Question

GreenThumbs Pty Ltd (GreenThumbs) operates a wholesale nursery growing and selling garden plants. Suni, Pierre and Rachel are the only shareholders and directors. Suni manages the company's day-to-day operations. Pierre, who left school at 14 and has no tertiary qualifications, is in charge of the nursery.Rachel is a non-executive director who does not take an active part in the management or operations of the company. Until recently, GreenThumbs has been very profitable. However, six months ago, a competing business opened nearby and since then GreenThumbs' profits have dropped considerably. Suni thinks that GreenThumbs should move to larger premises in a different area. Without consulting Pierre or Rachel, Suni starts looking for new premises and she decides the first place she inspects is perfect, although the price is more than GreenThumbs can comfortably afford. Suni does not think this will be a problem, because there is no competition nearby and she expects that profits will recover immediately. Suni calls a board meeting and tells Pierre and Rachel that moving will solve all the company's problems and that this property she has seen is absolutely perfect for GreenThumbs. She says they will have to act quickly as there is another interested purchaser. Suni does not tell Pierre and Rachel that she only looked at this one property. Suni is so enthusiastic that both Pierre and Rachel agree to the proposal even though Rachel is doubtful, feeling that they are being rushed into making a decision without being given time to consider other alternatives. Pierre agrees to Suni's proposal without really understanding the financial implications. GreenThumbs purchases the new premises but, because of continuing dry weather, its profits remain low. Rachel is becoming worried about her obligations as a director, especially if GreenThumbs' financial position deteriorates any further. Required: Advise Rachel about 1) her position in respect of any breaches of her general law or statutory duty of care and diligence as a director; and 2) whether her decision to agree to the purchase of the new premises would be protected by the business judgment rule. Support your advice with reference to relevant sections of the Corporations Act 2001 and to case

Answer 1

1. Rachel who is a non-official chief of the company,has forces and commitments which are unclear to official directors.She should inspect the execution of organization in gathering agreed targets and objectives.

Non-official executives need to ensure they are free from the organization of the association and any of its "Contributed Individuals". It is fundamental to ensure that non-official chiefs have an undefined access to information inside the association from various executives.

As chiefs are liable for the general organization of the association it takes after that they are committed somewhat for their exercises. A non-official executive will be at risk to an unclear obligation from some other chief in association with compensating their association for disaster rising up out of breaks by executives of their commitments. It is as needs be indispensable that they show that they have figured out how to practice care, bent and consistent quality in the execution of their parts and obligations.

Executives may procure singular risk, both normal and criminal, for their exhibits or oversights in planning the association. An individual can be fined on blueprint conviction or kept for up to a half year, anyway on arraignment the court is locked in to drive a fine of up to 4 Million and a term of confinement not outperforming five years (Section 8 (1) of the Competition Act 2002). A chief may in like manner be held before long indiscreet where he is eventually responsible for a particular trade or agreement with a pariah.

2. Rachel should concur with the choices of the official individuals from the load up, here Suni and Pierre, in obtaining of the new premises.The growing time obligation is relentless with the circumstance under the Corporations Act 2001 that there is no capability between non-official chief and official executives in the utilization of the inside points of view of the commitment of consideration – i.e. understanding association's money related position and being in a circumstance to screen the association's issues. In like manner, non-official chiefs ought to by and large rely on the business judgment oversee and 'appointment'resistances in the Corporations Act in leaving the regular organization of the association to the association's administrators. In any case, a continuous duty from a non-official executive is required.