Question

After several months of negotiations, the CEO of BIG Pty Ltd made the long-awaited announcement to board members that BIG Pty Ltd would be buying Melbourne based company, YAY Pty Ltd for $25m. The following persons were present at the meeting: Helen and Liam (Company Directors) and Tammy (Receptionist taking meeting minutes). News of the take-over would not be released to the public until the following week.

Discuss whether Tammy would be breaching any duties if, immediately after leaving the boardroom, she phoned her husband and told him to invest $100,000 in YAY Pty Ltd.

answer structure

Issue: What Tammy would be breaching any….
Rule: According to CA s 182 and 183…
Analyze: Here the facts tell us…
Conclusion: Clear that Tammy would be breaching Duty __

Australia

Answer 1

ISSUE: Tammy has disclosed Non-Public Price-Sensitive Informnation to her husband & asked him to buy shares of YAY Pty. Ltd.. Tammy would be breaching her Fiduciary Duty to not take advantage of access to any non-public information. This would classify as Insider Trading.

Rule:

SECTION 182 USE OF POSITION — CIVIL OBLIGATIONS

->According to Corporations Act 2001, Section 182(1) Use of position — directors, other officers and employees.

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.

-> Also, Section 183 of the Corporations Act provides a civil obligation that a 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 or cause detriment to the corporation.

ANALYZE:

Here, we can see that by disclosing Non-Public Price-Sensitive information to her husband, Tammy is taking undue advantage of her position and access to information. Also, Tammy fails to fulfil her fiduciary duty to the firm, and is also in violation of Insider Trading Regulations.

CONCLUSION:

Tammy is in violation of Section 182(a) & Section 183 of Corporations Act, 2001 by disclosing Non-Public Price-Sensitive information to her husband, as she is mproperly using that information to gain an advantage for herself.

By doing this, Tammy has indulged in Insider Trading activities & failed to comply with her Fiduciary Duty.