ASIC V Vines: Understanding Directors’ Duties And Responsibilities

Legal Duties and Responsibilities of Directors

Discuss about the ASIC VS Vines Case Study.

The issue of this scenario is whether Geoffrey Vines will be liable for contravening his duty of care in relation to the profits made by the company.

As per the Corporations Act, 2001 directors of a company has a few specific duties which they have to carry out while working in the organization. Section 180 of the above mentioned act discusses the duty of care and diligence of the directors of a corporation. An officer or director should exercise or carry out their powers and discharge their duties according to certain circumstances of the corporation (Murray 2017). If the company is occupied even then the directors will have the same responsibilities within the corporation. A director must meet the requirements of his responsibilities and duties as it have been mentioned under the act. Their duties are generally equal to the duties as mentioned under common law. Thereafter, Section 181 of the Corporations Act, 2001 deals with the civil obligations including good faith. This refers to a situation where the director or any other officer of a corporation should carry out or exercise their powers and discharge their duties in good faith in the best interests of the corporation by having a proper purpose. Followed by the above mentioned sections, Section 183 of the Corporations Act, 2001 the officers or directors of a corporation should gather the information but is not permitted to make improper use of it. The directors should not make any kind of direct advantage for others or for themselves. Thereafter, the officers associated or engaged with the organization must not cause any sort of detriment to the company. If any director or any officer contravenes these sections then he will be liable and answerable to the Court. Section 184 of the above mentioned act states that if the directors or officers of the corporation will be committing criminal offences if they fail to use their position and information honestly. Thus, if the officer or the director of a corporation are dishonest on purpose, reckless and fails to carry out their powers ad discharge their duties then they will be held for committing a criminal offence. Hence, the officers and the directors should act in good faith and in the best interests of the company. If the director or the employee of the company commits an offence by using their position not in an honest manner and with the intention of directly gaining, an advantage then he will not be allowed to be a part of that particular corporation as it will be treated as a criminal offence. Such circumstances and situations have been observed in the case of ASIC v Vines as it is considered to be as one of the leading cases on the duties and responsibilities of an officer of a company. Thus, in case of a criminal case, the higher degree of negligence must be proved.

Analyzing Relevant Sections of Corporations Act, 2001

On the other hand, if it is related to civil issues then a civil penalty will be imposed on the officers or directors engaged with that particular corporation. Along with the sections that have already been mentioned, comes Section 1318 that plays a major role in the corporations. This section further states that the associates of the company must act in the interests of the company and its shareholders. Thereafter, they must also carry out the statutory standard of due diligence and care. Duties are suppose to be shaped purposely based on the legal duties of the directors or officers. However, legal duties encompasses the basic fundamental duty for acting in good faith for the interests of the company based on its traditional formulation of the shareholders.

The case of ASIC v Vines is considered to be as one the famous and major cases on the responsibilities and duties of an officer of a company. As mentioned in the relevant rule, it can be stated that the care and diligence duty has been defined under section 232(4) of the Corporations Act, 2001. It can be said that Mr. Vines had contended the degree of negligence, which was needed for proving a breach of statutory duty that was higher as compared to that which was required to be proved in common law (Welsh 2014). The case further stated that Mr. Vines was the CFO of the company as well as a member of the adequate diligence panel which was proved for responding to the bid of AMP. However, the profits were guessed in the matter due to a catastrophe in America and the margin had reduced substantially. Thereafter, Mr. Vines had the knowledge of the situation, which was quite tight in Australia but a bid was taken and an increase was expected, which would not cross $60-$65 million when the bid was made. Whereas, it was noticed that the bid had already increased and reached the limit of $74 million. The offer was hence closed with 57% of the existing shareholders (Bottomley 2016). Mr. Vines was not aware of the fact that some of the people in AMP. Therefore, ASIC had sought all the declarations that Mr. Vines had caused a breach in his statutory duties of expressing care and diligence while carrying out his activities as an officer of the above-mentioned company (Whincop 2017).

It was thereafter determined that for proving that there was a breach of statutory duties, degree of negligence should be established and it will be dependent on the context of the statute, which was breached. If it is a criminal case, a higher degree of negligence must be proved. Thereafter, it was determined as per Section 1317JA and 1318 that Mr. Vines did not have any knowledge or access to any sort of information based on which he could have relied to obtain significant information from the shareholders. The disclosures of the company acts as the material for the board while making significant decisions that made Mr. Vines no unqualified statements even if he had made those specific statements that did not disobey his duty of care since they were working for the management. It can be said that on the other hand, Mr. Vines had worked in an honest manner and was unaware of the amounts that were raised in the company whereas, it can said that he had taken care of the affairs of the company with diligence and the profit was therefore forecasted by him (Aier, Chen and Pevzner 2014). In such circumstances, the shareholders and the investors should be kept protected and must make sure that the information shared is appropriate. From the facts of the scenario, it can be said that Mr. Vines had actually provided proper and accurate information and it was therefore not under his control that the market situation had moved towards the worst side. No liability can be imposed on Mr. Vines therefore. Lastly, it was held by the Supreme Court of Queensland that Vines did not rely much on these two. Any individual should have checked and Vines was however, appointed with specialist skill. Hence, Vines did not have any kind of higher duty of care. Thus, Mr. Vines did not act with any kind of penalty judgment. Mr. Vines had therefore performed their responsibilities by keeping informed about the complex matters of insurance. Therefore, the facts of the case are the elements that summarize the decision appeal of the court of New South Wales. The obligations associated with this case were imposed on Mr. Vines as it increased and gave warning signals of a more significant nature that he should have taken care of before making the necessary statements in the markets (Hickey 2017). The conclusion of this scenario majorly highlighted the fact as to whether there was any kind of breach of the statutory standard of diligence and care for identifying the powers that are being discharged.

Conclusion

Lastly, it can be concluded by stating that the liability on Mr. Vines was relieved.

References:

Aier, J.K., Chen, L. and Pevzner, M., 2014. Debtholders’ demand for conservatism: Evidence from changes in directors’ fiduciary duties. Journal of Accounting Research, 52(5), pp.993-1027.

Barker, S., 2015. Directors’ personal liability for corporate inaction on climate change. Governance Directions, 67(1), p.21.

Bottomley, S., 2016. The constitutional corporation: Rethinking corporate governance. Routledge.

Chiu, I.H., 2015. Regulatory Duties for Directors in the Financial Services Sector and Directors’ Duties in Company Law-Bifurcation and Interfaces.

David, B. and Ausserladscheider, J.L., 2016. Proportionality, Fundamental Rights and the Duties of Directors.

Donner, I.H., 2016. Fiduciary Duties of Directors When Managing Intellectual Property. Nw. J. Tech. & Intell. Prop., 14, p.203.

Hickey, S.J., 2017. Developments in the jurisprudence surrounding the defeasibility of a trustee’s duties: Australian Securities and Investments Commission v Drake (No 2)[2016] FCA 1552. Trusts & Trustees, 23(5), pp.571-576.

Murray, G., 2017. Capitalist networks and social power in Australia and New Zealand. Routledge.

Welsh, M., 2014. Realising the public potential of corporate law: Twenty years of civil penalty enforcement in Australia. Fed. L. Rev., 42, p.217.

Whincop, M.J., 2017. Corporate governance in government corporations. Routledge.