FACULTY OF BUSINESS
SCHOOL OF LAW
BLO 2205 CORPORATE LAW ASSIGNMENTSemester 1 2010
Melbourne Pty Ltd has one company secretary, Jill and four directors: William, Jack, Susan and Sarah. William is the managing director of the company while the rest of the directors are non executive directors of the company. Susan is an experienced business woman with other business interests and she is not involved in the running of the company. She leaves the running of the company to William and relies on him. She believes that if there is any problem in the company William will let her know. Sarah is William's wife and she never attends any company board meetings. Sarah always relies on William and never questions his management of the company because she trusts him implicitly in relation to all company matters. Jack has always been actively involved in the running of the company business until July 2008 when he was diagnosed with a heart condition when he became very ill. Following his illness Jack was unable to attend Board meetings and could no longer carry out his main function which was to monitor the financial situation of company. In June 2009 Jack intended to resign from his position as a director but was hospitalised and forgot to lodge his resignation with the company and ASIC.
In June 2009 the financial position of the company worsens. Despite being fully aware of the company's deteriorating financial position William does not inform the other directors of this as he does not wish to worry them. If ever questioned about the company’s financial performance William always stated that the company's financial position was solid and he distributed to the board members a summary report confirming this.
As a result of this favourable report, the board of directors decides to declare a dividend to members. Susan was absent from the meeting. Shortly after the dividend was paid the company went into liquidation. The liquidator discovers that the company was not keeping proper financial records since Jack’s illness.
Advise whether there have been any breaches of the directors’ duties in relation to insolvent trading. Also advise whether any defences are available to the directors and what penalties may be imposed upon them if they are found to have breached the insolvent trading provisions under the Corporations Act 2001.
(Total of 30 marks)
Lipton, P., and Herzberg, A., Welsh, M, Understanding Company Law, 15 edition Thomson Reuters. Students should remember to look at the Lipton and Herzberg website. www.lipton-herzberg.com.au
Harris, J. Hargovan, A. Adams, M. Australian Corporate Law LexisNexis Butterworths 2nd edition, 2009.
Austin R.P. & Ramsay, I., Ford's Principles of Corporations Law, Butterworths, Australia, 14th edition, 2010.
Baxt, R., and Fletcher, K.L., Fridman, S., Corporations and Associations Cases and Materials on, Butterworths, Australia, 10th edition, 2008.
Hanrahan, P., Ramsay I., Stapledon G., Commercial Applications of Company Law. CCH 11th edition 2010
Redmond, P., Companies and Securities Law - Commentary and Materials, Law Book Co., Sydney, 5th, 2009.
Ciro T, Symes C, Corporations Law in Principle LBC Thomson Reuters, Sydney, 8th edition 2009
Li, G, Riley, S. Applied Corporate Law: A Bilingual Approach LexisNexis 1st Edition 2009.
Cassidy, J. Corporations Law Text and Essential Cases. Federation Press, 3rd edition Sydney 2010
Harris, J. Corporations Law, LexisNexis Study Guide 1st edition 2008
Harris, J. Butterworths Questions and Answers Corporations Law:, LexisNexis, 3rd Edition Sydney 2009.
Fisher S, Anderson C, Dickfos, Corporations Law - Butterworths Tutorial Series, 3rd Edition Butterworths, Sydney 2009
Tomasic,R.,Jackson,J.,Woellner,R., Corporations Law - Principles, Policy and Process 4th Edition Butterworths., Sydney, 2002.
Tomasic, R. Bottomley,S. McQueen,R....