Question

Amy, James and Laura are the directors of Elite Editing Pty Ltd (“Elite”), a company that provides online thesis editing for university students. The company is performing badly and Amy seeks the professional advice of Marie, a business advisor. Marie advises Amy that she has designed new software that can reduce overhead costs and help generate profit. Marie asks whether Amy and Elite would be interested in marketing and using this new software. Amy tells Marie that there is no way Elite could afford the new software but Amy would be keen to market the software herself. Amy and Marie establish a separate company called Proofmate Pty Ltd (“Proofmate”) and become its directors. Amy is the majority shareholder. The business of Proofmate is an overnight success. The board of directors of Elite is unaware of this new business. 5 Advise Elite Editing Pty Ltd as to whether Amy has breached section 182 of the Corporations Act 2001 (Cth). As part of your answer, you should consider section 182 and the supporting common law, and what remedies are available to Elite and ASIC.

Answer 1

Section 180 of the Corporations Act makes aprovision   that any director or other officer must at all times exepress degree of care and diligence in the exercise of powers and the discharge of duties just as he or she would to his or her comapany.

The requirement for a director or officer include to make the judgement in good faith and for a proper purpose, do not have a material personal interest in the subject matter of the judgement, to inform themselves about the subject matter of the judgement to the extent they reasonably believe is appropriate & rationally believe that the judgement is in the best interests of the corporation. As per the Section 182 of the Corporations Act a civil obligation is provided that prohibits a director, secretary, other officer or employee of a corporation from making any  improper use of their position to have  an advantage for themselves or someone else, or to cause detriment to the company. Also the section 184(2) of the Corporations Act mentions that if directors, other officers or employees use their position dishonestly then it is taken as an offence. Provisions of Section 183 of the Corporations Act specifies that any person who obtains information because they are or have been a director or other officer or employee of a corporation must not improperly use that information to gain an advantage for themselves or someone else. another Section 191 of the Corporations Act requires a director of a company who has a material personal interest in a matter that relates to the affairs of the company to give the other directors notice of the interest, to must include details of the nature and extent of the interest and be given at a directors' meeting as soon as practicable after the director becomes aware of their interest in the matter.

In the above case study all these sections are breached. All remedies are available to Elite and ASIC under these section. the remedies on breach of duty , include exclusion from office draws penalties under the Corporations Act which range up to $200,000. Under both the common law and the Corporations Act, officers may also be required to pay compensation or to account for profits.