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Introduction - Business and Corporation Law
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Duty to avoid improper position:- section 182 of the act provide that no individual that is the officer, the director or any other kind of person from the board shall have the power to take wrong use of its position that is no person is allowed to use its position in order to gain advantage from themselves or someone else to cause detriment to the company. Section 182(2) of the act shall provide that id any person has committed such kind of offence that is wrongful use of its position to gain advantage then such person shall be held liable for committing an offence that is to use position for dishonest.
Duty to disclose certain interest:- it is the duty of an officer or the board to that if such concerned person is making any personal interest or gaining any kind of advantage from the company then he must disclose such information(Scherer, Palazzo, 2011). For such information to disclose a particular notice shall be served to the company.
Penalties:- whenever any individual who is the director of the company or an office breach any kind of statutory duties then penalties shall be drawn to him under corporation act. A penalty of up to $200,000 shall be imposed on to the person who shall breach his duty. In some of the cases it has been observed that when an director has breached his duty towards the office, then was entitled for disqualification from office also.
There are many cases which are instituted in respect to the breach in the duty of an officer but one of the famous case which has been instituted for breach of duty is a recent case of
Case Law: ASIC v CITIGROUP (2007)
the following case has been instituted in federal court of Australia which expressed two major key principle:-
a law does not possess any kind of power from restricting an investment bank to establish any kind of contractual relationship in certain circumstances
another principle which has been determined in this case was that the adequacy of information barriers arrangements can determine the liability has been seen in this case that Citigroup is kind of global market which has done various kinds of business division including investment banking and equities trading. It has been seen in this case that there were some kind of Chinese barriers that is information barriers are being set but the company by which private side of the market were exposed to confidential and to market sensitive information where as on the other side public employee are not being exposed to such sides. This attempt has been done by citigroup in order to reduce proper flow of business information or to restrict the flow of information related to business.
Significance of the Judgement.
After the judgement has been passed by the federal court, there are certain ground rules which has been established that is :-
whenever a restriction has been passed by the company then the directors has to apply their own mind and has to review the whole restriction so that necessary change can be done or any reasonable care shall be taken.
Considering that the director must have the specific knowledge about the Chinese walls and what are to be restricted information
the director must have the sufficient knowledge about accounting to carry out the financial procedure and to carry out their duties adequately(Bebchuk, Weisbach, 2010).
And an appropriate enquiries shall be made in terms of any kind of barriers. The court held that:-
in this case it was held by the court that a law does not prevent any investment bank from making a fiduciary relation at the commencement of the relationship
the court has further held that an office to a company according to this act shall be a senior person who will perform senior management role which an employee did not
further held in this case that purchase of share could be by the person who will have the information and such information shall be communicated or advice given by IB with respect to purchase.
In this case the court found that:-
- It is the duty of the director of the company regarding any kind of Chinese walls that all reasonable steps shall be taken for an example if any kind of financial statement has been proposes in from of the company then such statement must be reviewed by the director.
- The directors of the must make an inquiry to all the work carried out in the company so that no fault can occur later.
- A proper supervision shall be conducted by the director rather then making a detailed direct involvement in operational matters.
- It is also seen in this case that an investment bank possess right to form contractual relation.
The court has further held that there are numerous of errors which has been committed on the end of director and hence he should act in due care diligence and no negligence shall occur on the part of him(Mishra, Suar, 2010).
Hence the case was fully covered the are of law that the provision related to the duty of director has been covered and it was clearly seen that a director must review the financial statement and all reasonable steps must be taken against it.
There are many other cases which has been outlined on the basis of responsibility of director but from the above case it can be extracted that that there are many responsibility which has been granted to the director of the company and he is under the obligation to perform certain duties. If by chance, director fails in fulfilling his duty then he shall beheld liable for the breach of his duty and entitled to pay damages(Granovetter, 2010). The part of duty which is being highlighted in this case is the duty of care and diligence. When the case was decided by the federal court thin the first step towards fulfilling the duty to due care and diligence in terms of restricted information is that whenever a company or its director is proposing any kind of Chinese walls then a review must be done by the director so that no further fault can be rectified once the financial statement is proposed. The director in this case makes it very much clear that in listed public company , directors have skill of financial matter which is why a review shall be conducted by the director(Wood, 2010). It has been seen that section 180 of corporation act has been infringed by the company's director by which he has to pay a large amount of penalty to the court. It is very clearly mentioned in the act of corporation 2001 that any director who shall breach any duty of director in terms of company then such person shall be entitled for penalty. In certain cases penalty cloud be disqualification likewise it occur in this case that the CEO of the company was disqualified as he has breached the duty to care and diligence against the company as no reasonable care regarding the review of restriction regarding information has been conducted by which the company has to suffer losses(THOMSON REUTERS, 2017).
It shall be concluded from the above project that to protect and safeguard the interest of corporate world, Australia has implemented an act called Corporation of act 2001. there are many provisions described in this act of which one describe about the duty of director. The project has explained about various kinds of duties which is being explained in the act and it has been explained that such duties are necessary for a director to follow. The project has further explained the duties with the help of corporation case complied with judgement.
Books and Journals
Bebchuk, L.A. and Weisbach, M.S., 2010. The state of corporate governance research. Review of Financial Studies. 23(3). pp.939-961.
Brammer, S., Jackson, G. and Matten, D., 2012. Corporate social responsibility and institutional theory: New perspectives on private governance. Socio-Economic Review. 10(1). pp.3-28.
Carroll, A.B. and Shabana, K.M., 2010. The business case for corporate social responsibility: A review of concepts, research and practice. International journal of management reviews. 12(1). pp.85-105.
Granovetter, M., 2010. 19 Business Groups and Social Organization. The handbook of economic sociology. p.429.
Hillman, R.A., 2012. The richness of contract law: An analysis and critique of contemporary theories of contract law (Vol. 28). Springer Science & Business Media.
Horrigan, B., 2010. Corporate social responsibility in the 21st century: Debates, models and practices across government, law and business. Edward Elgar Publishing.
Layne-Farrar, A. and Lerner, J., 2011. To join or not to join: Examining patent pool participation and rent sharing rules. International Journal of Industrial Organization. 29(2). pp.294-303.
Lazonick, W. and Tulum, Ö., 2011. US biopharmaceutical finance and the sustainability of the biotech business model. Research Policy. 40(9). pp.1170-1187.
Mishra, S. and Suar, D., 2010. Does corporate social responsibility influence firm performance of Indian companies?. Journal of Business Ethics. 95(4). pp.571-601.
Scherer, A.G. and Palazzo, G., 2011. The new political role of business in a globalized world: A review of a new perspective on CSR and its implications for the firm, governance, and democracy. Journal of management studies. 48(4). pp.899-931.
Weis, T., 2013. The ecological hoofprint: The global burden of industrial livestock. London: Zed Books.
Wigmore, J.H., 2012. Principles of judicial proof. Rarebooksclub Com.
Williamson, O.E., 2010. Transaction cost economics: The natural progression. Journal of Retailing. 86(3). pp.215-226.
Wood, D.J., 2010. Measuring corporate social performance: A review. International Journal of Management Reviews. 12(1). pp.50-84.
THOMSON REUTERS. 2017. [Online]. Available through. <http://www.findlaw.com.au/articles/5136/directors-dutiesraising-the-bar.aspx.>. [accessed on 3rd January 2017.