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Topic:

Australian Corporation Law. Discussion of the Law.

Essay Instructions:

Australian Corporation Law  

The test must not exceed 2000 Words. The marks/points for each part should give an indication of the words that should be allocated for that part. Please observe the following requirements: Font: - Times or similar font - no smaller than 12 point in size Spacing: 1.5 line spacing, and appropriate paragraph spacing Margin: at least 2.5cm on the top, left, right & bottom  Pages: - Numbered in top or bottom margin Paper: - A4 size paper  Source Topics: Opinion from Memorandum attached as well as Australia Company Incorporation and its consequences as well as the Company’s Internal Rules, Management and Contracting. On the other hand, the topic on Corporate Governance Membership, meetings & Directors Duties will be a major focus.  Reference Style: AGLC  Question Exotic Ltd, a listed Australian public company provides exclusive luxurious and exotic holidays and operates a water front resort on a remote Pacific island. Joel is the managing director of Exotic Ltd. The other two directors are Bill a non-executive director appointed due to his connections with banks and financial institutions and Bibi, a Pacific islander with local connections. Bill lives in Perth and finds it difficult to attend monthly directors’ meetings on the island. He has missed the last two meetings and also cannot attend the next one, as he has a birthday party in Perth.  At the next meeting, the directors are to consider the company’s financial position and a loan. Over the last few years the water in front of the resort has been showing increased algae presence due to climate change and the directors have been aware of this. However, this year the algae bloom is so bad that the guests have been unable to swim or go into the water. As a result, the cost of the on-going treatment plan has increased drastically.  The company providing the treatment, Pacific Algae Treatment Inc, has stopped work as payments from Exotic Ltd are overdue. The directors of Pacific Algae Treatment Inc have informed the directors that Exotic Ltd has no choice but to incur major costs of treating the algae bloom and then contain the treated water by building a surrounding wall. The directors may need to consider obtaining a loan from Shark Finance Pty Ltd to pay for the major cost of treating and containing the algae bloom.  Bill believes that it will not matter if he does not attend the meeting because, after missing so many, he is not up to date with the company’s financial position. Also, he thinks it is better if the other directors are not aware of his father’s connection with Shark Finance Pty Ltd so they would not be biased to support it.  At the board meeting, the directors decide to follow advice from Pacific Algae Treatment Inc and change the algae treatment plan and build a surrounding wall so that the resort will continue to attract wealthy high spending tourists. Financial plans provided by the company accountant to the directors indicate that this should enable the company to trade out of its financial difficulties. A decision is made to obtain a large loan from Shark Finance Pty Ltd to pay the past amounts owing to Pacific Algae Treatment Inc to cover the more expensive algae treatment and to build a surrounding retaining wall.  A few months after the renovations are completed the only major airline servicing the Pacific island ceases operations due poor demand arising from the publicity of the algae bloom on that island.  Only a small airline offering budget tourist packages is prepared to operate on the island, but such guests will not pay the higher charges of the resort. Shortly thereafter, Exotic Ltd fails to pay interest due on the Shark Finance Pty Ltd loan and a liquidator is appointed to the company.  Required: Discuss the following matters (referring to the Corporations Act 2001 (Cth) and cases and the uploaded research material in part (a). (a) Research and upload five Australian articles relating to directors’ duties and climate risk that will assist you in answering part (b) below. Your articles can be from cases, case notes, journal articles, opinions and publications from legal firms, Government bodies such as the ASIC, APRA and other specific climate change related bodies etc. (25 Points) https://asic(dot)gov(dot)au/ https://www(dot)apra(dot)gov(dot)au/  (b) Discuss if the directors of Exotic Ltd (Listed Company) could be held liable for breach of duty of care and diligence in failing to take steps, including failure in reporting financial risks to the shareholders, in relation to the foreseeable climate-related risks that may have caused harm to the company, including reputational harm. (45 Points)  Note: Read the attached opinion from Noel-Hutley SC and Sebastian Hartford Davis before you answer this part.   (c) Whether the conduct of Bill or the other directors could make them liable for any of the debts of Exotic Ltd as a result of the company’s insolvency and defenses they may have against the liability. ( 30 Points)  Guidance: 1. Reference your answers to cases and the Corporations Act 2001 (Cth) where possible. 2. The opinion from Noel-Hutley SC and Sebastian Hartford Davis and your research materials will also assist you in answering part (b) above. 3. In answering the questions, a format 4 Step process is required. Where there are multiple parts/issues in the questions above, you can use the 4-step process for each part/issue separately.  The 4-step process are: - Step 1: Introduce the area of the law - Step 2: Discuss the applicable law to solve and quote relevant cases and the sections of the Corporations Act 2001 (Cth) where applicable. - Step 3: Apply the law to the facts to resolve the problem - Step 4: Come to a conclusion                  

 4. You do not have to discuss or apply Contract Law.   

Essay Sample Content Preview:

Corporation Law
Student’s Name
Course
Institution
Date of Submission
Question B
1 The area of law: Corporation Law.
Australian corporations law is a legal structure consisting of the national statute, single, the Corporation Act 2001
2 Discussion of the Law
The duty of the due diligence and care of the directors of the Australian company is outlined in the Corporations Act section 180(1). This section needs the directors to duly discharge their duties and exercise their powers with the level of due diligence and care which a reasonable individual can exercise in the needed situation. Regimes of Australian duties are recognized widely as particularly imposing stringent requirements of professionalism and proactivity mainly on corporate directors, with the duty of diligence and care (Mears, R. R. (2018).
Proof of bad faith and dishonesty, significantly are not to set up the breach. In the assessment of the reasonableness of the conduct of the director, the courts in Australia can use the subjective features of the directors as well as their company, the nature and size of its businesses or business, its constitution , the board composition as well as the reserved powers, whether the corporation is private or public to the assessment to whether the director took all the necessary steps to be in a place or position to manage and guide the company. In turn, it needs a balancing of the size of the risk (imminence, frequency, and gravity) and the chance that it can crystallize, as against the inconvenience, difficulty, and expense of countermeasures, as well as the conflicting responsibilities of the defendants. Despite the situations at hand, courts have stressed that directors ought to discharge the minimum requirements in order to meet or satisfy the duty of due diligence and care (Howson, P. (2017).
According to Noel and Sebastian Memorandum; “Climate change risks” might be associated with the duty of diligence and care of director to the extent that such risks can intersects with company interest, for instance the foreseeable risks to the business model of the company.
Relevant issues ought to be understood and identified to properly facilitate informed consideration. Else, Finch v Telstra: In case the consideration is not informed properly, it is regarded to be not true nor genuine. The role needs inquiry by the directors, forcing them to take an intelligent and diligent interest in the available information to them or which they might demand appropriately from other agents and agents or executives of the company. The directors might be forced to procure or make more inquiries where a document on an important issue is placed under them or to seek expert or professional advice from people that are competent, reliable, and experts were faced with difficult problems (Mears, R. R. (2018).
The reliance of the director on the advice of an expert or employee might not be reasonable in which the director on the reasonable grounds did not believe that the advisor or delegate was competent and reliable in the important matters, or the reliance was not carried out in good faith. Situation in which the plaintiff is capable of establishing reliance on the advice of p...
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