Company Law

  1. The statement heard by Louise is correct as in subsequent years, ASIC has utilized what others have described as a 'phase stone' method to the statutory duty of care of a director. (Herzberg and Anderson, 2012). The first move includes a lawsuit against a business for breach of the Corporations act. If the corporate negligence is found and the directors violated their statutory duties by causing their business to the possibility of criminal action, the liability of civil nature, or serious reputational harm, then claims can be made against them. As a result, a form of liability of civil nature for corporate negligence can be incurred by directors and officers. And there is no reasoning why the concept should be limited to infringements of the Corporations Act, 2001. This can be extended almost as effectively to directors who cause their businesses to violate environmental laws. In[1] involving suspected violations of the directors: Edelman J gave an explanation assume that a director takes a decision to conduct a serious violation of the law by purposely dispersing significant release of toxic waste. Suppose that the decision is taken on the grounds that, under the applicable environmental legislation, the potential risk of preventing an offense will be much greater than the cost of a legal penalty. Nevertheless, this conduct may entail a violation of the duty of responsibility and vigilance of the director, regardless of other violations. The ruling, in this case, did not involve a company's violations of environmental legislation. The instance of Edelman J, however, revisits an unanswered debate as to whether Section 180(1) of the Corporation Act, 2001 may be a 'step-stone' in litigation against the directors of corporations in violation of environmental laws. This aspect of the law allows corporate directors or other officers to perform their duties and conduct them with the level of caution and vigilance that a rational individual would practice. ASIC need not be the sole proper complainant, and the corporation itself (e.g. litigation by shareholders or liquidators in the form of derivative action) may initiate lawsuits toward directors for violation of Section 180(1).

That the problem is not completely imaginary is seen in[2]. On the grounds that there might be violations of the EPA Act 1979, Black LJ stated demand for an interlocutory injunction to restrain suspected contraventions of s 180(1) of the Companies Act.

Although directors are entitled to legislative, common law, and/or equity obligations, the review is limited to the two main duties under the Corporations Act, which are to practice due care and caution and care under section 180 (according to the Business Judgement Rule) and to operate in good faith in the business's greatest interests and for a special cause under section 181. These liabilities are owed to the company and are enforceable by the ASIC, the company itself (or its liquidators), or by shareholders in the form of a derivative proceeding (Barker, 2013).

It can also be inferred that a director's violation of his duty of diligence and care (caused, for instance, by a refusal to offer proper attention to the consequences of climate change) can necessarily lead to personal liability. A director can also be found to have violated his responsibility if he does not report the threats presented by climate change to the corporation adequately (Allens, 2020).

  1. ASIC has the right to investigate those infringements and charge the defendant in civil court but does not specifically enforce a sentence. Licensed firms, capital markets, and providers of financial services and credit services are governed by the Australian Securities and Investments Commission (ASIC). The goal of the ASIC is to encourage equal and productive capital markets, marked by fairness and accountability, and to support investors and capital consumers' secure and active participation. In order to ensure that they work successfully, legitimately, and reasonably across the Australian financial services licensing scheme, the ASIC grants financial licenses and regulates companies that offer financial services. Since July 2012, these enterprises have been offering services related to financial goods, including controlled emissions units. The ASIC maintains a registry of licensees of Australian financial services and the registered representatives of licensees of Australian financial services. The ASIC is also accountable for supervising stock exchange managers, clearing and settlement service managers, and investors in the capital system. The ASIC has facilitative, administrative, and compliance powers under the laws of financial markets, which include the authority to:

Make laws intended to ensure the integrity of capital markets

Investigate possible violations of the legislation which compel entities to submit books or answer questions during an investigation.

Issuing notices of the breach in response to suspected violations of certain laws

Stop individuals from participating in credit operations or offering financial services

Request to the judiciary for civil fines, and

Initiate proceedings (Clean Energy Regulator, 2015)

Edward’ act has attracted the provisions of Section 184 of the Corporations Act, 2001 which are as under-

(1) A director or other officer of a corporation commits an offence if they: (a) are irresponsible; or (b) are deceitful; and failed to exercise their powers and execute their duties: (c) in good faith in the best interests of the company; or (d) for a proper purpose,

(2) If they dishonestly exploit their position, the director, other officer or employee of a company commits an offence:

(a) with the purpose of obtaining an advantage directly or indirectly for themselves, or for someone else, or of causing harm to the company; or (b) recklessly as to whether the use may result in the obtaining of an advantage directly or indirectly for themselves or for someone else, or is causing harm to the organization.

Section 1317G(4) of the Corporations Act, 2001 has the penalty provision.

The pecuniary penalty applicable to the contravention of a civil penalty provision by a body corporate is the greatest of: (a) 50,000 penalty units; and (b) if the Court can determine the benefit derived and detriment avoided because of the contravention—that amount multiplied by 3; and (c) either: (i) 10% of the annual turnover of the body corporate for the 12-month period ending at the end of the month in which the body corporate contravened, or began to contravene, the civil penalty provision; or (ii) if the amount worked out under subparagraph (i) is greater than an amount equal to 2.5 million penalty units—2.5 million penalty units. There is a ceiling of 2.5 million penalty units for the statutory penalty for civil infringements incurred by businesses, as determined by the calculation applied to in section 1317G(4), and the maximum penalty for criminal infringements incurred by firms under section 1311C(3) does not appear to be equivalent. Although the maximum sentence for imprisonment for breaches of section 184 was initially planned to be increased from 5 to 10 years in relation to irresponsible and dishonest neglect of duties by directors, the final Penalties Bill substantially raised the maximum punishment for this crime to 15 years.

In the case of businesses, the overall legal liability is higher than:

50,000 penalty units ($11.1 million currently)

Three times the profit gained and damage avoided, or

10% of annual turnover, set at 2.5 million (currently $555 million) penalty units (ASIC, n.d.)

  1. As per Section 206B of the Corporations Act, 2001, Edward cannot automatically cease to be a director of HFL as automatic disqualification occurs in the cases of conviction, bankruptcy, or foreign court order. Edward is only charged under section 82 of the Crimes Act, 1958, he is not convicted.
  2. The board cannot remove Edward as per the provisions of Section 203E of the Corporations Act, 2001 which states that in the case of Public Companies Directors cannot be removed by other directors. A resolution, request, or notice of any or all of the directors of a public company is void to the extent that it purports to (a) remove a director from their office; or (b) require a director to vacate their office.
  3. Similar to those rules contained in the Commonwealth, Australia has strict laws to provide for the dismissal of directors by a simple majority vote of an ordinary resolution. Since GFC holding company owns 60 percent shares, it is possible to oust the director of its subsidiary company HFL as the ordinary resolution of shareholders approved by more than 50 percent of shareholders is necessary for the removal of the director. Public company shareholders have the statutory power to dismiss directors by ordinary vote under section 203D of the Corporations Act 2001, requiring 50 percent of the company's shareholders (attending and voting at the appropriate meeting) to approve the resolution to remove a director.
  4. No, Monique resignation is invalid as it doesn't fulfill the requirement enshrined in Section 203A of the Corporation Act, 2001 which states that, 'a director of a company may resign from his position by giving written notice of resignation to the company at its registered office'. Hence, Monique's resignation on the telephone is an invalid resignation.

Bibliography for Directors' Duties in The Anthropocene

Legislation:

Corporations Act, 2001

Case Laws:

ASIC v Cassimatis (No 8) [2016] FCA 1023

Re Centura Global Holdings Pty Ltd [2015] NSWSC 1744

References

Allen. 2020. A 'high risk' jurisdiction: Climate change and directors' duties. [Online]. Available at: https://www.allens.com.au/insights-news/insights/2020/05/climate-change-guide/a-high-risk-jurisdiction-climate-change-and-directors-duties/

[Accessed on September 22, 2020]

ASIC. n.d. Fines and penalty. [Online]. Available at: https://asic.gov.au/about-asic/asic-investigations-and-enforcement/fines-and-penalties/

[Accessed on September 22, 2020]

Barker, S., 2013. Directors' duties in the anthropocene: liability for corporate harm due to inaction on climate change. . [Online]. Available at: https://minerva-access.unimelb.edu.au/handle/11343/56750 [Accessed on September 22, 2020]

Clean Energy Regulator. 2015. The role of the ASIC. [Online]. Available at: http://www.cleanenergyregulator.gov.au/Infohub/Markets/Supporting-market-integrity/The-role-of-the-Australian-Securities-and-Investment-Commission

[Accessed on September 22, 2020]

Herzberg, A. and Anderson, H. 2012. Stepping stones—from corporate fault to directors' personal civil liability. Federal Law Review, 40(2), pp.181-205.

[1] ASIC v Cassimatis (No 8) [2016] FCA 1023

[2] Re Centura Global Holdings Pty Ltd [2015] NSWSC 1744

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