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Answered Same Day Apr 27, 2020


Preeti answered on May 04 2020
108 Votes
Law Questions
Question 1:
Given the fact stated, legal issue is based on identifying legal grounds for
inging civil or criminal action against Liam and Peta, along with nature of penalties.
Liam and Peta, while serving as shareholders and directors of ME Enterprise Pty Ltd, relies on company’s employees in preparing balance sheet, settling suppliers and creditors’ debt, taxes and other liabilities. This ignorance on the part of Liam and Peta caused ME Enterprises Pty Ltd receive a legal notice from Australian Taxation Office demanding payment of unpaid company taxes.
The Corporations Act 2001(Cth) specifies that company director need to exercise powers and discharge their duties with care and diligence. The directors’ duty is subjected to business judgement rule expecting director to act in good faith and proper response, informing about the subject matter with reasonable level understanding and judgement, and acting in the best interests of the corporation (ASIC: Directors’ Key responsibilities, 2018).
The Corporation Act 2001(Cth) also sets out civil and criminal penalty provisions for dishonest or failure in exercising power and due diligence in discharging duties in good faith and best interest under section 184 (ASIC: Directors’ Key responsibilities, 2018).
A) As per the provisions of The Corporations Act 2001(Cth), directors (Liam and Peta) has intentionally failed in discharging their duties or exercising powers in good faith for a proper purpose and in the best interest of the company, giving rise to civil obligations. On grounds of violation of civil obligations, ASIC is entitled to
ing civil action against Liam and Peta, as specified in ASIC –v– Cassimatis (No 8) [2016] FCA 1023, where ASIC alleged directors on
each of duty of care and diligence resulted in heavy financial losses to Storm Financial Limited (Lacey, 2016). The court hearings sets out the fact that directors are expected to judiciously use their position and power for benefiting firm, instead of fulfilling role and duties for the sake of fulfilling. Pursuant to it, Liam and Peta can be sued for explaining reasons behind ignorance of duty of care and diligence (Lacey, 2016).
Additionally, case provided fact that Liam was not aware of the events occu
ed in the duration as he has been diagnosed with cancer and undergoing treatment at the time. Under section 191 The Corporations Act 2001, directors hold duty of making full and frank...

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