The legal procedures established by a tribunal to regulate all business-related activities might be referred to as business or company law. Shareholders, directors, employees, and creditors of any organization are all covered by various laws created in this field. It outlines several laws and guidelines that regulate business operations to ensure that no unlawful behaviour is tolerated in any company. The topic of business and corporation law is covered in this study. Accordingly, the case of Australia has been discussed, covering the Corporation Act and its several provisions that define the duties of officers and directors in the workplace. In addition, a critical analysis of the tribunal’s ruling in the case at hand will be conducted to comprehend all the crucial components of the Corporations Act.

Statutory Duties of Directors Under the Corporations Act

In recent years, the tribunal has demonstrated a keen interest in corporate governance issues, as well as the function of directors and company secretaries (Page and Katz, 2010). Accordingly, it has been stated that no director or officer of the corporation disputes the organization’s operations by claiming that they were ignorant of their roles and obligations. Australia had a state-based corporate law system prior to 1991 because it believed that states had jurisdiction over commercial legislation. However, several advancements occurred over time, leading to the enactment of acts under corporation laws that governed business-related regulations. The laws and regulations created under this law could make corporate personalities fearful of the legal actions that may be taken against any unlawful business practices. The director and company secretary of a corporation are expected to fulfil several duties and responsibilities under specific laws that have been formulated for them in Australia. As a result, officers are classified into three groups based on a number of responsibilities under Australian law: Statutory obligations, common laws that clarify due diligence and duty of care, and fiduciary duties are the first three (Meese and Oman, 2014).

Different duties and responsibilities are established in different parts of the Corporation Act (CA). According to the law, there may be consequences for violating sections 180–183 of the CA. However, s. 184 may apply in certain serious situations that suggest criminal responsibility. Similar circumstances can be seen in the James Hardie Group case mentioned above, when ASIC prosecuted the directors and company secretary under the Corporation Act after discovering that they had not carried out their responsibilities with appropriate care and diligence.

They were subject to a specific number of penalties under CA. A company’s directors are the individuals who used to act on behalf of all its shareholders. They must therefore fulfil all expected functions and obligations and carry out their duties in good faith. The James Hardie Group violated several important responsibilities that are expected of the organization’s officials and directors. The Corporation Act of 2001 outlines the following:

Duty of Care

Section 180 of the Corporation Act states that the directors and officers of the company are accountable for conducting all its business with the utmost care and diligence. Showing reasonable care in an action that also demonstrates the organizations, and all its linked stakeholders’ best interests is what is meant by “due care.” Maintaining the activities aimed at formalized security, which have systematic regulations, standards, and related guidelines that can aid in upholding the proper method for carrying out legal works, is another reflection of this.

In addition, the term “due diligence” refers to the thorough examination and study of every action carried out by the company to prevent any unlawful activity. Due to the mentioned enterprise’s improper performance of both duties, the directors were accused of penalties and faced legal action. Furthermore, the court found that the directors of the company had violated their duty when they approved the ASX announcement during a board meeting.

Good Faith

According to Section 181 of the Corporation Act, the directors of the company must act in the organization’s best interests and in good faith. Additionally, this illustrates the legal obligation of faith and trust. The directors and officials are required to act with their full attention in accordance with this duty. There shouldn’t be any false beliefs or intentions that indicate a willingness to do any form of fraud. This act required the referenced enterprise to disclose all its facts truthfully and without intending to deceive any parties. However, the directors concealed information and gave the ASX the incorrect amount of pay.

Misuse of Professional Designation

A company’s officials are prohibited by section 182 of the Corporation Act from using their position inside the company in any way that would give them or any third party an unfair advantage. The fact that the business has lost money because of directors’ and officers’ inappropriate use of their positions is irrelevant. What matters is that their performance and aim were not in accordance with the law. The directors in the James Hardie case misused their authority and position. Moreover, the company secretary failed to carry out his responsibilities in accordance with the regulations (Letsou, 2010). Therefore, the directors and executives committed a grave violation of their duties and responsibilities.

Misappropriation of Information

Section 183 prohibits directors and officials of the company from using information for purposes other than those for which it was intended. They shouldn’t tamper with the data or information in any way for their own gain. Additionally, the way information is used should be clear and understood by everybody involved with the business. In addition to being easy to handle, this would be a morally just thing for the business to do. Regarding the situation mentioned above (Segrestin and Hatchuel, 2011). The remuneration sum was incorrectly disclosed by the board to ASX, since it was underfunded by 1.5 billion dollars.

Analysis of the Judicial Decision

James Hardie’s case was heard in court, and following several rounds of deliberation, a definitive ruling was rendered. The court decided during the first round of the trial that Mr. Shafron, the company secretary of the business, had violated his duties. According to Mr. Shafron’s position, it was his duty to provide appropriate advice in a suitable way. He was in charge of alerting the full board of directors about the organization’s announcement in a very forceful manner. The court made it apparent that since Mr. Shefron participated in the decision-making process, he was obliged to ensure that all the activities were lawful. Any firm’s CS is in charge of investigating the organization’s legal issues to restart the enterprise’s legal proceedings. Failing to fulfil this obligation could have major repercussions, including possible legal action against the company.

A few of the organization’s directors appealed the Supreme Court’s ruling in the second round, arguing that the minutes should not have been allowed. As a result, the court reversed the NSW ruling, and the ASIC-presented minutes contained numerous errors. However, since Mr. Shafron was found to have violated his duties, the decision remained the same. Additionally, he argued that since he was just serving as general counsel and not as CS, the Corporations Act of 2001 should not be applicable. According to Dezalay and Garth (2011), regardless of their position now, the directors and all other officials participating in the decision-making process bear complete responsibility for all actions and choices made during the meeting.

The high court also participated in this decision-making process, overturning the NSW ruling. They held everyone accountable for the violation of their obligations. As CS was operating as an officer at the time, his appeal against the organization was denied, and the Corporation Act was fully applied against him, holding him accountable for all choices. Furthermore, the court ruled that a board meeting is proof of the entire topic, including the decisions and resolutions it contains, because there is no contradicting evidence. Given that the directors failed to carry out their duties in a proper manner, it was thus amply demonstrated that the court and its ruling on the breach of duty in the James Hardy case were correct.

Conclusion

The different basic roles and responsibilities of an organization have been described in the business and corporate law report mentioned above. The issue of James Hardie, an Australian manufacturing company that made incorrect references to its compensation funds, has been discussed in the study. A number of the indicated fir’s directors and officers were found to have violated their duties in this instance.

The report concludes that the acts and regulations enacted under the Corporation Act had the capacity to instill fear in corporate personalities regarding the possibility of legal action being taken against any unlawful business practices. According to the law, there may be consequences for violating sections 180–183 of the CA. However, s. 184 may apply in certain serious situations that suggest criminal responsibility. The officers and directors are required to act with their whole attention in accordance with their duty. There shouldn’t be any wicked beliefs or intentions that indicate a willingness to do any form of fraud. 2010 saw the court’s final ruling in this matter.

References

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