Discuss about the Company Law for Business Firm and Employment Act.
Holding the power of a director in an organisation has got many crucial responsibilities associated with the position. Here the following case study explores two fine directors of Fine Homes Pty Ltd: Roger and Gerald; and their conflict of interest. Together, they have got powerful control and systematic synchronisation to act accordingly for the success of the company. In fact, they understand the concerned ethical duties performed by the directors such as diligence, skill, care, fixed purpose and strong faith. However, a strange breach of confidence had been observed between these two directors regarding their approach towards general duties enacted by the directors under sec98 of the Enterprise, business firm and Employment Act 2015[1].
It is impossible to judge without knowing the exact frame of condition and there is no law that can penalised without realising the exact state of affair conducted by these two directors. As both of them are brilliant with their approaches and they do realise the consequences of the breach under sections 171 to 177. It is mentioned in the case study that the two directors have got equal right to Fine Homes Pty Ltd and they are struggling to make it better and stronger due to the presence of other competitive business hubs, such as Homes-R-Us Pty Ltd. However, a little twist in the tale can magnify the real bond shared by the two directors, as it is been observed that Gerald is envious and feels insecure due to the high public profile and appreciation enjoyed by Roger. Gerald knows that Roger do have strong reputation and association in the business market and somehow it helps them to get prospective offers. Yet, Gerald had refused a great opportunity “lucrative contract” offered by Futuristic Homes Pty Ltd due to the said insecurities mentioned in the case study. It is discussed earlier, that both of the directors have equal rights for the welfare of the company and cannot decide separately to establish commitment with Futuristic Homes Pty Ltd. However, Roger played his trick and got the contract for his own ‘one person company’. Now, here is the deal that delves further into the corporate law incorporated by the two directors to get Specific duties under the Companies Act, as their behaviours have raised conflicts of interest and that arena should get further analysis and that is referred below:
Company contracts: a business contract is an imperative subject that contributes great help during the time of crisis. Each and every law had been mentioned to frame a perfect research copy for the concerned responsible bodies. When a director of some company signs with another company, he should realise his promises with the present responsibilities, because problems may arise if he is already restricted by the present organisation[2]. As a matter of fact, the situation still needs clarity as Roger entered into the contract with Futuristic Homes Pty Ltd under his own firm and also earned a profit of $1 million. Thus, it may reflect that the contract revised between Roger and Gerald does provide an estimated provision to a director to be a “corporate sole” under section 132[3]. It still necessary to mention the said role of contact to provide a better understanding to this research:
The analysis of the said case study does not provide any fraudulent action by the two directors as the necessary amendments are not recorded to have a better understanding of the breach of confidence. Moreover, it is noteworthy to mention the requisition if breaches of directors’ duties are followed and they are:
When a company gets its registration process, there are many legal entities follow directly with innumerable terms and conditions. It has got ASIC deregisters to get liabilities, legal status, rights and property to organise the legal preparation for preventing future hindrance. The director of a limited company can enjoy his power as a shareholder and also obliged to pay in times of dire circumstances. However, his own personal resources are not required to prevent the company losses as that is not counted as per personal liability measures[4]. The key measures to get personal liabilities by the director are as follows:
The given case study is an unique frame that defines personal issues and conflicts between the board of directors, as it is already been observed that both the directors do share same interest and positive faith for the company and did whatever possible to pertain successful competition. Roger and Gerald, both of them tried to pursue with their company shares and also asserted the said goal by offering 100 shares to Joe. It is considered to be a huge market risk, but still they had successfully managed their strategy to bring their business on course. Here, we are talking about “good faith and honesty” shared by these directors in the interest of the company and so it is not very distinctive to understand their documented share of interest before claiming any conclusion. Maybe they share independent liabilities and restricted claiming to each other’s personal resources and also hidden consideration for each other. It is quite clear that the company’s interest is directly correspondent to director’s interest, but due to hidden insecurities and self-doubt of Gerald had caused negative imp-acts. There is no doubt that the offer proposed by Futuristic Homes Pty Ltd is quite advantageous and can prove great merger to earn profits, but due to envious interest of Gerald, had put off this provision. Thus in this situation where a director breach the duty to get proper consideration for the company, he may face charges and subjective test to justify his part of reasoning[6].
Thus to avoid conflicts of interest under sec 175, a director of a said company should avoid those conflicts that are directly linked with personal interest[7]. He should be strict with his moral reasoning and always motivate the interest of the company as there are many hopeful souls working to get living amenities.
Thus, the action committed by Gerald is considered to be a criminal and civil offense, as he dissolved the lucrative offer, due to his personal issue. In this case, he is also subjected to punishment as per Australian securities and Investment commission. The provision introduced by the Corporation Act 2001, the director breach of civil or criminal act may ask various legal charges. The company suffered the loss because of the detrimental decision of Gerald and that represents him as a criminal as per section 184[9].
Conclusion
There is being a corporation’s internal management policies within the organisation which guides certain duties and decision making policies by the directors. The corporation Act under section 134 suggests that the internal management should observe this breach of interest to protect distrustful intention of the directors. Surely, the intention of Gerald was against the interest of the Fine Homes Pty Ltd and that reflects the consequence of breach comes under Sections 171 to 177. However, it is difficult to authenticate the action implied by Roger without having further evidences and resources.
References
Ali, Hasani Mohd, Aishah Bidin and Jady Zaidi Hasim, “Inconsistencies Between Theory And Practice: A Preliminary Study On The Concept Of Directors’ Duties Under The Companies Act 1965” (2011) 18 Procedia – Social and Behavioral Sciences
Ceil, Chenoy, “Director’s Duties Under Companies Act 2006” SSRN Electronic Journal
Gelter, Martin and Geneviive Helleringer, “Constituency Directors And Corporate Fiduciary Duties”SSRN Electronic Journal
Miah, Md. Suhel, “Critically Examine The Seven General Duties Of The Directors Under Company Act 2006” SSRN Electronic Journal
Moore, Colin R, “Obligations In The Shade: The Application Of Fiduciary Directors’ Duties To Shadow Directors” (2016) 36 Legal Studies
Wei, Yuwa, “Directors’ Duties Under Chinese Law: A Comparative Review” SSRN Electronic Journal
Davis, John, A Guide To Directors’ Responsibilities Under The Companies Act 2006 (2016) accaglobal <https://www.accaglobal.com/content/dam/acca/global/PDF-technical/business-law/tech-tp-cdd.pdf>
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