Discuss about the Law of Business Organization for Slater and Gordon Law Firm.
The shareholders had put wrong allegations on the Slater and Gordon’s Law firm for misinterpreting the prospects of its financial issues. The rival of Slater and Gordon was Maurice and Blackburn. Their section of class included a group of members of 3000 and 250,000 dollars. According to the shareholders who had given false allegations stated that Slater and Gordon Law firm had gained a part of the company known as the Quindells in the month of April 2015. After the process of acquiring it got misrepresented subsequently in the financial prospects. The Plaintiff suspected that on the hall that he had relied on, this particular Law firm misrepresented Matt Hall. Therefore, the firm had to suffer a loss of million dollars since the price of the shares had decreased dramatically. The firm was thereafter accused on the fact that they were aware of the financial issues that it was facing. Thus, it did not succeed in sharing the same information in the public. The firm was therefore accused of giving false statements regarding the financial prospects as exclaimed by Mr. Watson.
The issue of this scenario is that whether the directors of the firm had committed breach of duty by producing the financial prospects of the firm that were misrepresented.
This particular scenario can be governed under the Corporation Act, 2001. According to the Australian Securities and Invest commission (ASIC), the duty of the directors is to execute the rules that have been produced in the Corporations Act. The duty of the directors is to act in utmost good faith and also in the interest of the shareholders of the company. This has been defined under Section 183 of the Corporation Act. Therefore, as per this Act, it can be stated that a business organization has a few obligations. The obligations of this organization state that an undertaking must disclose the material facts and continuous information to the public according to the rules of listing. Under Section728(2) of Corporations Act, an individual must provide a statement regarding the matter that will contain sufficient information that can be held to be as producing a misstatement. Before this particular provision is Section 728(1), which states that an individual cannot offer any kind of securities that can mislead a person. Implying this, thereafter under Section 728(3) of the Corporations Act, if an individual produces any kind of misstatement or fails to specify any kind of new information that had arose, will be held to have violated under the provision of Section 728(1). According to Section 1041A, if a person is engaged in business cannot undertake any kind that can affect the formation of an artificial price for the aim of trading the financial product. An individual can prohibit himself from carrying out any kind of activity or to omit the activities is expected to form a false appearance as per Section 1041B.
As observed from the facts of the case, the Staler and Gordon law firm had misrepresented the financial reports of the firm. These statements were relied on by the shareholders of the firm and had therefore suffered losses subsequently. Hence, it can be stated that the firm had breached under the Section of 728(1) of the Corporation Act. No legal provisions were complied, by the firm as per the Section 674 of the Corporations Act. It makes it necessary that the business must disclose the information and the material facts. However, in this scenario, the directors of the firm failed to perform in utmost good faith and in the interest of the shareholders and the company. It was breached under the provision of Section 183.
It can be concluded from this scenario that misstatements were provided by the firm regarding their financial statements and therefore the directors were liable in committing breach of duty.
In this scenario, the concerned issue is regarding the kinds of options that are available in the enforcement of the law agencies and the directors of the firm that are linked to the legal issues.
The Australian Securities and Investment Commission explained that it has obligation for enforcing the legal provisions as mentioned under the Corporations Act 2001. The companies of Australia can regulate its operations as per the Act. An individual who contravenes will commit a civil liability under this section. Section 1041H, it can be explained that an individual cannot engage themselves in any kind of misleading conduct or deceptive conduct. It is related to the concept of disclosing material facts regarding the financial products and services. Section 201 of the Corporations Act defines that a court has the power to disqualify an individual from being the director of the company as mentioned by the ASIC. A director can be disqualified from and therefore the courts can take into consideration the activities of the director related to managing the company. Secondly, the court will take into consideration the matters that are appropriate by the courts. However, the courts have the power to alleviate an individual from his liability if the court is persuaded on the fact that such an individual had breached the provision of civil penalty but had acted with honesty as per Section 1317S. The Corporation Act states the provisions of a civil penalty. Section 137E defines that the Court has the authority to make a declaration of the convention. Such a convention must include the provision of civil penalty, which have been breached.
As per the given facts of the scenario, Slater and Gordon being the directors had associated in deceptive and misleading the conduct that was linked to the financial prospects of the firm under Section 728 of the Corporations Act 2001. However, the directors will be committing a civil liability as mentioned in Section 1041H. Proceedings can commence against the company for breaching under the sections that have been mentioned above since it was proved that the directors were liable. The Australian Securities and Investment commission can bring certain charges for the breach of the duties of the directors that can act in the interest and utmost good faith of the shareholders the company according to the Section 183. It has been determined that directors had breached the duties as they will acquire a civil liability according to what is mentioned under Section 1315E.
It can be concluded in this scenario that proceedings can start against the law firm for breaching the provisions of the Corporations Act, 2001 as mentioned earlier.
The issue of the scenario states that whether the corporate veil of Slater and Gordon can be pierced by the Court in this case.
Solomon V Solomon explains the concept of corporate veil has been determined here. The principle that has been discussed that the company must be treated as a separate legal entity and therefore it can be distinguished from the members and owners of the company. Such a situation leads to the process and concept of corporate veil. However, the Courts are usually bound by this concept, as they do not hold the members of the company for all the liabilities that have been acquired by the company. The Courts had therefore held that the principle of corporate veil and it had unnoticed the principle of the separate legal entity of the company. The Courts usually lifts up the corporate veil if it assesses any kind of fraudulent activities that can be continued after the veil of the company. As mentioned under Section 728 of the Corporations Act 2001, civil liability will be incurred if the director has associated himself deceptive statements.
The scenario states that there have been a series of misrepresentation of the financial prospects of the firm. The shareholders relied on the information that was provided and hence they had suffered a huge loss. Therefore, it can be stated that directors had actually engaged themselves in providing and false statements and providing misleading conduct. This has been mentioned under Section 728. As stated above, if any person fails to act in the best interest of the company and in utmost good faith then the directors will be held liable thereafter. The directors will be liable personally and not the company as it considered to be a separate legal entity. A company and its directors are always distinguished according to the Corporations Act. If the director breaches any kind of duty, he will be held liable for it separately and not the shareholders and the company itself. They are treated as two different entities and not as one. However, the corporate veil in this case will be pierced as per the requirements of the Corporation Act. Therefore, the corporate veil will not be effective on the company itself but the directors.
It can be concluded that in this situation the corporate veil can be lifted in this case.
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