Solution ACC2200

Topics: Corporation, Fiduciary, Contract Pages: 5 (1280 words) Published: June 20, 2014
PART A
Courts all over the world have set precedence’s of treating directors as trustees which means in the performance of their assigned legal and corporate duties, they stand in a fiduciary relation to the shareholders of the company. A director as a trustee shall act in the best of his ability to benefit the company and not in furtherance of his own interest. Each of the four directors of the company stand in a fiduciary position to the company and thus liable for their acts of omission and commission to the shareholders of the company. They did not take adequate safeguards while deciding to invest a relatively huge sum of $20 million in a completely new business venture. Section 232(2) and (3) of the Corporations Act has provided the followings: An officer including a director of a corporation shall be duty bound to act with honesty of intentions as well as actions while exercising his powers vested while discharging his duties. This has been well documented in the case of Australian Growth ResourcesCorporation Pty Ltd v. Van Reesma (1988) 13 ACLR 261.Arthur who has already acquired stakes in Weaves Pty Limited should have disclosed his position to the Board of directors of Chance ltd. He was in a position to influence the Board and thus acted with sufficient and provable dishonesty. He is liable to be prosecuted under s.233. It has been an established fact that if certain business decisions are taken and they don’t serve any rational purpose for the betterment and furtherance of immediate entities future prospect then every officer of the entity who is a party to the decision would be held liable for the irrational act. Arthur, Bill, Christine and David did not undertake a due diligence report and did not undertake a proper careful research before a new activity was undertaken. The business decision undertaken by them was in the interest of the company but it was not a rational corporate decision. None of the directors had any prior idea of the new venture and thus they were not in a position to decide clearly. The Board of Chance Limited took the decision to invest without being in a position to judge, assess, summarise the new business proposal given to them by Walter. In normal circumstances they must have gone for a detailed project report and viability studies. the commercial and financial aspects should have been assessed as well. It would have been prudent for them to have undertaken the advice of an expert panel to assess the new proposal instead of relying on Personal graffiti of Walter, who himself no expert. Thus the decision undertaken by the Board of Chance limited was not a rational decision and thus amounted to failure of oversight on the part of Arthur, Bill, Christine and David. The Board of directors of chance let themselves to be fooled by a single presentation of Walter and committed hard earned money of the company in a project they had no knowledge about. Further it was preposterous to just go for the project without undertaking any Project appraisal. And to further complicating the matter Arthur was found to be a shareholder of Weaves pty and he did not disclose the same to his board of directors. He disregarded his fiduciary position with regard to Chance limited and must be held liable for the losses accruing to Chance. The Board Of directors of chance limited have been found to be negligent in acting as trustees, agents and manager and failed to undertake established legal procedures. Further they also failed to undertake rational and informed business decisions. Arthur has conflict of interest individually, other members of the board were responsible of negligence, apathy to the cause of shareholders and fraudulent behaviour by completed going off-track on many counts. If the shareholders would be aware, the entire board runs the risk of being replaced.

PART B
Anthony and John are the parties to the contract. John acting on behalf of Dubious connection ptyLtdand Anthony on his...

References: 1. Australian Corporations and Securities Legislation, CCH 2011, VOLUME ONE
2. Boros and Dun, Corporate Law, 2nd ed., OUP, 2010.page 145,243.
3. Austin & Ramsay, Ford 's Principles of Corporations Law, 14th edition, Butterworths, 2009,page 147.
4. Ramsey, Hanrahan& Stapleton, Commercial Applications of Company Law, 11th edition
,page 233.
5. Vickery, R and Pendleton, W, Australian Business Law: Principles and Applications, 4th Edition, Pearson Education, 2003 ,page 279.
6. Clarkson .Kenneth & Miller Roger, Business Law – Text and Cases, south western publication , 11th edition, 2009.
7. Beatty, Jeffery & Samuelsson, Essentials of Business law, Thomson press, 3rdedition , 2008.
8. Mann Richard and Barry Robert, Business Law, south western, 15th edition, 2008.
9. Vickery Roger and Flood Mary Ann, Australian Business Law – compliance and practice, Pearson Publication, 7thed ,2010
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