Both the public and private business corporation within Australia are always being governed by the Corporation Act 2001. This Act precisely indicates the procedures that should be used in running this various business, it further explains the role that should be played by every personnel within the business. The Act also states the person who should be responsible for negotiating the contractual terms on the companies’ behalf (Corporation Act 20001).
Issues Involved in this case:
(i) Prior knowledge of company’s articles and public documents.
(ii) What are the permitted actions of a director in a company?
(i) Section 181
(ii) The Company’s constitution
The Australian law directs that any person transacting…show more content… They have to come into agreement of what step they should take. They can only append their signatures in a deal that they have all verified. Since it is the company’s constitution that regulates activities within the corporation including all transactional procedures, it must be observed. Any move in its contravention is null. The remaining directors can thus properly cancel Harry’s deal with the supplier and any other similar transaction in which they are not involved. They must not append their…show more content… Shares worth $ 4 million were bought. Unlisted investments were purchased from another company belonging to the defendant. Additional loans were acquired by companies related to the defendant. All the transactions occurred without the board or member’s knowledge. The loans were also acquired using improper documentation.
The court decided that the defendant had contravened four sections of the Corporations Act. These included one on the duty of a director to act in good faith, and for a proper purpose (Corporation Act 2001). Another concerned the duty not to improperly use his position as a director. The third one was a duty disclose and not misuse information and finally the duty to act with reasonable caution and diligence (Corporation Act 2001).
The court also found that the three directors of HIH, together with the company controlled by the defendant were aware of the contravention of the rule even if they did not understand that the transaction was within Section 210 of the Corporations Act (Corporation Act 2001). ASIC v