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.

Question: 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

Avoid improper use of position

Section 182 of the Corporations Act provides a civil obligation that prohibits a director, secretary, other officer or employee of a corporation from making improper use of their position to gain an advantage for themselves or someone else, or to cause detriment to the company. Section 184(2) of the Corporations Act specifies that directors, other officers or employees of a corporation commit an offence if they use their position dishonestly

CORPORATIONS ACT 2001 - SECT 182

Use of position--civil obligations

Use of position--directors, other officers and employees

(1) A director, secretary, other officer or employee of a corporation must not improperly use their position to:

(a) gain an advantage for themselves or someone else; or

(b) cause detriment to the corporation.

Note: This subsection is a civil penalty provision (see section 1317E).

(2) A person who is involved in a contravention of subsection (1) contravenes this subsection.

Note 1: Section 79 defines involved .

Note 2: This subsection is a civil penalty provision (see section 1317E).

These are the suggested remedies