Assignment BULAW5915 Corporate Law Semester 1 2018 Purpose To enable you to consider and research...

Question

Assignment
BULAW5915 Corporate Law
Semester 1 2018

Purpose

To enable you to consider and research a topic of cu
ent interest of relevance to Australian
corporate law.
The Assignment will be marked out of 100, adjusted to a final mark out of 30 in accordance
with the weighting of this assignment to your final grade for the course: 30%.
It is important for you to take time to think through how to structure and present arguments
and to review and discuss what the law is or should be in a particular area. Whilst
discussion with others is encouraged, the final piece of work must be your own.
Word Limit

2,300-2,500 in total (assignments exceeding the word limit may not be marked and may be
eturned to the student for re-writing; assignments less than the required length will risk not
covering the topic adequately and may result in a fail). Do not include synopsis, references
or bibliography in the word count.
Note: All Federation University Australia rules relating to referencing, citation and
acknowledgement must be followed.
Due Date
By 11.00 p.m. Friday in Week 9 – submission through Moodle.
It is recommended that you process your assignment through TURNITIN before submission.
Assignment fact situation
Fruut Pty. Ltd. owns an orchard and also grows and sells young fruit trees. Rik and Patel are
directors and shareholders. There are another six shareholders who have committed money
to the business but take no part in decisions. Rik manages the day-to-day financial
operations. Patel, who has no tertiary qualifications, is in charge of the orchard and growing
the fruit trees for sale. Lana is Rik’s girlfriend and is a qualified accountant. Although not
named as a Director she often attends Board meetings to help the others with difficult
decisions. She has also provided a guarantee to the Bank for a loan to the business.
Until recently Fruut had been very profitable. However, six months ago a competing business
opened nea
y and profits have fallen. Rik thinks that Fruut should move. He starts looking
for new premises and decides the first place (owned by Watel Pty Ltd) he sees is perfect. It is
an old shop, located at the front of a large block of land with excellent soil. Although the rental
is quite high there is not another business selling trees nea
y. He thinks they could serve
coffee in the shop area and grow and sell fruit trees out the back. Without talking to anyone
else, Rik signs a lease for three years.
Rik calls a board meeting and tells Patel and Lana that moving will solve all the company’s
problems. He says they will need to spend some money to fit out the old shop so they can
serve coffee; and also to complete some work at the back and plant the fruit trees. Patel and
Lana cannot think of any questions to ask, although Lana feels that Rik should not have signed
the lease without them all having a chance to think about it.
The shop alterations are completed, Fruut moves to the new premises and staff are employed
to run the coffee side of the business. The company had to bo
ow more money from Bank for
this purpose. Business in the coffee shop is slow following a worldwide shortage of coffee
eans caused by a disease affecting coffee plantations. In addition, there is a drought and
Fruut’s trees are not looking healthy. Potential customers are delaying the decision to buy fruit
trees as water restrictions mean gardens (including trees) can only be watered occasionally.
Even with the new coffee shop, sales have fallen below those obtained in the old premises.
Lana is wo
ied that they have made a mistake moving.
REQUIRED: Complete task a. in A and task b. in B. Each task is worth 50 marks.
A
Assume you are invited by Lana to address a Board meeting to talk about options for the
company. Lana asks you to talk about whether any of them may have
eached their
duties as directors.
a. Write an explanation in preparation for this meeting, setting out what the
duties of directors are under s.180(1)of the Corporations Act, explaining
the effect of s XXXXXXXXXXand assessing whether any of the directors may have
eached their duties under this section.
In your answer you should compare their situation to at least two cases you
have studied.
AND
B
Now assume that Rik, Lana and Patel agree that their only solution to the money problems
facing Fruut is to move back to the old premises that are still empty. Lana suggests that the
new lease is unenforceable anyway as Rik signed it with his name rather than that of the
company. The agent for Watel Pty Ltd objects, saying that the lease is perfectly valid and
enforceable against Fruut.
. Explain to Lana, Rik and Patel whether Fruut can be forced to keep
leasing the new premises for the three year term.
In your answer you should compare their situation to at least two cases you
have studied.

tae_636612087916465462_117895_1.pdf

Pulkit · Accepted Answer

Part- A:
Duties of the director under section 180(c) of the corporation Act 2001
Before understanding to the sec 180(c) of the corporation Act 2001 it is necessary to understand the meaning of director according to the corporation Act. The definition of the corporation is defined in the section 9 of the said act and it includes:
· A person who is validly appointed as a director by the company. 
· A person appointed as an alternative director by the board of directors.
· Also even person is not validly appointed a director and if that person acted as a director then it is also known as the de facto director of the company.
· A person, even though not validly appointed as a director and if the directors are accustomed to act according to the instruction or the wishes of that person then it is known as the shadow director. 
There are four basic duties of the directors which are as follows:
Care and diligence: It is the duty of the directors to show the care and diligence towards the corporation and its property. It is also the same duty that is imposes under the trust act where the trustee has the obligation to take care of the assets and the property of the trust. The relationship between the directors and the corporation is the same as principal and agent relationship where the agent is always be in the fiduciary position an in the case of the director and the corporation the director is always be in the fiduciary position.in the recent case held it has been the judgment of court for the James Hardie cases that it is the duty of the director to get the approval of the financial statement of the company and the board approval issued by the company. Another point to be considered as the breach of the duty of the directors when the director entered the company into the risky transaction without any prospect of deriving the benefit to the company and where a managing director fails to inform the board for the  matters which clearly should have been brought into the board's attention. The judgment of the business provide that the safe harbor for the director of the company in the relation to the claim for the breach of the care and the diligence which is required to be considered by the director under the common law or under the section 180 of the corporation Act 2001.
It is clear to know that the to be inform about In what cases directors have met their duties in exercising care and diligence and apart from these there are certain factor to be considered includes the type of the company, the size and the nature of the company, the composition of the board of directors of the company and mainly the distribution of the work between the board of directors of the company. It also observe that the duties of the directors is also depends on the skills and the experienced of the directors. The courts have established that where a director breaches the duty of care and diligence in the enactment of their duties, an action can be brought under the offense of negligence.
Good faith: it is the duty of the director to do the business transactions and the decision making of the company in such a way so that it is the best interest to the company as a whole and its includes to avoid the conflict of the interest so that the organization’s goal can be achieved, reveal and the management of the conflicts if they arise. This is the duty and the obligation of the director to be honest in dealing with the third parties on the behalf of the company and the self-interest to be avoided while such dealings. This is because the directors are the personnel of the company who has the fiduciary duty to achieve the company’s objective without involving their own personal interest. Also the corporation Act 2001 imposes the duty of the directors with regards to fiduciary position in the company.
Not to improperly use position: According to the section 182 of the corporation Act 2001 it is also the duty of the directors that they should not to use their authority in the improper manner for their own self benefit and or to the detriment to the company.

Assignment BULAW5915 Corporate Law Semester 1 2018 Purpose To enable you to consider and research a topic of current interest of relevance to Australian corporate law. The Assignment will be marked...

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