Is the amendment to the constitution valid? Today we are stuck in the process mind-set. It has brought us disasters like the health racketeering bill and a widespread willingness to accept the rogue “supreme” court’s decision. Those who are stimulated by doctrines of justice and have constantly contended for core principles must guide all politics and judge all policy. The progression philosophy always rejects this in practice and also in principle. If we rely solely on book, we must consider that the book is refereed only by whatever dignified word is scribbled on the cover. There is a loophole between honourable activism and deceitful process-mongering. The verdict is not new although the roots are spread far before the dawn of the country. The elementary philosophical gesture here is to go from the right to be let alone to the “right” to swing one’s fist anywhere you want, no matter whose face is there. The process’ philosophy without additional argument disregards the problem and humbly says, “The amendment is the process of entities speaking, and the process of courts (and pundits) talking about and deciding what it is.” The conventional approach was that the constitution was to be adjudicated whether or not they are valid or invalid with existing. According to Section 136, if the company passes a special resolution adopting a constitution or a court order is made that requires the company to adopt the constitution.1 A public company is required to lodge with ASIC a copy of a special resolution passed or modified within 14 days after it is passed. If the company has passed a new constitution or did modifications in its existing constitution, the effect of that change would be applicable on the date specified for that purpose or immediately after passing if no date is mentioned. Under section 203E of Corporations Act 2001, the law guides that in a public company, a director cannot be removed by any of other directors. Any resolution, request or notice of removal of a director is absolutely void if it is made to remove a director from their office or require director to vacate their office.2 In the present case study, George or any of the directors does not have any right to remove a director of his position or even doing any sort of propaganda against such resolution. Although, directors may appoint other directors, yet the company must confirm the appointment by resolution at the company’s next AGM, otherwise the appointment will cease automatically on the next AGM (Section 201H).3 According to Corporations Act 2001 of Australia, a public company must have at least 3 directors (not counting alternate directors), and at least 2 directors must ordinarily reside in Australia. George, being a director of the company, does not have the right to remove any director or make interruptions in the diligent and reasonable hiring of any director.4 Under section 203D, a public company may by resolution remove a director from office despite anything in: (a) the company’s constitution (if any); or (b) an agreement between the company and the director; or (c) an agreement between any or all members of the company and the director. Further explaining, if the director was appointed to represent the interests of particular shareholders, the resolution to remove the director does not take effect until a replacement to represent their interests has been appointed. If the director of company was hired to symbolize the benefits of individual shareholders, the resolution to remove the director does not take effect until and unless the replacement of the removed director has been provided to represent shareholders’ interests. Mostly, a director presents his resignation by giving prior notice of the resignation to the company board. A member also has discretionary rights so he can also lead the resolution to remove the director. For that purpose, notice of intention to move the resolution must be given to the company at least 2 months before the meeting is to be held. However, if the company arranges a meeting after the notice of removal of director is served, the meeting may then pass the resolution if the duration between the notice serving and meeting is less than two months.5 Some of the most important common duties of directors are; to act in good faith, to act in the best interests of the company, to avoid conflicts between the interests of the company and the director’s interests, to act honestly, to exercise care and diligence, to prevent the company trading while it is unable to pay its debts, if the company is being wound up liquidator must be informed of the affairs, to help the liquidator if the company is being wound up like giving to the liquidator any records of the company that the director has). Has George breached any statutory duties as a director and / or as Chair of the Board? If so please identify and discuss them. As a director, a person carries several duties, including; To act within given powers and keep checking if the company follows its constitution as set out in the Memorandum and Articles of Association. To perform in moral trust to promote the objective achievement of the company for the benefit of its shareholders / members. It is also in his duties to carry out duties with reasonable care and skill. Executive directors are expected to deliver higher standards as they are hired for a specialist or professional skills. To exercise independence and self-regulating objectivity. To make sure that there is no encounter of his personal and his professional obligations. Should perform in an ethical manner rejecting any bribes, getting influenced by others, and must disclose any personal benefits to the corporation. Not to take vantage of any business information for personal benefits or advantage. A director is not allowed to vote on matters of conflict of interest. It is highly recommended to disclose such conflict of interest to the members. Not to act in any matter for the intent to hurt or deceive any of creditors or to be involved in any other fraudulent matters. Not to engage in illogical or unethical trading. Directors are not allowed to keep on trading and doing transactions on the behalf of the company if it becomes insolvent. To carry out the constitutional responsibilities levied by the Corporations Act 2001 and other legislation. A director or other officer of a corporation must exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if they were a director or officer of a corporation in the corporation’s circumstances; and occupied the office held by, and had the same responsibilities within the corporation as, the director or officer. According to Section 181, a director of a corporation must exercise their powers and discharge their duties in good faith in the best interests of the corporation; and for a proper purpose. A director should exercise its given powers and perform its duties with the utmost degree of diligence and care that a reasonable person would exercise6. Being director, it implies responsibilities to act in good faith towards the company. It also requires acting only within their powers and using their powers only for purposes which benefit the organisation. Directors may be held personally liable who bind the company to the transaction by acting beyond their powers. Directors are also liable to act in the best interests of the company and to avoid a conflict between personal and company interests. A director must be obliged to act in the best interests of the company. George breached all his duties mentioned above as director in Comfotech Ltd. He did not stop Carl using the cheap quality Coils even promoting the faulty coils after having reported flaws in coil. He did not even mention to the other directors about the faulty coils. He hid safety issue of heating systems from the other directors. It was in his personal benefit by not disclosing the faulty coils to directors. As George developed the old heating system, he never wanted company to change it and was emotionally attached to it. Under section 182, a director of a corporation must not improperly use their position to gain an advantage for themselves or someone else, or cause detriment to the corporation.7 Under the Corporate Law 2001, George is not allowed to create such an environment that creates hindrances for a director in performing its duties and responsibilities. George is involved in an unethical practice for ceasing Samantha from directorship of the company. As per section 184, a director or other officer of a corporation commits an offence if they are reckless; or are intentionally dishonest and fail to exercise their powers and discharge their duties; in good faith in the best interests of the corporation; or for a proper purpose.8 George, as a director and chairman, committed an offence by using his supreme position dishonestly with the intention of directly or indirectly gaining an advantage. It also involved detriment to the corporation. Has Samantha breached any of her general law and / or statutory duties as a director of Comfotech Ltd? If so please identify and discuss them. According to the law, any person can becomes a director of a company on registration if the person’s name is indicated in the submission of company registration documents requiring mutual consent. The law gives the freedom to assume that anyone who appears from material submitted for company registration by the company that is available to the public from ASIC, can be a director of the company. A director needs to be duly appointed; and has authority to exercise the powers and perform the duties customarily exercised or performed by a director or company secretary of a similar company. According to Section 198A, the business of a company is to be managed by or under the direction of the directors. The directors are allowed to exercise all the powers of the company granted to them according to the law and company constitution except any powers that this Act or the company’s constitution (if any) requires the company to exercise in general meeting.9 Directors are allowed to serve different boards of companies. A director must act in the best interests of the company and its shareholders. Being serving on two different boards, Samantha owes a separate and distinct fiduciary duty to both entities as legal individuals in their own right. The most important factor in this situation is to guard the shareholders obliged to act in the best interest of company as a whole. Directors are obliged to work for the best interest of the company as a corporate being in its own right and not to the members individually, not even to a member who is a majority shareholder. As far as Samantha’s directorship in Comfotech is concerned, she delivered her duties and responsibilities with utmost care and due diligence. She indeed provided Comfotech with the innovative idea of replacing equipment technology in order to cope with the change. She knew the fact of firms who do not change their selves, get obsolete and out of business and same happened with Comfotech. If we discuss Samantha’s role as a director in more than one company, law allows her to serve two or even more boards at a time. Under Corporations Law 2001, the directors of a company are responsible for managing the company’s business. It is a replaceable rule that generally the directors may exercise all the powers of the company except a power that the Corporations Act, a replaceable rule or a provision of the company’s constitution (if any) requires the company to exercise in general meeting. If we go into the details of Corporations Act 2001 Sec191, a director of a company who has a material personal interest in a matter that relates to the affairs of the company must give the other directors notice of the interest.10 As a director, Samantha carries rights as well as duties and responsibilities towards her firm. She is expected to act within the authorised powers given under Memorandum and Articles of Association. She is obliged to act in good faith to promote the success of the company for the benefit of its owners / members. Being a director, also have to undertake the consideration of employees, suppliers, customers, the environment and the community. Is Samantha personally liable to pay for the 5,000 gas boilers she ordered from Ignigas Pty Ltd? According to Corporations Law 2001 Sec131, if a person enters into, or purports to enter into, a contract on behalf of, or for the benefit of, a company before it is registered, the company becomes bound by the contract and entitled to its benefit if the company, or a company that is reasonably identifiable with it, is registered and ratifies the contract; within the time agreed to by the parties to the contract, or within a reasonable time if there is no agreed time.11 The person is liable to pay damages to each other party to the pre-registration contract if the company is not registered, or the company is registered. Directors hold a position of on behalf of shareholders and also appointed by them to look after the company’s operations on their behalf. They act their powers and duties through the Board, which typically controls company business activities. Articles of Association of any company defines the role, power, duties and responsibilities of any director. It is always advised for any director to seel legal advice before accepting the responsibilities of directorship. According to Section 201G, A company may appoint a person as a director by resolution passed in general meeting.12 Since the company was not incorporated at the time Samantha put order for boilers, the company directors may refuse to take the responsibility for payment. Moreover, Samantha did not get a prior approval from the directors for putting order of 5000 boilers with Ignigas Pty Ltd. So, Samantha is personally liable to pay for the 5,000 gas boilers even if she ordered on behalf of Heatflo Pty Ltd. According to Corporations Act 2001, a director of a company may be liable for debts incurred by the company at a time when the company itself is unable to pay those debts as they fall due. A director of a public company may be held liable to reimburse the company for any losses the company suffers from a breach of director’s duties to the company. The director may also be subject to a civil penalty for his fraudulent activities in addition to liability for the company’s obligations toward third parties. The director of a company may be asked by a third party repay a mortgage over their house to secure the company’s repayment of a loan. If the company does not repay the loan due to the conflict of decision or any personal benefit of directors, the director will be held liable and his personal property would be on stake. According to the law, a director may be penalised of or imprisonment or even both in case he fails to perform his duties with diligence care and found guilty of a criminal offence. There is also provision that a director may be personally liable to compensate the company or third parties for the personal transactions or any loss or damage due to director’s failure to perform his duties. Furthermore, director will be prohibited from managing a company. A director is still liable to the acts if the company is deregistered or declared bankrupt. Further discussing the scenario, Samantha has not played her part with due diligence as a director. She should not order the new equipment without the approval of the board only on some personal preferential basis. Disregarding the cost of the equipment bought by Samantha on behalf of her company, her decision was based on his personal choice and not mutual consent of other board of directors. She was required to exercise independent judgement and to make sure that there is no conflict of interest and duty. Indeed the case also falls under wrongful trading. According to Section 132, a party that is involved in to the preregistration contract may release the person from all or part of their liability under section 131 to the party by signing a release. Samantha did not perform her duties with reasonable care. Higher standards of professionalism were expected from directors like Samantha who are responsible for an area in which they have a specialist or professional qualification. References: Corporations Act 2001 of Australia http://www.lloydstsbbusiness.com/support/businessguides/becoming_a_company_director.asp http://www.saflii.org/zm/cases/ZMHC/1984/4.html Read More