Corporation Law Australian Investors Forum Pty Ltd †Free Samples

Question: Discuss about the Corporation Law Australian Investors Forum Pty Ltd. Answer: Introduction: Corporation Act, 2001, regulates some laws regarding business entity and prescribes duties for the directors of an Australian company (Tills and Wills 2016). The director of a company plays a very important role in case of the companys management and its constitution. Directors are responsible for a companys daily business and owe duties to every shareholders of a company (Burba 2017). Corporations Act deals with statutory requirement of a registered firm, and set out rules regarding the conduct of a companys director and officers. However, there are certain situations where it has been noticed that the Directors are held liable for breach of duties imposed on them. A few cases show the discrepancies on behalf of the directors in their dealing with the company. In Australian Securities and Investment Commission vs. Australian Investors Forum Pty Ltd, the Court has observed that the director of a financial company has failed to show due diligence and care to its share holders, which r esulted in cataclysmic consequence for the company and the effect was detrimental in nature. The Supreme Court of New South Wales suspended the directors of the company, Dennis Ralph Anthony and Lloyd-cocks for a period of 25 years and imposed fine upon them. Discussion: Case summary: Australian Investors Forum Pty Ltd was a company dealing with tradable financial assets, had its office at Sydney (Gitman, Joehnk, Smart and Juchau 2015). Dennis Ralph Anthony and Martin Lloyd Cock were the directors of the company (Asic.gov.au, 2017). On 2005, Australian Securities Investigation Commission had alleged that both the directors, Mr. Anthony and Martin Lloyd-cock breached a numbers of provisions of Corporations Act, 2001. New South Wales Supreme Court held both of them guilty and passed decree against them by suspending them for a period of 25 years and imposed a fine up to $3.6 million. Issue: According to the case law, the issue arose that whether the directors, Mr. Anthony and Mr. Martin Lloyd-Cock had breached the provision of Corporation Act or not. Relevant rules: Corporation Act, 2001 was encoded with an object to regulate the conduct of the directors of a company, and regulates law regarding business (Ciro and Symes 2013). The case of ASIC vs. Australian securities Forum Pty Ltd., is based on the relevant sections such as Ss. 180, 181, 182, 206E(1), 208(1), 209(2), 727(1), 1317E, And 1317H of the Corporation Act, 2001 (chen and Everett 2014). According to the provision of section 180(1) of the Corporation Act, a director of a company should exercise their duties with due care and diligence. Section 181(1) of the same Act stated that a director of a company must exercise those duties for the interest of the corporation as well as for the appropriate purpose. It is not desirable that the directors shall misuse their position for an intention to gain advantage or to cause effect on the corporation. If it is seen that any director had breached these provisions, he shall be liable under these sections. Australian Securities investment Commissions is a body of Australian government that established with a view to regulate laws relating to financial services with an object to protect the consumers (Bird Giligan and Ramsay 2016). If any director infringed any provision of Corporation Act, ASIC can sue him for that before the competent authority. As per section 206E(1) of Corporation Act, 2001 the court can disqualify a person or restrain him from his post after an allegation made by the ASIC if the person contravened the provision of the Act (Hedges et al. 2017). In case of a public company whose shares are traded freely, should acquire approval from its members. If the company fails to do so, the court may pass an order of injunction to prohibit the benefits offered by that company. According to section 727 of Corporation Act, 2001 provides that a person can make an offer only after the disclosure of certain documents to the Australian Securities Investors Commission (Baird 2014). These documents include prospectus, profile statement, and an information statement. Section 1317E and section 1317H of the Act provide the penalty provision in case of contravention of any specified provisions of the Act including the provision regarding breach of officers duties. The penalties stated under the provision of section 1317E are civil in nature. Section 1317H of the Act has confined certain compensation sectors in case of damage faced by corporation. The ratio of compensation should be decided based on damage suffered by company. In ASIC vs. Adler, Adler was the owner of a company named Pacific Eagle Equity Pty Ltd, who got a loan from one general insurance company (du Plessis, J.J. and de Koker, J.N. eds., 2017). Adler was also a trustee of Australian Equities Unit Trust. Pacific Eagle Equity Pty Ltd sold its shares at $2 million loss without the approval taken by the shareholders. Even, the company did not disclose any documents to the investment committee. The loan was also approved without any legal documents. The Court held that, Adler had failed to show due care while performing his duties and the Court had banned Adler from the post of director for a period of 20 years and imposed penalties upon them. Application: It was alleged against Australian Investors Forum that they had offered securities to their members without disclosing any documents before the ASIC. Another allegation was that the directors of a company had infringed their duties due course of performance. Australian Investors Forum ran an investment club since 1998 and used to offer its members placement in companies. Between May 1999 and October 2001, the forum received an amount of $3.2 million as membership fees and subscription fees (Asic.gov.au, 2017). They used the shares as initial public offerings. That lump sum amount was paid to the companies that are owned by the duo directors themselves along with another director, Mr. Dominic Luvara. On 2002, the forum was wound up by the order of court and subsequently others companies that were related to Mr. Anthony, Mr. Lloyd-Cock and Mr. Luvara were also wound up. Australian Securities Investors Commissions was raise their voice against it and filed a case before the Supreme Cou rt, New South Wales in the year 2005. In the course of the cases hearing, the Supreme Court observed that both the directors had failed to perform their duties with due care and negligence (Ozkan, Poletti-Hughes and Trzeciakiewicz 2017). Court has observed that the directors took away all the money that are gained by the forum in between the year of 1999 and 2001, it is a proof that they had done their job with an ulterior intention and they failed to show good faith regarding it and they had used their position improperly. During the investigation, it was found that Mr. Anthony had engaged himself in the management of the forum illegally. He was a bankrupt and thus, prohibited from the company affairs. Further it was revealed that Mr. Lloyd-Cock had contravened the provisions of Corporations Act 2001 knowingly and abstain themselves not to disclose any documents relating to the forum, which was a public company. One Sage Global Fund Limited, where Mr. Anthony holds the post of director, had failed to acquire assent from its shareholders about the payment (Sagecap.in, 2017). Australian Investors Forum had also contravened a part of the Act by misuse its dealers license with an intention to hold clients money on the trusts. All these contraventions were within the knowledge of both the directors, Mr. Dennis Ralph Anthony and Martin Lloyd-Cock. It was observed by the Supreme Court that a company expects directors who acts honestly with a good faith and should be careful over the issues regarding the public policies. He should not present himself as a threat towards the public who are investing. In this case, it was quoted by the court that the duo directors had failed to represent themselves honestly and breached the provisions of Corporations Act. ASCI submitted that a director, who had failed to ensure any strict liability, is liable under section 180(1) of the Act. The profit earned by the forum during the year 1999 and 2001 had been invested to the companies where the directors had interest proved that the directors had failed to exercise their duties for the interest of the corporation and for the benefit of the forum and become liable under section 181(1) of Corporation Act 2001. It is also proved that the directors had misuse their post and tried to gain illegal advantage. The Supreme Court had imposed section 206E upon the directors, holds them liable, and suspended them for a period of 25 years from their respective post by the request of Australian securities and Investment Commissions. It is held that as the forum had failed to show necessary documents to the ASIC, and both the directors know that, are liable within the scope of Corporation Act and are guilty within the provision of section 727 of the Act, 2001. Conclusion: Therefore, from above discussion, it can be concluded that the Australian Investors Forum, being a public company had failed to abide by all the norms of Corporation Act and the Directors of the company were also unable to perform their duties with due care and with good faith. The observation of the court regarding the duo directors was right. After a prolonged examinations and perused all the related documents regarding the case, Supreme Court of new South Wales came into the decision that Mr. Anthony and Mr. Lloyd- Cock are guilty and penalize them by suspending them for a period of 25 years under section 1317E of the Act. The Court had also imposed a penalty of $3.6 million under section 1317H of the Corporation Act 2001 (Hedges 2016). References: Australian securities Investigating Commissions vs. Australian Investors Forum Pty Ltd and Ors (No 3) [2005] NSWSC 1198 (30 November 2005) Tills, M. and Wills, C., 2016. 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