Question

Sports Pty Ltd is a company that operates a large sports store. Bruce and lee are the directors. Lee's daughter, Sprinter, is a talented marathon runner. Sprinter's ambition is to represent Australia at the 2021 Olympic Games in Tkyo. Lee thinks Sprinter would be a good brand ambassador for Sports Pty Ltd.

Lee ask Bruce to prepare a contract between Sprinter and Sports Pty Ltd under which the company agrees to pay Sprinter $50000 per year for four years in return for two in-store appearances per year, and a further$50000 bonus if she is selected for the olympic team in 2021. Sports Pty Ltd is also allowed to use photographs of Sprinter in its advertisements.

Bruce is concerned about this commercial deal. He knows that at a sportsperson, similar to Sprinter's reputation, would not ecpect to earn such a high commercial fee for a similar deal. Bruce, however, does not wish to harm his long-standing friendship with Lee and does not vioce any concern.

The agreement is approved an the company's board meeting in september 2020, with all the director(including Lee) voting in favour of it. Thr shareholders of the company are unaware or this contract.

some sic months later, there is direct evidence to show that the finance committed by Sports Pty Ltd to this sponsorship deal with Kell has put a large strain on the company's cashflow.

your answers below must be supported by relevant precedennts and relevant provisions of the Corporations Act.

Q1. Advise whether any of the directors(Bruce and Lee) of Sports Pty Ltd have breached their duties under the relevant provisions of the Corporation Act 2001(Cth);

Q2.Assume breaches of law have been identified for both Bruce and Lee. if so, discuss whether any legal defences will help them avoid liability

Q3.assume breaches of law have been identified for both Bruce and Lee. ASIC, as the corporate regulator, has a range of enforcement tools uner the Corporation Act. adnise ASIC which is the most appropriate law enforcement tool to use, with reference to the question above, and th reasons for advice. your answer must also include th potential legal consequences of the advice given to ASIC.

Answer 1

sol:

Corporations Act 2001:

Businesses in Australia square measure regulated by varied provisions during this act and imposes fiduciary duties on corporations and administrators. they need to follow the subsequent regulations:

Avoid conflicts
Act properly
Act in honesty
They should use no inappropriate data
To not misuse their power
a

Rob, the director, acted not suitably as below Sec a hundred and eighty of the act states to perform with diligence and care wasn't followed. His friendly relationship with Sally upset his judgment on the high industrial fee. This was wrong. He ought to have acted partly of the corporate and negotiated adequately and not involve his material interest.

Sally has used his power to profit his girl, that could be a third party. thus he failing below the Sec. 181 of the firms Act, 2001.

b.

Legal defences that might facilitate them in avoiding liabilities are:

Sec. 588H and therefore the rule of the statutory business judgment below Sec. a hundred and eighty (2) of the firms Act, 2001 may well be used. They shield administrators from liabilities associated with diligence and care.

c.

Potential consequences are:

May face jail time up to five years
Company could also be disqualified from in operation
Fine up to $200,000
May have to be compelled to clear the company's debts

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