Question One

1. Growth Ltd. is a public limited company and it want to make a 12 million share issue for the development of the business. According to the Corporations Act, 2001 the provision mentioned under Chapter- 2D does not allow the public company without issuing a prospectus when the amount of funds is large in nature.  A prospectus is necessary because it is considered as the disclosure document.
2. If the prospectus has been made by the company and if they provide all the information related to investment then the directors will not be liable for prosecution under Corporation Act, 2001.
3. No alternatives will be available under the Corporations Act, 2001 because it is the duty of the directors to act in good faith and cannot take advantage by misleading the shareholder.
4. The Corporations Act, 2001 give protection to the directors only if it is proved by Section- 180 (2) otherwise they will not get any protection.

Question Two

1. Goodtimes Ltd. had a successful business trading and in order to invest the profits the company decided to purchase 12% of the ordinary shares held by Jasline. Section- 256 A of the Corporations Act, 2001 says about rules to be followed in case of buying back the share and depletion in the share capital (Adamson and Loch 2018). The Directors need to save the creditors and the shareholders by stating that the insolvency of the company can be occurred by the transaction, shareholders of the company must act according to impartial manner, all information related to the company must be disclosed (Langford and Teele 2016). Section- 257 A of the act talks about the power to buy back must be followed by the procedures of the company and it must not effect on the company in relation to make payments to the creditors. This type of buy back is considered as the special buyback. Section 257 D of the act talks about procedures about the particular buy back. The offer of buyback has been made only to Jasline and not to every shareholders in the company. Section 257 D (1) talks about that this buy back should be approved by all the shareholders or 75% of majority members must favour a resolution. Jasline who is the selling shareholder in this buyback must not vote in favour of this buy back. Section 257 D (2) talks about notice must be sent to the shareholders to inform about the meeting to vote for a selective buyback and it must include all the necessary information related to the proposal. The company does not need to provide all the information if it has been already disclosed by the company to the shareholders, if that would be unreasonable. Section 257 D (3) of the corporations act talks about the necessary documents to be file by the company to Australian Securities & Investment Commission (ASIC) before sending the notice to the shareholders. The documents which needs to be lodged are the copy of the notice and the relevant documents which will send to the shareholders along with such notice.
2. Goodtimes Ltd offer all the ordinary shareholder to sell 8% of the shares to the company then it will come under the Equal access buy back. Section 257 B talks about the procedure to be followed by company. Goodtimes Ltd in this buy back offers to sell all ordinary shareholders their ordinary shares and it satisfies Section 257 B (2) if the act. In order to deal with Section 257 B (2) it must ignore certain differences which related to offers on which different amounts remain unpaid, different accrued dividend entitlements and each shareholder is left with a whole number of shares (Chan, Konan, Chen, Hu and Liu 2018). The obligation of the directors must be according to Section- 256 A of the act by informing all the shareholders the material information about the company, risk involved in the transaction and it must treat all the shareholders in an impartial manner.

Question Three

1. Nominee directors are those directors who is appointed by an interest group or creditor, a shareholder and the proposer should ensure that there is continuous loyalty or some interest must be taken into consideration but the interest must not be related to the company. Nominee directors must act in the best interest for the company and not in  favour of the nominator (Adam and Chik 2016). However, the directors are allowed to look after the interest of the nominator if the nominators are actually acting for the betterment of the company. These directors must ensure that there is no conflict of interest between the company and the nominator. Nominee directors in the occasion of conflict must take side of the company and if such situation occurs where there is no other option then he/she should resign from the board of directors (Cole 2016). These directors if allowed by the companies may have different duties from other directors and it can lead to conflict with other directors. In such case Section 199 A of the Corporations Act, 2001 must be followed which gives certain limitations (Voogt 2018). The particular provision talks about the situation where the cost subjected to a director will not be reimburse, exempt, or indemnify by an organization.
2. Casting vote of directors is elaborated under Section 248 G of the act which talks about the resolution passed by directors. Section 248 G (1) talks about the majority vote and Section 248 G (2) talks about the casting vote (Macdonald and Ramsay 2016). The provision of casting vote says that if the director has the capacity to vote in addition to any vote if it is necessary. Casting vote of directors are falling under the voting of resolution. In order to pass a resolution include certain criteria. Firstly, it should be passed at meeting and it must forgather and satisfy the minimum number of members requirements, secondly, the resolution must be kept with the record of the company within a month of the meeting, thirdly, the signature by the chair of meeting on the minutes are necessary where the resolution passed (Muhammad, Huang, and Liu 2019). The above mentioned criterias need to be full filled otherwise it will consider as invalid.

Question Four

Part- (A) The case study showing that Christine, Sharni and Mandy are the directors of Layabout Ltd and the company is running in loss and in to ensure the future all of the directors planned for a TV advertising and Christine want to involve her husband Sunil to engage in such tv ad as he has relevant experience for that. Christine as a director need to act according to Section 180 of the act which talks about  the care and diligence must be exercised as a reasonable person do exercise if he or she is in the position of director. Christine must need to follow Section 181 of the act to act in good faith for the betterment of the company and purpose must be met and there should not be any conflict between the directors and if it arise must be controlled by Christine. Christine must not act improperly and she must not use her position to take a favour from the company as mentioned under Section 182 of the Corporations Act, 2001 (Hedges, Bird, Gilligan, Godwin, and Ramsay 2016). Christine must not improperly use the information as a director to take an advantage from the company as mentioned under the provision of Corporations Act, 2001. In order take Sunil for the advertisement the company must meet Section 1018 A of the act which says about the promotional material and advertisements need to identify the issuer and refer to product discloser statement. Section 1018 A (1) of the act talks about certain rules which need to be followed for advertisement. The financial product which are available to the retail clients and it is available to the clients by way of sale or issue to which section 1012 C apply, then it must advertise product or publish a statement that will encourage the people to buy the product. The advertisement or statement need to identify whether it is available to the customers through issue or sale. The name of the issuer and seller must be mentioned and product disclosure statement must be included to help the customers that the customer from where they will get product. The statement will also help the customer to decide whether the product need to be purchased or continue to use the product. The Layabout Ltd must follow the above mentioned rules in order to get the advantage of the advertisement. The TV advertisement will come under Section 1086 A (6) of the act and it will be considered to be broadcasted in media. Therefore from the above discussion it can be mentioned here that as director Christine has to act according to the rules provided by the company like must act in good faith, no undue advantage to be taken by using the post of the director. Sunil who is the husband of Christine must be taken by the company without any injustice to other directors.

Part- (B) The directors are bound to act with the due care and diligence as a reasonable person can act with such due care and diligence if he/she holds the position of a director. Section- 180 of the act talks about the duty of a director as mentioned above. In the case of Daniels v AWA Ltd (1995) 13 ACLC 614 the court of appeal observed the duty of director as envisaged under Section 180 of the act. The appeal court observed that in order to exercise the duty the director must fulfill the basic requirements. The directors must understand generally the business of a company and must well known with the rules and regulations of the company. The directors need to monitor the company’s affairs instead of looking after the daily activities. It is an important obligation of the directors that to know about all the activities of a company. The auditing of a company is done by the auditors but the directors must be aware about the financial status of a company. In a recent case of Australian Securities and Investments Commission v. Healey the court made it clear that the directors need to pay attention to the company’s affair and a director must give advice if it is needed in order to act in his own power. The defense available to directors related to duty of care is also known as the business judgement rule (Akhtar 2016). Section 180 (2) of the act talks about the defense need to be taken in case there is any breach of duty by the director as per the act. The business judgement rule involves the director as well as the any officer who is acting under the duty of care. The defenses are firstly the director or the officer made the judgement according to proper purpose and good faith, secondly it must reflect that the business decision taken by the director or officer never made in favour of personal interest, thirdly the judgement was made with a belief that it was the best option for the company, the business decision was communicated among the people of the company in a proper standard. The decision taken by the director or any other officer will be considered as a fair one if a reasonable man also thought in the same way as the directors. Therefore from the above discussion it can be concluded that it is true that the company directors have to exercise a very high standard of care and diligence under both the Corporations Act and case law because if they make a decision that causes any damage to the company they will be personally liable to the company.

References

Adam, Yang Chik. “corporate governance and nominee Directors–What Does it mean?.” Management and Accounting Review (MAR) 15, no. 2 (2016): 171-184.. “corporate governance anD nominee Directors–What Does it mean?.” Management and Accounting Review (MAR) 15, no. 2 (2016): 171-184.

Adamson, David, and Adam Loch. “Achieving environmental flows where buyback is constrained.” Australian Journal of Agricultural and Resource Economics 62, no. 1 (2018): 83-102.

Akhtar, Farida. “The probability of a firm making a takeover bid: an empirical analysis of Australian firms.” Australian Journal of Management 41, no. 1 (2016): 27-54.

Atif, Muhammad, Allen Huang, and Benjamin Liu. “The effect of say on pay on CEO compensation and spill-over effect on corporate cash holdings: Evidence from Australia.” Pacific-Basin Finance Journal (2019): 101105.

Chan, Konan, Hung-Kun Chen, Shing-yang Hu, and Yu-Jane Liu. “Share pledges and margin call pressure.” Journal of Corporate Finance 52 (2018): 96-117.

Cole, Steven. “Good governance and the curious case of the alternate director.” Governance Directions 68, no. 10 (2016): 603.

Hedges, Jasper, Helen Louise Bird, George Gilligan, Andrew Godwin, and Ian Ramsay. “An Empirical Analysis of Public Enforcement of Directors’ Duties in Australia: Preliminary Findings.” CIFR Paper 105 (2016).

Langford, Rosemary Teele. “Corporate Culpability, Stepping Stones and Mariner-Contention Surrounding Directors’ Duties Where the Company Breaches the Law.” Stepping Stones and Mariner-Contention Surrounding Directors’ Duties Where the Company Breaches the Law (February 2, 2016) 34 (2016).

Macdonald, Robert D., and Ian Ramsay. “The Australian Sports Commission’s Governance Reform in Sport Discussion Paper and Voting Rules in Corporate Constitutions.” Company and Securities Law Journal 34, no. 5 (2016): 387-402.

Voogt, Thea. “A conceptual assessment of board skills in ASX100 companies.” Australian Business Law Review 46, no. 4 (2018): 218-236.