LAWS1091 - BUSINESS ASSOCIATIONS

Description

Contents members assembled in a general meeting and its board of directors. ............................................................................................................ 3 • The informal corporate acts doctrine: ........................................................................................................................................................ 8 DUTY TO ACT BONA FIDE, BEST INTERESTS OF CO. (GOOD FAITH) ......................................................................... 12 2. Is the relevant person a director or officer? ............................................................................................................................................. 12 3. To whom will they owe a duty? ................................................................................................................................................................. 12 4. What is the duty and its source? Duty to Act in Good Faith ............................................................................................................... 13 5. Remedies: ....................................................................................................................................................................................................... 14 PROPER PURPOSE ....................................................................................................................................................................................... 15 3. To whom will they owe a duty? ................................................................................................................................................................. 15 4. What is the duty to act for a proper purpose? ......................................................................................................................................... 16 5. Defences to liability ..................................................................................................................................................................................... 16 6. Remedies ........................................................................................................................................................................................................ 16 7. Has there also been a criminal breach of the duty? ................................................................................................................................ 17 b. Criminal ......................................................................................................................................................................................................... 17 Issue: Has a director or officer breached their duty to avoid conflict of interest? ..................................................................................... 18 c. NB: ss 191 (‘material personal interest’) & 192 act in addition to the general law relating to conflict of interest, not in derogation of it: s193 ............................................................................................................................................................................................ 18 4. Specific equitable duties: ............................................................................................................................................................................. 19 5. Does the constitution modify the equitable rule or its consequences? ............................................................................................... 20 b. S 183 – misuse of information. .................................................................................................................................................................. 21 7. Defence: ......................................................................................................................................................................................................... 22 b. Statute: ............................................................................................................................................................................................................ 22 8. REMEDIES: ................................................................................................................................................................................................. 22 1. Is the relevant person a director or officer? ............................................................................................................................................. 23 8. PENALTIES: ............................................................................................................................................................................................... 25 DUTY TO PREVENT INSOLVENT TRADING ...................................................................................................................................... 26 2. On the facts ascertain if and when the co. became insolvent: .............................................................................................................. 26 3. At the time the debt was incurred, was the company: ........................................................................................................................... 27 4. If the above elements of s 588G(1) are satisfied, then the D may be liable. ...................................................................................... 27 6. If D is liable under s588G(2)(a) then criminal liability under s 588G(3) may apply if: ..................................................................... 27 7. CIVIL DEFENCES for breach of s 588G(2): ........................................................................................................................................ 27 8. D is personally liable for debt of co. incurred when insolvent or put into insolvency - s588M. .................................................... 28 ● Adler knew all the facts which made the payment to PEE the giving of a financial benefit otherwise than on an arm’s length 2 terms even if he mistakenly assumed that the transaction was protected by s 210. ................................................................................... 32 6. WHAT ARE THE CONSEQUENCES OF BREACH? ..................................................................................................................... 32 3. HAS THE CO. BOUND ITSELF DIRECTLY? .................................................................................................................................. 33 c. Has the company bound itself directly though s 127? ........................................................................................................................... 33 4. HAS THE CO. BEEN BOUND INDIRECTLY THROUGH AN AGENT? .............................................................................. 34 i. This can be inferred from conduct of the parties and the circumstances of the case ...................................................................... 34 5. IS THERE OSTENSIBLE/APPARENT AUTHORITY? ................................................................................................................. 35 6. IS THE K ENFORCEABLE BECAUSE THE CO. HAS APPROVED/RATIFIED? ............................................................... 35 7. If the contract is enforceable, the company may have a personal action against the director for breach of contract under s 140 35 a. s 237(2)(a) - probable that the co. will not commence proceedings; AND ........................................................................................ 36 OPPRESSION SUITS ......................................................................................................................................................................................... 38 2. What is the source of the impugned conduct? Can be any of the following: ..................................................................................... 38 c. Where the co. exercises a power to alter the CC in a way that harms some shareholders. .............................................................. 41 i. The resolution was passed for a proper purpose, namely that it would secure the co. from significant detriment or harm; AND ........................................................................................................................................................................................................................ 42 ii. Both the process and the terms of the acquisition were fair. ................................................................................................................ 43 2. NB: How the constitution works as a contract: between a member and a company ....................................................................... 44 iii. HICKMAN/ELEY: DOES THE RIGHT COME WITH THE SHARE? ..................................................................................... 45 External Administration when the company is insolvent ............................................................................................................................... 48 Voluntary Administration .................................................................................................................................................................................... 48 c. The voluntary administration ends when the company is subject to deed of company arrangement: s435C(1)(b), (2)(a). ........ 50 4. Importantly, receivers are an officer of the company under s 9 – this means they cannot sell off assets at ridiculous prices. Whilst they are the receiver they owe duties. .................................................................................................................................................... 51 1. Voluntary: No court involvement. ............................................................................................................................................................ 52 2. Compulsory winding up: At the discretion of the court. ....................................................................................................................... 52 b. Other grounds: ............................................................................................................................................................................................. 53 4. Company affairs conducted in a way that is oppressive: s 461(1)(f) .................................................................................................... 54 Step one: Definitions: Does the transaction come within one of these definitions: .................................................................................. 56 Step two: s 588FE - The transaction is voidable: Step three: s 588FF - Orders the court can make. ..................................................... 56 Steps in enforcement ............................................................................................................................................................................................ 57