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Company Law: Final ASX Announcement

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Question:

Discuss about the Company Law for Final ASX Announcement.

 

Answer:

Issue

Whether there had been a breach of director duties on part of Bond in this case, or not?

Rule

In Australia, the Corporations Act, 2001[1] is the legislation which rules over the conduct and the working of the companies in the nation and included in Part 2D.1 of this act is the director duties[2]. As per section 180(1) of the Corporations Act, it is the duty of the directors in the nation to act in a manner which depicts care and diligence particularly when the directors use their powers and discharge their obligations[3]. In case where the provisions covered under section 180(1) are contravened, civil obligations covered under section 1317E are raised and in such cases, the court gets the power to make a declaration of contravention[4].

In Australian Securities and Investments Commission v Macdonald (No 11)[5], the chief executive officers of the company, was deemed to have contravened this section as he was covered under the definition of other officers in section 180(1)[6]. The chief executive officer in this case was MacDonald, and he had failed in advising the board of the company about the Draft ASX Announcement. Apart from this, he had also failed in getting the necessary approval before the Final ASX Announcement was released and also regarding the facts that some modifications had been carried on before the announcement was released. As a result of this conduct of Macdonald, the same was deemed as a contravention of director duties, apart from being misleading and deceptive[7].

In addition to the statutory law, the common law also provides certain obligations over the directors of the company, in addition to the key officers of the company. As per the common law, it is the duty of the directors to steer clear of such circumstances in which a conflict of interest is present and also are required to avoid using the corporate opportunities for their personal benefits[8]. These provisions are also covered in the statutory law, i.e., the Corporations Act, as per which the directors and the officers of the company are under an obligation to make proper use of the position which they hold in the company, on the basis of section 182[9]; and also have to use the information of the company in a proper manner particularly when it relates to confidential information, on the basis of section 183[10]; and the applicability of both these sections put a restriction against such misuse, whereby an advantage is attained for someone else or for themselves, particularly when it is detrimental for the company[11].

A leading matter in which this was upheld was the case of ASIC v Stephen William Vizard[12]. This was a case in which the court banned the director of the company, i.e., Vizard, from managing the affairs of any company for a period of 10 years and was also awarded pecuniary penalties to the sum of $390,000. The reason for such high penalties was that the director had dealt with the shares of the company for gaining a personal benefit and in order to do so, the confidential information of the company was used, which he got by being Telstra’s director[13].

 

Application

The case study shows that Bon had decided on the draft of the ASX Announcement and that he had placed the contents of this draft before the board, instead of the actual draft. He failed to inform the board that the borrowings were characterised as being non-current ones due to which, the final instalment repayment could not be rolled over to the next year. Apart from this, an approval over the Final ASX Announcement was also not undertaken by him. Applying the verdict given in Australian Securities and Investments Commission v Macdonald (No 11) to the facts of this case, these failures of Bond would be deemed as a breach of his director duties, particularly as he was neither careful, not diligent in his work.

Apart from section 180(1), there also has been a contravention of section 182 and 183. This is because he obtained information about the takeover of Casino as a result of being the CEO of the company, which he misused and asked his assistant to purchase shares. On the basis of ASIC v Stephen William Vizard, this would make Bond liable for misuse of position and information of the company. Even though the shares did not result in a profit for Moneypenny, but the information was nonetheless misused and this was a conflict of interest, as a result of which Bond breached his duties.

Conclusion

To conclude, there had been a contravention of both statutory and common law director duties, by Bond.

 

Bibliography

Articles/ Books/ Journals

Cassidy J, Concise Corporations Law (The Federation Press, 5th ed, 2006)

Cases

ASIC v Stephen William Vizard [2005] FCA 1037

Australian Securities and Investments Commission v Macdonald (No 11) [2009] NSWSC 287

Legislation

Corporations Act, 2001 (Cth)

Others

Czoch K, and Mulder M, Australia: The James Hardie Decision: Australian Securities & Investments Commission v Macdonald (No. 11) [2009] NSWSC 287 (2010) <https://www.mondaq.com/australia/x/106690/Corporate+Governance/The+James+Hardie+Decision+Australian+Securities+Investments+Commission+v+Macdonald+No+11+2009+NSWSC+287>

Jacobson D, ASIC v James Hardie Decision: Company, Directors And Officers Were Misleading (2009) <https://www.brightlaw.com.au/asic-v-james-hardie-decision-company-directors-and-officers-were-misleading/>

PwC, A guide to directors’ duties and responsibilities for non-listed public companies and proprietary companies in Australia (2008) <https://etraining.communitydoor.org.au/pluginfile.php/608/course/section/95/GuideDirectors_Apr08.pdf >

Reid K, Civil penalty and disqualification orders: An overview of the Vizard case (2017) <https://www.findlaw.com.au/articles/1970/civil-penalty-and-disqualification-orders-an-overv.aspx>

OR

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