Directors and Corporate Management Analyses – Law Assignment Help

Assignment Task

Task 

Task Overview:
In this assessment, you will be analysing a current contemporary issue that relates to an aspect (topic, area, issue) of the material covered in the unit from Lecture 4 onwards. You will be required to complete a 1000 word WRITTEN ANALYSIS on the following contemporary issue:
Company directors have a duty to exercise their powers “not only in that manner required by law but also bona fide for the benefit of the company as a whole” (Richard Brady Franks Ltd v Price (1937) 58 CLR 112 at 125 per Latham CJ). Consider this statement in the context of one of the topics covered in Weeks 4-12 of this unit.

Written Analysis Guide:

1. Introduction
• State your main view of the topic (thesis)
• State whether you agree or disagree with the statement and why (this should link to your chosen topic from weeks 4-12).
• Keep this to 3-5 sentences. Aim to write this section concisely.

2. Analysis
• Critically explain why you agree or disagree with the statement.
• Critically explain your argument with specific evidence from your chosen topic such as the relevant laws and cases. You can also use secondary sources such as legal articles to help support your arguments.
• Have one or two strong arguments in this section and analyse them in depth.

3. Conclusion
• Summarise your main argument (thesis)
• Restate whether the statement is valid or not

Additional Requirements:
The analysis is to be typed and 1.5 spaced (a standard 12-point font should be used). It should be checked for spelling, consistency, and clarity of

Topic 6: Directors and Corporate Management, Directors’ Fiduciary Duties What is a director?
S9 of the Corporation Act 2001
(a) a person who: 
is appointed to the position of a director
is appointed to the position of an alternate director and is acting in that capacity regardless of the name that is given to their position

(b) unless the contrary intention appears, a person who is not validly appointed as a director if:
they act in the position of a director
the directors of the company or body are accustomed to act in accordance with the person’s instructions or wishes

Contrary Intention:
• S 249C:Power to Call meeting of a company’s members 
• S 251A (3):Signing minutes of meetings 
• S 205B:Notice to ASIC of change of address

What is an Officer?
(a) a director or secretary of the corporation
(b) a person:
• who makes, or participates in making, decisions that affect the whole, or a substantial part, of the business of the corporation
• who has the capacity to significantly affect the corporation’s financial standing?
• in accordance with whose instructions or wishes the directors of the corporation are accustomed to act (excluding advice given by the person in the proper performance of functions attaching to the person’s professional capacity or their business relationship with the directors or the corporation).

Application of the S9 Definition:
S 179:Sets out the background to Pt 2D.1 “Duties and Powers”
PT 2D.1:Draw a distinction between employees and officers (for example, s 189(a)) and other sections specify when they apply to employees (for example, s 182, 183) 
S 197(2):States that officer includes “as well as directors and secretaries, some other people who manage the corporation or its property (such as receivers and liquidators)”.

What is the definition of de facto/shadow director and officer?
De facto Directors: 
under s 9(b)(i) are those who, while not validly appointed as directors, act in the position of director. 
Shadow directors under s 9(b)(ii) are also not validly appointed as directors, but the directors of the company are accustomed to acting in accordance with their instructions or wishes.

Board of Directors: Delegations Powers to Others and Reliance on Advice:
• ASX Listing Rules 12.7
• Corporations Act 2001, s 189, 190, 198C, 198D 
• Principle 1 of the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations 4th Edition (February 2019)

Important Provisions:

s 198D allows the directors to delegate any of their powers to: 
(a)a committee of directors 
(b)a director 
(c)an employee of the company, or 
(d)any other person. The delegation must be recorded in the company’s minute book: s 251A

The only situation where directors will not be held accountable for the actions taken by the delegate is if the directors can prove:
they always believed on reasonable grounds that the delegate would exercise the power in accordance with the duties imposed on directors by the Act and the company’s constitution they believed that the delegate was reliable and competent to carry out the duties delegated to that person and formed that belief based on three criteria: 
• on reasonable grounds 
• in good faith, and after making proper inquiry
• if the circumstances indicated that there was a need for such an inquiry (s 190).

s 201J:
• the directors of a company may appoint one or more of themselves to the office of managing director of the company for the period and on the terms (including as to remuneration) as the directors see fit. 

s 203F:
• a person automatically ceases to be a managing director if they cease to hold the office of director

Board of Directors: Delegation to Directors – S198C
• Audit Committees
• Nomination Committees
• Remuneration Committees

Express Authority of Managing Director:
Section 198C:
Permits the directors to confer on a managing director any of the powers that the directors can exercise. Regulation 81 of former Table A has a similar effect. These provisions give the directors a broad power to expressly delegate authority to the managing director

Implied or Ostensible Authority of Managing Director:
Re Quintex (No 2) (1990) 8 ACLC 811: 
Where there has been no express delegation of authority, the board will often remove any doubt as to the managing director’s authority by ratifying the action in question. Otherwise, the validity of the managing director’s actions may depend upon the scope of his/her implied authority. Alternatively, the managing director’s actions may be within his/her ostensible authority

Responsibility for the Exercise of Delegated Power: s 190
Section 190(2) sets out the criteria under which the board is not responsible for the actions of the delegate. These can be summarised as
(a) The delegating director believed on reasonable grounds that the delegate would exercise the power in accordance with the director duties imposed by the Act and the company’s constitution.

(b) the delegating director believed on reasonable grounds and in good faith that the delegate was reliable and competent in relation to the power delegated. If the circumstances indicate the need, the director will have to make proper inquiry as to the delegate’s reliability and competence. 

Reliance by Board or Director on Information and Advice: s 189
Section 189 operates in relation to information or advice from the following:
(i) An employee of the corporation whom the director believes on reasonable grounds to be reliable and competent in relation to the matters concerned.
(ii) A professional adviser or expert in relation to the matters that the director believes on reasonable grounds to be within the person’s professional or expert competence.
(iii) Another director or officer in relation to matters within the director’s or officer’s authority.
(iv) A committee of directors on which the director did not serve in relation to matters within the committee’s authority.

Director Eligibility:
Age and Statutory Disqualification:
Minimum 18 years of age and not subject to a disqualification order.
No Licensing System:
Directors are neither required to hold academic or business qualifications nor required to have business experience. 
Fit and Proper Person:
There is no “fit and proper” person test. introduced a “fit and proper” person test.

This includes an assessment of whether the person has:
• nappropriate knowledge, experience, competence, judgment, character, honesty, and integrity
• been subject to criticism, discipline, disqualification or removal by a professional body or Court 
• failed to manage personal debts satisfactorily 
• been obstructive, misleading, or untruthful in dealing with others
• been involved in business practices that appear negligent, deceitful, or otherwise improper
• and been or is of bad repute.

The proposed “fit and proper” policy must:
• Always remain up to date and must be reviewed annually
• contain clearly documented guidelines and clearly defined processes to gather evidence and undertake fit and proper assessments
• contain processes for dealing with persons who are not fit and proper, including procedures for removal of such persons
• be disclosed in the company’s annual report and made available on its website.

Is a Director Required to hold Company Shares?
However, s 140(1) states that a company’s constitution and any replaceable rules that apply to it have effect as a contract:
(a)between the company and each member
(b)between the company and each director
(c)between a member and each other member 
Under which each person agrees to observe and perform the constitution and rules so far as they apply to them.

Topic 7: Directors’ Statutory Duties and Corporate Governance, Financial and Reporting Obligations, Audit

To Whom do the Statutory Duties Apply
• Director or Secretary 
• “de facto” officer 
• Administrator

To Whom do Directors Owe their Duties?
• The Company 
• Exceptions:Creditors (only in a few circumstances)

Director’s Duty of Care and Diligence:
Section 180(1) requires directors and officers to exercise their powers and discharge their duties with care and diligence. Whilst an objective standard of care is required, s 180(1) allows certain subjective elements to be taken into consideration, namely 
(a)the corporation’s circumstances
(b)the director or officer’s position within the corporation and their responsibilities.

Companies that are under voluntary administration, in controllership or in provisional liquidation, are not exempt from the requirements, but may be entitled to class order relief with respect to reporting to members and lodgement with ASIC

RG 174: Relief for externally administered companies and registered schemes being wound up:
Companies with more than 100 members are given greater scope for relief than companies with 100 or less members. The class order relief does not extend to companies subject to deed of company arrangement. 

Auditors and Audit of Financial Reports?
Every company, registered scheme and disclosing entity required to prepare a financial report in accordance with the requirements set out in Ch 2M, must appoint an auditor. The responsible entity of a registered scheme is responsible for compliance with the obligations under Ch 2M. Directors of the responsible entity are taken to be directors of the scheme. 

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