Company Law of Australia - Assignment Example

Law and Business Student inserts His/Her Name Here Lecturer Inserts Student Grade 6th September, 2011. Question 1 Issue The legal issues and circumstances surrounding the question on Harold can be looked at from different perspectives. The main issue to be looked in this scenario is the rights and obligations of employees. Employees such as senior executives are hired by the board of directors and they sign a contract with terms and conditions. The company in which Harold worked with (AGCO) has sued Harold for breach of duty since he was initially employed by the firm but breached is duties to venture into other activities. Law Harold resignation and subsequent operation of the mine in Africa breached the Corporations Act. According to the Australian Corporation’s act, a breach of company agreements is considered to be an offence. Therefore the action of Harold is considered to be an offence and the company has all the rights to act in the manner it acted. Section 180 through to section 183 clarifies the duties of directors as well as the duties of officers in the company. In section 183 of the Corporations Act, it clarifies that a person who is/was a director or officer of the company cannot use information obtained from the company improperly (Parker, 2010). The section clarifies that the information cannot be used to cause detriment to the company. Section 184 of the Corporations Act clarifies that a director or officer should act in good faith with the possession and use of information. Thus if an officer uses information reckless or intentionally dishonestly then he/she breaches the Corporations Act and therefore commits a civil wrong. The Corporations Act and the laws recognize a company as a separate legal entity and thus it can sue, be sued and enter into contracts (Latimer, 2010). Duties and tasks undertaken by company officers are explained in company constitutions; in case a company does not have a Constitution then the corporations Act is used. Section 185 of the Corporations Act explains how sections 180 to 184 work and it clarifies that if an officer or director breaches any of the provisions then civil proceedings can be taken against the said officer. Section 186 of the Corporations Act clarifies that territorial duties do not affect the Act since the company carries out business based on the same jurisdiction (Clarkson, 2009). Analysis & Conclusions The scenario presented the cases between Harold and Agco for a decision to be made on the issue, the Corporations Act need to be looked at. According to the Corporations Act section 183, Harold committed an offense by using information that was procured by Agco when he was an employee of the firm (Clarkson, 2009). Harold’s employment at Agco was based on a contract and therefore upon termination of the same, he had no right to use information from his former employer for his own benefit. Harold did not act according to terms he was contracted to work on and he instead breached the law and sections of the Corporations Act. The issue between Harold and Agco is multi-faceted and it can be looked at from different perspectives (Cassidy, 2006). If Harold resigned from Agco and then formed a company then the company pursues the African mining interest then Harold will not have breached any laws. In this case, the company formed by Harold will be sued for obtaining information from officer attached to another company. Question 2 Issue The issue raised in the scenario looks at a director whose conduct has been wanting and thus one of the directors has requested for the director to resign voluntary. The director who is a non-executive director at the company attends board meeting but ends up disrupting the proper functioning of the board. The main issue raised in this scenario is that of the powers of directors and if in fact the directors have powers to remove any member from the board of directors (Tomasic, 2002). Law The Australian Corporations’ Act is a law enacted to deal with formation, operation and winding up of companies. The Act has provisions of how directors can act and the Act advises that directors should act with care and diligence. Section 180 of the Corporations Act further states that directors should act with due care and diligence when conducting functions for the company. However company directors are elected and given powers by virtue of their positions in the company. Chapter 2D of the Corporations Act explains on the procedure to be followed in appointing and dismissing directors (Vermeesch, 2003). According to the Corporations Act, section 203E of this act clarifies that a director cannot remove another director from his/her position. The power of appointing and removing directors is mainly done by shareholders through a general meeting resolution. If directors pass a resolution or decision to remove another director then the law does not recognise such a move (Latimer, 2010). Removal of directors in the Corporations Act can be done through a resolution of the members/shareholders of the company. A member or shareholder can raise the issue of removal of a director from the company. Section 203D of the Corporations Act clarifies that a director can only be removed based on the resolution of the company to remove the director. This is despite any agreements between the director and the company (Hanrahan, 2011). However, using section 203D, directors can pass a resolution to put on notice the removal of a director through the use of a general meeting. The notice must lapse a period of two months however if a meeting comes before this time the resolution might be passed by the shareholders. Another avenue used in removing directors in the Corporations Act is section 206 whereby the ASIC (Australian Securities and Investments Commission) can disqualify a director if the director is found to have violated the Corporations Act on a number of occasions. The ASIC can do so through the law courts (Parker, 2010). Analysis & Conclusions In the case of XYZ pty limited, the non-performance of Edward cannot lead to his removal from the board by other directors. This is because the Corporations Act does not give powers to directors to remove other directors. But he could be removed if a resolution by the members/shareholders is passed at the company’s general meeting. A member can raise an item in a general meeting for the removal of a director; the affected director will be given a chance to defend himself/herself. If a resolution is passed then the director will be removed pursuant to section 203D of the Corporations Act (Tomasic,  2002). Question 3 Issue The main issue in this scenario is the question on to what extent do directors have power to undertake certain tasks. The issue of powers of directors powers to call and organise general meetings. Another issue is to the extent in which directors can award themselves benefits accordance to the job undertaking and procedures of awarding this benefit. This issue arose when one of the shareholders, Vince raised the issue in the general meeting but he was interrupted and thus it begs the question of what the Corporations Act can be used to resolve the above question. Law The Corporations Act of 2001 (Cth), has in section 200 E and F provisions of how benefits such as remunerations are awarded to directors in a company. Section 200 E of the Corporations Act states that remunerations awarded to any officer or director must be passed by a resolution of the members’ general meeting. For a remuneration or benefit to be awarded to an officer or director of the company it must be included as an item in the notice of the general meeting (Hanrahan, 2011). In the case of Nong Pty, the directors followed the right procedure in including the remuneration item in the general meeting notice. However, sections 180-185 of the Corporations Act state the duties of directors and other company officers. Section 184(2) of the Corporations Act state that a director or officer of a company commits an offence; if he/she uses his/her position to gain advantage and thus causing a detriment to the company. Section 182 of the Corporations Act further explains on the duties of directors of a company. The law clarifies that a director is obligated by the law not to use his/her position improperly to gain advantage for themselves or anybody else (Parker, 2010). Directors have powers to call general meeting and make important decisions in a company has it is written in section 180 of the Corporations Act. Under section 180(2), directors must exercise sound business judgement which are in good faith and does not have material benefit towards him. Analysis & Conclusions David as a director of Nong Pty limited did not act in accordance with the Corporations Act in reprimanding Vince a shareholder during the company’s general meeting. Although directors have power of calling general meeting, the resolutions of general meeting are passed by shareholders. Shareholders have power to contribute to general meeting and question the activities of directors in their job undertaking. Based on the powers vested on directors either in the Corporations Act or the company’s constitution, the actions of David were unwarranted and it amounts to breach of the Corporations Act (Latimer, 2010). David used his position as a director of the company to unduly influence the company shareholders to consider a decision that would be detrimental to the company. The decision undertaken by the board to raise the issue of salary increments was against section 180(2) of the Corporations Act since the judgement was not in the best interests of the company. Furthermore shareholders are given an opportunity to raise questions on items raised general meeting notice and all resolutions arrived at a general meeting should be approved by the shareholders (Vermeesch, 2003). References Latimer, P., 2010. Australian business law 2011. Sydney: CCH Australia Limited. Parker, W. and Clark, G., 2010. Company Law; A Concise Manual of the Law and Practice Connected with the Organization, Management and Winding Up of Companies. Adelaide: Nabu Press. Tomasic, R. Bottomley S. and McQueen, R., 2002. Corporations law in Australia. Canberra: Federation Press. Hanrahan, P. Ramsay, I. and Stapledon, G., 2011. Commercial applications of company law 2011. Sydney: CCH Australia. Vermeesch, R. and Lindgren, K., 2003. Business law of Australia. Melbourne: Butterworths. Cassidy, J., 2006. Concise corporations law. Los Angeles, CA: Federation Press. Clarkson, J. and Khan, K., 2009. Solving corporate conflicts in Australia. The Australian Law Monthly, 12(1), pp. 21-26. Read More