Bergera Corporation Law (Clw/3100)

Assignment Corporation Law (CLW 3100)
Name: Phuong Thao, Nguyen Student ID :121946
Introduction:

This case is related to the director’s duties. According to the Corporation Act, five directors of De-Caffeine Delights have breached their duties as directors.
There are 5 issues in this case:
1.Costa, De-Caffeine’s CFO reported wrong financial status and other directors, Elliot, Chloe and Raj, didn’t read financial report carefully.
2. The board decided to pursue an aggressive marketing campaign in an attempt to boost sales.
3. Elliot, Chloe and Raj, who also sit on the board of coco Delights, in an effort to bail out De-Caffeine, approved the sale of Coco’s prime office property (worth $5.5 million) to Caffeine Delights for $500,000.
4.De-Caffeine
( Corporations Act 2001 (Cth) s588)
Case law: Deputy Commissioner of Taxation v Clark.8
Application:
Hanrahan, Ramsay and Stapledon showed that “In Deputy Commissioner of Taxation v Clark, the court considered the meaning of the words “some other good reason”. The court said “ a core, irreducible requirement of involvement in the management of the company” and “every director is expected to participate in the management of company.” (Hanrahan, Ramsay and Stapledon 2014).
- According to Deputy Commissioner of Taxation v Clark case, Sulin was on holiday that was not “good reason” so section 588H(4) was not available for her.
- Some standards of care, skill, diligence and delegation and reliance be shown by
Hanrahan, Ramsay and Stapledon:
“Detailed inspection of day-to-day activities is nor required but what is required is a general monitoring of the company’s business affairs. Accordingly, a director should attend board meetings
Based on standards above, Sulin has breached her duty of care and diligence as director of De-Caffeine Delights. Conclusion:
Costa, CFO’s De- Caffeine Delights has contravened the statutory duty of care, diligence and skill under section 180 (1). He has also breached section 181 about act in the good faith in the best interest of the corporation and section 286 of Corporation Act because of not preparing financial statement consistently.
Elliot, Chloe and Raj have breach their duties of care, diligence and skill as directors of De-Caffeine Delights because of not reading carefully financial report under section 180(1). They have also taken responsible for not preparing and maintaining financial statements under section (286). In addition, they have breached section 187 about director’s duties on wholly-owned subsidiary.
Sully has breached section 180(1) about duty of care, diligence and skill because she didn’t participate in board meeting.

Reference