Adrian,
the managing director of Landforce Pty Ltd organises a loan of $ XXXXXXXXXXfrom
Whichbank...

Question

Adrian,
the managing director of Landforce Pty Ltd organises a loan of $ XXXXXXXXXXfrom
Whichbank Ltd on behalf of the company. Adrian is a long-standing officer of
the company and has dealt many times with this particular bank. The company’s
constitution stipulates that any borrowing exceeding $ XXXXXXXXXXmust first be
approved by the board of directors. Adrian has not sought the appropriate
approval from the board and he directs that the loan funds should flow into a
special account that only he has access to.
During
the negotiations to arrange the loan, a bank official asks Adrian why the funds
are going into the special account rather than to the company account. Adrian
assures him that this is the new arrangement sanctioned by the company. One
week later the money from the bank and Adrian have disappeared. The company is
refusing to pay back the loan to Whichbank Ltd.
Is
Whichbank Ltd able to recover the loan from the company?t is
recommended that you use the 3rd edition of the Australian Guide to Legal
Citation, a copy of which can be downloaded from the library site http://www.usq.edu.au/library/help/referencing/aglc>.

David · Accepted Answer

Introduction 
According to the Sec 132 (1)-(amdt 2007), directors of a company should exercise their 
powers for a valid purpose and in the best interest of the company. Under its fiduciary duty, a 
director needs to act in the best interest of the company i.e. to act honestly and as per the 
requirement of the position he holds in the company.  
If the director fails to act or discharge his duty honestly, then the act is defined by the s. 
232(2) and (3) of the Corporations Law as an act of dishonesty. According to this section, a 
director at all times needs to do his duty diligently, and in the best interest of the company. If 
the director does not discharge his duty diligently he is liable for punishment (either through 
imprisonment or penalties). Imprisonment can be for five years besides a penalty of $20,000.

Adrian, the managing director of Landforce Pty Ltd organises a loan of $ XXXXXXXXXXfrom Whichbank Ltd on behalf of the company. Adrian is a long-standing officer of the company and has dealt many...

Solution

Answer To This Question Is Available To Download

Related Questions & Answers

Submit New Assignment