Case Introduction 2 The breach of duties by directors 2 Case Analysis 4 Directors’ duty of care and its scope 4 Test for the breach of care and diligence 4 Impacts on Australian corporation law 5 Conclusion 6 References 6 Case Introduction The aim of this report is to research on the case ASIC v Cassimatis (No. 8) [2016] FCA 1023 involving breach of company directors’ duties under the Corporations Act 2001 (CA). This case is about the litigation that brought by ASIC against Mr and Mrs Cassimatis for alleged breaches of their duties of care and diligence as directors of Storm Financial Limited (Storm). First of all, before the Global Financial Crisis in 2008, Storm was a highly profitable company and they pursue an investing model called Strom model. This model generally involved investors being initiated into Storm by a preliminary appointment and after that they …show more content…
Although it is impossible for directors to be responsible in all aspects, duty of care and diligence is a basic principle that is compulsively applied to every company and director(ref a guide). In this case, Mr and Mrs Cassimatis were the only two executive directors of Storm, who created and applied the Storm model to their business and well managed every aspect of the company(ref case). Hence, given a supreme position and such controlling power in Storm, they have a compelling obligation to exercise care and diligence. To be specific, they must provide proper care that a reasonable director would do, foresee potential business issues and eliminate or lower relevant risks, monitor management and provide proper guidance for employees in terms of duty of care, and make decisions considering interests of stakeholders and all circumstances(ref
This decision was made in good faith and cannot be conspicuously construed to have self-interests veiled in them. Further, the executive directors made an informed decision to refrain from passing this information to the board and they did believe that this would be in the best interests of the company as disclosure would have brought an end to the company’s existence much before the actual downfall. Thus this judgment met all the requisites prescribed under the provisions of Section 180 (2) of the Corporations Act, 2001 (Rawhouser, Cummings and Crane 2015). This case was the first to comprehensively lay down the business judgment defense and apply it to the facts and circumstances of a case. This defense would negate the apparent breach of the duties of the directors as prescribed by the statute and under common
... his actions were conducted in the best interest of the company. Further, by appointing Helen as director, no substantial injustice was done to any other parties. Thus, I am of the opinion that it is fair for s1322(4)(a) to apply in this situation.
The High Court focused primarily on the nature of the employment relationship between Vabu Pty Ltd and its cour...
The tort involved in this case is that of negligence, which is defined as the breach of an individual’s duty to take reasonable care in situations where damage has occurred to another person or organisation (Legal Services Commission, 2013).
...me a director of the third company within five years after the liquidation of the two companies. The third company was funded by a creditor, Mr. Silverleaf. When the third company was wound up, Mr. Silverleaf then had knowledge of the previous two companies’ failures and claimed a debt of close to ₤135,000 . Mr. Silverleaf was successful in bringing proceedings under sections 216 and 217 of Insolvency Act 1986 even there’s no evidence of any asset transfer between the companies.
Obviously, financial establishments can endure breathtaking misfortunes notwithstanding when their risk management is top notch. They are, all things considered, in the matter of going out on a limb. At the point when risk management fails, be that as it may, it is in one of the many fundamental ways, almost every one of them exemplified in the present emergency. In some cases, the issue lies with the information or measures that risk directors depend on. At times it identifies with how they recognize and impart the risks an organization is presented to. Financial risk management is difficult to get right in the best of times.
Sections 260-264 of Companies Act 2006 (the Act) can be considered as ‘new regime’ for regulating derivative actions supersedes the common law derivative action. Under the Act, a derivative action may be brought only under statute , by any member , against any director (including former and shadow directors) and other persons implicated in the breach , former directors are included and/or in respect of negligence, default, breach of duty and breach of trust by a director of the company.
As a consequence of the separate legal entity and limited liability doctrines within the UK’s unitary based system, company law had to develop responses to the ‘agency costs’ that arose. The central response is directors’ duties; these are owed by the directors to the company and operate as a counterbalance to the vast scope of powers given to the board. The benefit of the unitary board system is reflected in the efficiency gains it brings, however the disadvantage is clear, the directors may act to further their own interests to the detriment of the company. It is evident within executive remuneration that directors are placed in a stark conflict of interest position in that they may disproportionately reward themselves. The counterbalance to this concern is S175 Companies Act 2006 (CA 2006) this acts to prevent certain conflicts arising and punishes directors who find themselves in this position. Furthermore, there are specific provisions within the CA 2006 that empower third parties such as shareholders to influence directors’ remuneration.
Salomon v Salomon was and still is a landmark case. By confirming the legitimacy of Mr Salomon's company the House of Lords put forward the concept of separate corporate personality and limited liability. Inextricably linked with this ratio is an acknowledgement of the importance of certainty within the law, thus separate corporate personality becomes a concrete principle to which the law must adhere. Salomon v Salomon is followed in subsequent cases, notably Macaura v Northern Assurance Co.[3] and Lee v Lee's Air Farming Ltd[4]. These cases highlight the reality of the separate corporate identity and take it a step further in stressing the distinction between a company's identity and that of its shareholders.
Bibliography: Turnbull, S. (1997). Corporate governance: its scope, concerns and theories. Corporate Governance: An International Review, 5 (4), pp. 180--205.
In company law, registered companies are complicated with the concepts of separate legal personality as the courts do not have a definite rule on when to lift the corporate veil. The concept of ‘Separate legal personality’ is created under the Companies Act 1862 and the significance of this concept is being recognized in the Companies Act 2006 nowadays. In order to avoid personal liability, it assures that individuals are sanctioned to incorporate companies to separate their business and personal affairs. The ‘separate legal personality’ principle was further reaffirmed in the courts through the decision of Salomon v Salomon & Co Ltd. , and it sets the rock in which our company law rests which stated that the legal entity distinct from its
The Principle of Separate Corporate Personality The principle of separate corporate personality has been firmly established in the common law since the decision in the case of Salomon v Salomon & Co Ltd[1], whereby a corporation has a separate legal personality, rights and obligations totally distinct from those of its shareholders. Legislation and courts nevertheless sometimes "pierce the corporate veil" so as to hold the shareholders personally liable for the liabilities of the corporation. Courts may also "lift the corporate veil", in the conflict of laws in order to determine who actually controls the corporation, and thus to ascertain the corporation's true contacts, and closest and most real connection. Throughout the course of this assignment I will begin by explaining the concept of legal personality and describe the veil of incorporation. I will give examples of when the veil of incorporation can be lifted by the courts and statuary provisions such as s.24 CA 1985 and incorporate the varying views of judges as to when the veil can be lifted.
According to Corporation Act 2001 s124(1), it illustrates that ‘’A company has the legal capacity and powers of an individual both in and outside the jurisdiction” . As it were, company as a legal individual must be freely with all its capital contribution shall embrace liability for its legal actions and obligations of the company’s shareholders is limited to its investment to the company. This ‘separate legal entity’ principle was established in the case of Salomon v Salomon & Co Ltd [1987] as company was held to have conducted the business as a legal person and separate from its members. It demonstrated that the debt of company is belonged to the company but not to the shareholders. Shareholders have only right to participate in managing but not in sharing the company property. Besides ,the Macaura v Northern Assurance Co Ltd [1925] demonstrates that the distinction between the shareholders and company assets. It means that even Mr Macaura owned almost all the shares in the company, he had no insurable interest in the company’s asset. The other recent case is the Lee v Lee’s Air Farming Ltd [1961] which illustrates that the distinct legal entities between employee ad director allows Mr.Lee function in dual capacities. It resulted that the corporation can contract with the controlling member of the corporation.
Corporate law is an area of law that directly relates to dealings with corporations within our legal system. “In Ontario, law compromises of statutes, regulations and cases. This means that to understand the law in any area, you must familiarize yourself with the statute or statutes that relate to that area, check related regulations where required, and read cases that show you how the courts have applied those statutes and regulations in real life situations” (Corporate Law for Ontario Businesses, 2012, pg. 2). In this paper I will be doing just that. I am going to be looking at a particular case that happened and examine how the courts applied legal regulations to a real life situation. I will also be examining what it means for a corporation to be a separate legal entity, as well as the level of importance a shareholder has within a company. All of these topics directly relate to the case I will be examining and are important to knowing in order to understand why the court made the decision that they did. Lastly, I will be discussing my own personal opinions on the case and the decision made by the courts.
According to Carol Padgett (2012, 1), “companies are important part of our daily lives…in today’s economy, we are bound together through a myriad of relationships with companies”. The board of directors remain the highest echelon of management in any company. It is the “group of executive and non-executive directors which forms corporate strategy and is responsible for monitoring performance on the behalf of shareholders” (Padgett, 2012:1). Boards are clearly critical to the operation of companies and they are endowed with substantial power in the statute (Companies Act, 2014). The board is responsible for directing and steering the company. The board accomplishes this by business planning and risk management through proper corporate governance.