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Business & Corporations Law OZ Assignments

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Case chosen related with the companies ProCropand Central Development group. Both the companies are Australia based companies and therefore the affairs of the company are to be carried out in the light of Corporation Act 2001. Both the company advertised the schemes for inviting the public to invest in the companies and therefore a false and misleading advertisement was prepared by the officers of the both the companies. Therefore suit was instituted against them for violation of the applicable laws.

ASIC v Maxwell & Ors[2006] NSWSC 1052, is a chosen case to analyse the consequences of the breach of the duties given under the Corporation Act 2001 in Australia. A scheme was promoted by Mr Maxwell for ProCrop Investment and Central Development group to seed capital from the other investors throughout New South Wales.  The offer was published on newspaper in which there was shown 30% return. This return was further shown on the secured and guaranteed return.  However, in actuality, most of the investments were unsecured at that time.  The ProCrop group collapsed in 2004 with debt owing of $108 million owing to 120 seeds capital investors and Central development Group with 32 debtors owing $3.3 million. The directors of both the company were liable for such an operation of the company for their respective roles played by them.

Duties of the directors under the Corporation Act

The responsibility of managing Corporation lies with the directors of the company only. They bear the statutory duty of protection of the interest of the corporation and other related matters under the Corporation Act 2001 of Australia. When the directors make the deviation from their statutory duty then it will amount to breach of the statutory obligation which is itself prohibited by the statute and the same time punishable in terms of imprisonment as well as fine.  Therefore it is important to study what are those duties which to which directors being on responsible position in the company bear on them sleeves and to which they are not obliged to deviate (, 2017).

The Corporation Act 2001 imposes certain kinds of obligation on the companies working in Australia. As a director of the company they have duty to ensure that company have its own registered office, all the records regarding  the financial transaction that takes place is also maintained,  if any change takes place in the composition of the company or other relevant matters then it must be brought into notice by the directors of company withASIC.

Section of Corporation Act 2001

Duties of Directors


Carrying out such business works there will be no negligence on the part of directors.

Section 181

The directors also have duty to carry out the operation of the company which will benefit.

 Directors will carry out the operation in same manner as if he carries his own works. In the due course of working for company free flow of information takes place to directors of company and this information is to be used by them only for business and not for any personal and private interest of them.

Section 191

In the situation of conflict of interest of directors and company, this must be brought into the knowledge of the other directors of the company (Department of the Premier and Cabinet, 2017).

 Duties breached in the case and reasons of the breach of duty

Nahed was one of the directors who were involved in the false and misleading promotion of the scheme however he was not at front footing and therefore it was up to the court as to how to deal with such a situation in which breach took place by the conduct of officers of the company who is not directly involved in the breaching act. Section 180 (1) imposes the duty to perform the business functions with full care. Nahed, was involved directly in the violation of law or indirectly, his conduct made the breach of section 180(1). His indirect involvement as well harmed directly or indirectly the interest of the company (Legal service commission of South Australia, 2017).

Section 180 (1), a degree of diligence and care is to be there on part of officers of company which includes directors as well. The power which is to be exercised on the part of the directors of the company has to be so in good faith as well as in interest of company and only for the proper business purposes only as in section 181 (1).  There can be no improper use of the position by directors of company under section 182(1) (Keay and Welsh, 2015).  The act of the directors of the company who were involved in the promotion of the shames was found to be against the rules of the Corporation Act 2001.

When the directors and other officers of the company are found guilty they can be fined up to $200,000 or they can also be sent in the imprisonment up to five years. The directors’ role is important in the functioning playing in the organisation and they cannot be engaged in their work recklessly. For strict compliance with the legal duties by directors, strict penalty and punishment are provided as a consequence.

Business & Corporations Law OZ Assignments

Decision of the Court

The court ordered that the directors of the company make the breached of Corporation act when the functions of the company are not performed as per the Corporation Act 2001. However, everything will not give effect to the breach of the Corporation act except the act is jeopardy to the interest of the company i.e. when the directors of the company fail to prevent the breach of provision of the corporation act by the third party to the business.  The directors were made liable for the breach of section 181- 183 of the Corporation Act 2001 (Black, 2014). Mr Maxwell was held liable for the illegal property financing scheme and therefore on this basis, he was ordered to pay $1 million as a compensatory amount and penalty and he was also banned from running company again throughout his life. Along with him, seven other officers of the company were banned who were involved in the promoting of illegal mezzanine funding scheme.  The court's order was made when it found that:

1.The above-stated scheme was promoted without disclosing the required and relevant documents.

2.The representation which was made to the different inventors was also of deceptive and misleading nature.

3.The officers of the company who were having important duty being directors of the company failed to carry out their duties properly (Black, 2014).

Critical analysis of the decision of the court as per Corporation Act

Decision was made in favour ASIC. Australian Security and Investment Commission is a body that has the functions of carrying investigation and taking the steps for regulating the business and per the functions of the company in the right directions as per the application of the Corporation Act 2001. Mr Maxwell held very responsible position in the company and his involvement in the designing of the malicious advertisement in have the effect of misleading the investors about their decision of the investment in the company affected the business of the company in its entirety.  He was the lead role player in the violation of the legal privations of the corporation act 2001 in this case.  Therefore in the light of role played by him in the entire instance of promotion, thereby misleading investor and appealing them to invest on the false information all show the presence of the guilty intention on his part in breach of the provisions of the Corporation Act 2001. The pronouncement of the decision of the court for penalty imposition against him shows the right determination by the court in the light of application of under section 180- 183 of the act (Australian Institute of Company Directors, 2017).

The determination of the court on the matters concerning role played by the other directors of two companies also shows that the initial petitions were started against all the directors of two companies but they all were not held liable for this.  Mr Malcolm Fortune, Troy Fortune, Mr Bennett, Coakley, Mr Kolios, Mr Jammal and Mr Skaf were the directors who were penalised by the court and the charges against the other person were removed on finding them to be not guilty.  The real point of decision, in this case, arose when the liability of Nahed was to be taken into consideration. He was not directly involved in the affair of promoting the given scheme for the two companies. Therefore court took the right view that effect of business function is a determining factor to decide the liability of the person involved in the work. And on the basis of that it was correct decision by the court that direct or indirect involvement does not differentiate the decision of court and when the result of the function of the director is such that it shows malicious intent on his part and it resulted in adverse effect over the interest of company or person interested in it then he will be liable for the violation of Corporation Act 2001 (Wolters Kulwer, 2017).

Relevance of the decision to the development of Australian Corporation law

Decision of court in ASIC v Maxwell & Ors [2006] was taken by the Australian Security and Exchange Commission before the court for determination.ASIC is a vigilance body that makes the consistent efforts of regulating and enforcing the applicable laws of the Corporation and any other applicable law over it.  This body ensures the compliance of legal duties by the officers of the company and if it finds the violation of any law then takes that matters before the enforcement body in the country.  The decision pronounced by the court in the above mentioned case exerts the liability to follow the applicable laws in the country on the companies by all the executive and non-executive officers of the company by imposing the exemplary punishment in terms of penalty and permanent and temporary disqualification of the directors of the company involved in the guilty acts of the corporations (Power, 2015).

Decision of the court further appeals from ASIC to be visitant in its future investigations as well so that it can regulate the affair of the company properly and at the same time appeals from the person bearing responsible position in the companies to be loyal towards their work and to carry out the interested works on them in the interest of the company only. The directors and other officers of the company are also deterred from engaging in the practices which can jeopardise the interest and business of the company in which they are employed.  

The decision of the court in the given case does not have to transform the picture of the companies working in Australia. It only enforces the existing laws enshrined in the varied sections of the Corporation act 2001 and other relevant laws in the country, however, the decision shows the active roles that are played by the court in the enforcement of the legislation in the country and also the vigilant role played by the Australian Security and Investment Commission (Jade, 2017).

Impact on operation of companies in Australia

The companies that are engaged in the Australian trading market are bound to follow the legal duties applicable to them under the Corporation Act 2001. All companies whether domestic or international if it is working in Australia have to follow the legal principles enforceable though the legislative act of the parliament. The companies have to follow the applicable rules by instructing and guiding the directors and other officers of the company (QC and Hynes, 2010).

The decision of the court appeals the officers of the company who demos not want to get indulged in the illegal activities to follow strictly the applicable corporation law in the running of the company and its respective operation. Companies have to be carried as per the law only otherwise running the business in Austria becomes impossible and prohibited.


1. 2017, Directors' key responsibilities. Available at: [18 December 2017]
2. Australian Institute of Company Directors 2017, Law Reporter. Available at: [18 December 2017]Black, A., 2014. Recent Developments in Corporate Law. NSW Young Lawyers Annual One Day Seminar - Business Law 2014 – 8 March 2014.
Department of the Premier and Cabinet 2017, 7.3 Corporations Act 2001 (Cth) (the Corporations Act). Available at: [18 December 2017]
Jade 2017, Australian Securities and Investments Commission v Cassimatis. Available at: [18 December 2017]
Keay, AR AND Welsh, M 2015. Enforcing breaches of directors’ duties by a public body and antipodean experiences. Journal of Corporate Law Studies.
Legal service commission of South Australia 2017, General Duties of Directors - Corporations Act 2001 (Cth). Available at: [18 December 2017]
6. Power, J., 2015. Courage to move beyond the past: Common law and canonical structures for the governance of Australian congregational schools in the 21st century. University of Notre Dame Australia.