Legal Obligations Of Company Directors And Recourse For Non-Payment Of Monthly Fees

1). A. Amaya, what the process for altering a company constitution is, and whether she can prevent the inclusion of the clause allowing the directors to expropriate her shares?
B. Gracey, what recourse, if any, she has for the non-payment of her monthly fee for the remainder of her one year contract?

2). A. Lily-Mae whether the directors of Drink It Up Pty Ltd have breached s181 of the Corporations Act 2001 (Cth) or their equivalent equitable duties and what penalties or remedies might be applicable; and
B. Dhruv whether he has an action against Kristofer for breach of directors’ duties for selling him the shares in Drink It Up Pty Ltd just before it was going into liquidation.

Legal requirements for company directors

1(a. The directors of a limited company have obligations outlined and approved by the corporate constitution, certainly the obligation of care and loyalty. The directors of a limited company should endeavor to act in the best of the organization. The stockholders are the substantial support of the corporation and therefore, the directors need to perform in the best of the shareholders and corporate. The directors of the limited company should always put the necessary measures to overcome conflicts of interest. Significantly, it is advisable for the directors to reconcile and harmonize conflicts of interest over a certain transaction. If there are conflicts of interests or divided opinions by the directors, there should be full disclosure. The Australian legal requirements of divided opinions or conflicts of interest by the directors necessitate full disclosure under CA 2001 “section 191-193”. Consequently, directors or officials attached to two limited companies and have presumed conflicts of interest should only entirely declare on the conflicting interests but also provide a detailed disclosure of the anticipated danger to the corporate. The determination of a manager to transact for the welfare of the company requires the manager to seek settlement of the management before the transaction, courtesy of Corporations Act, s182. The Australian legal outlines for limited corporations require the organizations to have constitution that guide the operations of the various corporations. The constitution guides for elimination of managers of the corporation through the process of voting by the shareholders. Each of the shareholders has the right to vote for the elimination of managers from the office despite that the extent of shares limit the liability of the members. However, there are shareholders either individually or collectively controlling about 5% of the rights to vote may demand the corporation directors to mobilize shareholders’ meeting and propose resolves. The CA 2001 “section 136(2)” provides the over-all meeting of shareholders has the authority to amend or alter the corporation constitution by three quarters vote, when a special resolve is required. The observation of the constitution is pillar that enhances the sustainability of limited corporations in Australia.

Logically, Amaya as a director of the Oh My Pty Ltd owes an accountability of loyalty and care to the shareholders. As the accountant of Oh My Pty Ltd, Amaya should act and transact in the best interests of the corporate. However, Amaya has conflicting interests between Gosh Pty Ltd and Oh My Pty Ltd, which need to be disclosed. . The Australian legal requirements of divided opinions or conflicts of interest by the directors necessitate full disclosure under CA 2001 “section 191-193”. Subsequently, Amaya presume conflicts of interest between Gosh Pty Ltd and Oh My Pty Ltdand should only totally declare on the conflicting interests but also provide a detailed disclosure of the anticipated danger to the Oh My Pty Ltd. When a manager seeks to take a chance in which the company may perhaps have an interest, the manager must advance the fully informed accord of the panel, or the chance will belong to the corporation under CA 2001”sections 182-183.” 

Conflicts of interest and full disclosure

Again, according to the constitution of Oh My Pty Ltd and the lawful frame work for corporate bodies in Australia, the constitution allows for the removal of directors through voting.  The CA 2001 “section 136(2)” provides the over-all meeting of shareholders has the authority to amend or alter the corporation constitution by three quarters vote, when a special resolve is required. Moreover, shareholders with either individually or collectively controlling about 5% of the rights to vote may demand the corporation directors to mobilize shareholders’ meeting and propose resolves. Consequently, Amaya is removal from the office through a voting forum, which is applicable through the constitution.

1(b. Commercial contractual relationships are subject to some essentials that include capacity, certainty, intention, consideration and agreement. The parties entering into a commercial contractual relationship should the inclination to offer and accept. Once either party offers and the other accepts, there is a commercial agreement between the parties and agree to be limited by the terms and conditions of the agreement. Again, consideration is an essential of binding commercial agreement between the two parties. Consideration is the medium that supports the commercial contract between the parties, for instance, money. Capacity is the legal capability of the parties entering the commercial agreement, for instance, sound age and mind. The intention of the parties should ensuring commercial contracts that are legal, the deal of the contract should observe the legal formalities. Finally, certainty requires the parties to fully and clearly determine the duties and role, rights and obligations, which are enforceable through the law.

Commercial agreements are bound by terms and conditions and the parties are subject to the terms and conditions. The violation of the terms and conditions impact to breach of contract. The terms and conditions of the agreement are legally binding and therefore enforceable through the law. Moreover, the failure to observe the legal rules of the commercial contract amount to the termination of the contract. Repudiation impacts to the termination of the contract if one of the parties does not have the capacity to meet the agreed obligations. If either party behaves in manner to suggest unwillingness to the agreement, the contract is terminated through renunciation. Moreover, the vitiating factors that lead to the change of contractual obligations impact termination of the deal, for instance, when one party applies undue influence to the agreement.

Breach of the contract results to damages for the aggrieved party. However, the nature of the agreement determines the recourse to the parties entering the agreement. In an agreement where the accepting party owes a duty of performance and fails to deliver, the consideration to the agreement is no longer applicable for the remaining period of the contract. Moreover, the accepting party cannot sue the offering party due to the failure of performance.

Process for altering a company constitution

Certainly, the case between Oh My Pty Ltd and Gracey is a commercial agreement since all essentials are observed and duty of performances is owed. Oh My Pty Ltd is the offering party while Gracey is the accepting party, thus an agreement. As for the consideration to the agreement $ 4000 per month for one year, the capacity, certainty and intention of the agreement adhere to the legal regulations. However, Gracey airs for the Gosh Pty Ltd instead of Oh My Pty Ltd that calls for the termination of the contract through the vitiating factor undue influence. As a party to the commercial agreement, Oh My Pty Ltd suffers poor reputation against Gosh Pty Ltd since Gracey podcasts Gosh Pty Ltd instead of Oh My Pty Ltd. Moreover, the Oh My Pty Ltd terminates the agreement through repudiation since Gracey does not meet the obligations of the contract, podcasting for Oh My Pty Ltd. Again, the deal between Grace and Oh My Pty Ltd renounces the agreement since Gracey is unwilling to podcast for Oh My Pty Ltd.

Sensibly, Gracey should podcast for the Oh My Pty Ltd since the terms and conditions for the agreement are binding through the law. Oh My Pty Ltd can sue Gracey for failure to observe the duty of performance. Moreover, Gracey will not be able to receive the remaining payment since the breach of the contract impacts to termination of the deal.

2 (a. Legal requirements demand the directors of corporations to exercise power within limits and due diligence. The Corporations Act 2001, “section 180” sooth corporate directors to practice authority and perform duties with necessary care carefulness. The directors are required to make a business decision that is bound the principle of good faith and for the interest of the company. The managers should assimilate personal desires while making the decisions that related to the interests of the corporation. Substantially, the decision should consider the welfare of the shareholders and the company.  Furthermore, the directors and related staff members of the corporation should exercise authority and perform in good faith since the welfare of the corporation is the main objective. (s 181). The management should not misuse the powers to have personal gains or guide a share order to benefit from the powers enjoyed or lead to the collapse of the company (s 182). Moreover, it is against the Corporations Act for managers to use sensitive information from the company for self-gains or for others parties.

Recourse for non-payment of monthly fees in commercial contracts

The accountability to perform in good faith need the management to perform fairly, for the welfare of stakeholders. The accountability to exercise good faith is linked to the duty of performing for the welfare of the corporation. The management should not exercise authority for self-gains since the performance does not reflect the appropriate reason and there is negligence of performing in good faith. The role of equity branches from the fiduciary duties grounded on equity. The duty deserves the directors to perform in the rank of honesty. The fiduciary duty is not subjective until the management is proved to exercise power for self-reasons by the law. The association between the corporation and the directors is presumed to be fiduciary and thus the duty assimilates the management. Considerably, trustworthy manager fails perform the duties though acting for the welfare of the company. The law applies subjective and objective strategies to evaluate if the manager failed to perform in good faith for development of the corporation. If the management openly supposes the engagements are made for welfare of the company, the court of law will not repudiate that proclamation by assessing the viable worth of the engagement.  If the manager is confident that the performance assimilated good faith, the law does not disprove the declaration through examining the worth of the performance. The law applies self-governing policies to determine if the manager performed for the welfare of the company.

The directors of Drink It Up Pty Ltd breached the Corporations Act since the provisions of Act are not observed, performance that assimilated good faith.  The Corporations Act 2001, “section 180” sooth corporate directors to practice authority and perform duties with necessary care carefulness. The accountability to perform in good faith need the management to perform fairly, for the welfare of stakeholders. The accountability to exercise good faith is linked to the duty of performing for the welfare of the corporation. The management should not exercise authority for self-gains since the performance does not reflect the appropriate reason and there is negligence of performing in good faith. The role of equity branches from the fiduciary duties grounded on equity. The duty deserves the directors to perform in the rank of honesty. The fiduciary duty is not subjective until the management is proved to exercise power for self-reasons by the law. Furthermore, the directors and related staff members of the corporation should exercise authority and perform in good faith since the welfare of the corporation is the main objective. (s 181). The management should not misuse the powers to have personal gains or guide a share order to benefit from the powers enjoyed or lead to the collapse of the company (s 182). Moreover, it is against the Corporations Act for managers to use sensitive information from the company for self-gains or for others parties.

Essentials of binding commercial agreement

The Corporations Act is accountable for ensuring legal actions are imposed the management performs contrarily. The obligation provides for remedies upon the failure of the management to observe law. The damages provide for s 1317E (1)  in the Corporation Act, include pecuniary damages against a manager. The manager is to compensate the ASIC.  The determined consequence is $200,000.The law court further eliminate a manager or the presumed compensation. Consequently, the directors of Drink It Up Pty Ltd are liable to imposition of is $200,000 as a penalty for the breach of Corporations Act.

2 (b. The case between Perival and Wright (1902) proved that the managers of a corporation owe fiduciary duties to the corporation since the managers are part of the corporation and maintains the dealings. However, the managers do not, entirely by consideration of the company management that require fiduciary responsibilities to the stockholders, jointly or separately. The directors of a corporation are liable for performing the fiduciary exercise in circumstances that permit unique relation between the management and the stakeholders. Significantly, the unique relation between the management and the stakeholder is presumed to be above the standard that the management is expected to portray to the members. Certainly, the unique relation is prompted by circumstances such the requirement to perform a certain transaction between the manager and the stakeholder.

 Dhruv cannot take action against Kristofer due to the declaration that a corporation is a distinct body from the management and the liabilities are evaluated relating to the number shares acquired. The managers are just agents of the corporation and are not liable for the obligation s of the company. Considerably, the management would be subject to numerous claims from different members if the management would tolerate liabilities on the behalf of the corporation. The directors of a corporation are liable for performing the fiduciary exercise in circumstances that permit unique relation between the management and the stakeholders. Significantly, the unique relation between the management and the stakeholder is presumed to be above the standard that the management is expected to portray to the members determined relation between Dhruv and Kristofer.

Anderson, Mark, and Victor Warner. Drafting and negotiating commercial contracts. Bloomsbury Publishing, 2016.

Australia company laws and regulations handbook, 2009. Vol. 1 strategic information and basic regulations. Vol. 1 strategic information and basic regulations. Washington, International Business Publications.

Bagley, “The entrepreneur's guide to law and strategy”. Mason, OH, Thomson/Southwestern/West, 2017.

Baxt, Robert. Duties and responsibilities of directors and officers. AICD, 2015.

Bhatia, K. L. Textbook on legal language and legal writing. Universal Law Publishing, 2010.

Butterworths (FIRM). Australian legal words and phrases. Sydney, Butterworths, 2011.

Comino, Vicky. "Australia's' Company Law Watchdog': ASIC and Corporate Regulation." (2015).

Conaglen, Matthew. Fiduciary loyalty: protecting the due performance of non-fiduciary duties. Bloomsbury Publishing, 2010.

Gani, Ismail, Albert Wijeweera, and Ian Eddie. "Audit Committee Compliance and Company Performance Nexus: Evidence from ASX Listed Companies." Business and Economic Research 7, no. 2 2017: 135-145.

Gerrard, Michael. "Global climate change and US law." American Bar Association, 2017.

Harper,  “Business organizations: keyed to courses using bauman, palmiter, and partnoy's corporations.” [Place of publication not identified], Kluwer Law International, 2008.

Horsey, Kirsty, and Erika Rackley. Kidner's Casebook on Torts. Oxford University Press, USA, 2015.

Kidner, Richard. Casebook on torts. Oxford University Press, 2012.

Latimer, Paul. Australian Business Law 2012. CCH Australia Limited, 2011.

McFarlane, Donovan A. "The importance of business ethics to small ventures." Entrepreneurship and Innovation Management Journal 1, no. 1 (2013): 50-59.

Miller, Paul B., and Charles Weijer. "Fiduciary obligation in clinical research." The Journal of Law, Medicine & Ethics 34, no. 2 (2006): 424-440.

Mitchell, Catherine E. Contract Law and Contract Practice: Bridging the Gap Between Legal Reasoning and Commercial Expectation. Bloomsbury Publishing, 2013.

Pettit, Philip H. Equity and the Law of Trusts. Oxford University Press, 2012.

Reda, Reifler, & Thatcher,. Compensation committee handbook. Hoboken, N.J., Wiley, 2015.  

Tomasic, Roman, Stephen Bottomley, and Rob McQueen. Corporations law in Australia. Federation Press, 2012.