The paper "Advice to the New Directors of Juices Ltd " is an outstanding example of a management assignment. Generally, directors of companies owe three duties to their companies. They are supposed to act lawfully, carefully and loyally. The duty of care applies to all decisions that the directors make, and the decisions they are supposed to make should they be exercising ordinary care (House of Representatives, 2001). Section 180(2) of the Corporations Act requires the directors or other corporate officers who make a business judgment are required to adhere to the requirements of the statutory duty to exercise diligence and care, and the corresponding duties in equity and at common law, in respect of any decision if they engage in the following fiduciary duties: (a) make the judgment in good faith for a proper purpose, and (b) do not have a material personal interest in the subject matter of the judgment, and (c) inform themselves about the subject matter of the judgment to the extent they reasonably believe to be appropriate, and (d) rationally believe that the judgment is in the best interests of the corporation. By proposing to acquire FJC Pty Ltd, Chen who is a non-executive director was neither acting in good faith nor did he rationally believe that the proposition was in the best interest of the company.
Indeed, Chen had some vested interest that perhaps inspired him to recommend the acquisition of FJC Pty Ltd. The fact that he owned substantial shares in FJC Pty Ltd can be understood to be the reason why he wanted Juice ltd to engage in the acquisition. Such an act is in bad faith and amounts to a breach of duty as a director.
Jack who is the company’ s chairman acts in total disregard of his duty of care by allocating only ten minutes for discussion of such an important agenda. He ought to have allocated enough time so that the members can have adequate and appropriate information on the subject matter (Kling, 2000). Although there was no adequate time to ask questions, it does not warrant Isaac to have shoddily done his analysis as a financial officer; he breached his duty for not applying adequate professional care (Baxt & Baxt, 2005). Non – executive directors are mandated to play a role in the operational decision of the company that is of considerable importance (Clarke, 2002).
They are supposed to act reasonably by delegating authorities to others. To ensure that the company is being run effectively, they are supposed to make sure that any important financial information is properly recorded and analyzed. As such, the blame on the poor work done by Isaac can as well be spread to the non-executive directors. A recent case from New Jersey, Francis v United Jersey Bank, requires the directors to possess a proper understanding of the fundamentals of business upon which they are acting as directors.
Consequently, the directors of juice ltd ought to have adequate knowledge, to an extent of foreseeing that the acquisition could not work. Furthermore, the duty to use care in decision making requires that the directors have adequate knowledge prior to making a decision. The level of information required depends on the magnitude of the decision being made. In this case, the decision by Juice ltd to acquire FJC Pty Ltd is a decision of high magnitude and significance - it required adequate time.
It was, therefore, a breach of duty for the chairman to have allocated such a short time for its discussion.
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