Case Study: Asic Vs Adler.
The case revolves around Adler who was a non-executive director of HIH. On the other hand, Williams held the position of the director and the chief executive officer and Dominic Federa maintained the position of the director and financial controller. However, Adler made some requisition and Williams together with Fodera made some arrangements of the advance of ten million dollars from a subsidiary of HIH. Adler was the officer of Santow J to the Pacific Eagle Equity Pty Limited a newly formed organization by him. The purpose was to make profitable trades and investments for HIHC. Moreover, on the next period the company purchased the HIH shares that amounted to the value of three point nine million dollars. The ASIC came to the conclusion that Adler’s main intention was to purchase the shares in order to support the HIH share cost for his benefit of his personal HIH shareholding. In addition to that, the Australian Equities Unit Trust was established and PEE was made the trustee. The units of several classes got issued to the HIHC and the Adler organization that was controlled by Adler. The investment of HIHC of ten million dollars that included the HIH shares got purchased with it and later on became part of the trust.
Moreover, the HIH shares were later sold at a loss of two point one million dollars on the month of September the year 2000. From August to September the year 2000, Adler made AEUT to buy from his company various investments that were not listed in technology and other internet corporations. The AEUT lost the three investments that amounted to more than three million point dollars. From July to November the year 2000, Adler made PEE to make various unsecured loans that totaled to two million dollars to the organizations that were associated with him. The ASIC had alleged that it was disadvantageous to the AEUT’S corporation. However, the ASIC brought various proceedings against Adler, Williams, and Fodera as they alleged the contravention of the associated party transaction. The financial status assistance and the duty provisions of the Directors regarding the Corporation Act were also contravened (Clarke et al, 2003).
The case highly reminds the directors of their duties and responsibilities while within the organization. The directors of the company did not act according to their expected ways as outlined by the law. The arising issues were the payment of the ten million dollars that was carried out by an HIH subsidiary to a corporation that Adler was the sole director. All the transactions were carried out without any board member approval and also no disclosure was done to the investment committee of HIH. There was also no documentation of the loans being issued or any form of security that was laid out. The payment was done and it never came to the attention of the other HIH directors who had to be notified of any transaction. Adler had contravened various sections of the Act that stipulated the director’s duties. The duties and responsibilities breached include the duty to always act with care and diligence. The directors are supposed to comply with section 180 of the act. They should make the business decisions in good faith and for the best purposes without any personal interest. Adler had made the decisions for his benefit and that of his newly formed company (Bevans, 2007).
Secondly, they were supposed to act in good faith and for a better purpose to the organization. The section 181 was breached by the directors and Adler failed to make the appropriate disclosure of where the cash was intended to be directed. He made sure that his personal interest of protecting his shareholding of HIH that was in conflict with the interests of the enterprise. On the other hand, Adler had also breached his duty of acquiring the three unlisted technology investments to PEE and the unsecured loans from AEUT. Thirdly, the duty not to improperly use position was also breached. The section 182 of the act states that any officer, director or employee of any institution should not at any given time improperly use their positions for their advantage. Adler breached the conduct by supporting the cost of shares for his benefit. Williams also misused his position by authorizing the ten million dollars payment without following the correct procedures (El & Vault, 2003).
Lastly, there was improper use of the information that regarded the company. The section 183 states any member of an organization should not misuse the information they have obtained so as to gain advantage for themselves or other individuals. Moreover, it should not cause any detriment to the company. Adler breached the section by using the information for his advantage and that of his corporation. It concerned the investment committee procedures and investing guidelines. He made sure that the HIH invested the money in the proper way that would lead to him gaining more advantage and profits. The directors breached the act by taking part in actions that are prohibited. It is their role to act according to the act as stipulated by the law and for the smooth running of the corporation.
The tribunal decision was to ban Adler acting as director of any company for twenty years a she had violate the legislation outlined in the act. He breached various sections of the act that were supposed to be followed by the directors, employees and other members of the company. Breaching the Corporations Act had to be penalized as it was against the law and the people had to follow it as required. Williams and Adler had contravened the sections of the act that had outlined the duties and responsibilities of the directors in a particular company. The Supreme Court ruled out that Williams was disqualified to being a director of any corporation for a period of ten years. Williams was found guilty of breaching the section 180 and 182 of the Corporation Act and other convictions were entered against the associates. The decision of the court was important to ensure that other persons with similar motives do not breach the act. It was to set an example to other directors of various organizations and also caution them on the consequences of not following the act. They should respect the Corporation Act and run the organization as expected without any favor or self-interest. The court of law ensures that all the individuals follow the law and those that violate are dealt with and heavy penalties imposed on them (Hill & McDonnell, 2012).
In conclusion, Adler used his position by ensuring that the ten million dollars was paid to his newly formed company for his interest. He took advantage of the HIH was investing in conservative ways and gave them an option that would be advantageous to him. On the other hand, Williams authorized the payment without the correct procedures or following up to know the exact truth of the matter. The misuse of the information was also seen as Adler used his knowledge to acquire the funds and increase his shareholding in the HIH. The issue later caused deterioration in the company as there were no interests gained. The HIH was supposed to invest and acquire favorable interests that would help them gain profits. The Supreme Court penalized the directors and imposed heavy penalties for violating the Corporations Act. Adler was banned being a director for twenty years while Williams was disqualified for ten years. It was important for them to get punished for their mistakes and neglecting their duties and responsibilities in the organization.
Wheelen, T. L., & Hunger, J. D. (2002). Strategic management and business policy. Reading, Mass. [u.a.: Addison-Wesley.
Clarke, F. L., Dean, G. W., & Oliver, K. G. (2003). Corporate collapse: Accounting, regulatory and ethical failure. Cambridge [u.a.: Cambridge Univ. Press.
Hill, C. A., & McDonnell, B. H. (2012). Research handbook on the economics of corporate law. Cheltenham, U.K: Edward Elgar.
Bevans, N. R. (2007). Business organizations and corporate law. Clifton Park, NY: Thomson Delmar Learning.
El, K. Z., & Vault (Firm). (2003). Vault guide to corporate law careers. New York: Vault Inc.
Lee, D., Swartz, M., & American Bar Association. (2007). The corporate, securities, and M & A lawyer's job: A survival guide. Chicago: ABA, General Practice, Solo & Small Firm Division.
Bainbridge, S. (2015). Corporate Law. West Academic.
Bainbridge, S. M. (2002). Corporation law and economics. New York, N.Y: Foundation Press.
Tomasic, R., Bottomley, S., & McQueen, R. (2002). Corporations law in Australia. Sydney: Federation Press.
Kraakman, R. H. (2009). The anatomy of corporate law: A comparative and functional approach. Oxford: Oxford University Press.