In a recent case, directors were held personally liable for
representations given by the company, despite the fact they were
not personally parties to the contract. The court found that no
fault was required on behalf of the directors to prove liability
and that the directors were not protected by the limitations in the
contract which applied to the company.
DIRECTORS DUTIES - MCCRACKEN
Section 1324 of the Corporations Act 2001 empowers any person
whose interests have been affected by conduct in contravention of
the Corporations Act, to apply to the court for injunctive relief
or damages. In this case, where a director was guilty of various
breaches of duty, section 1324 of the Corporations Act was extended
to include creditors as a class of people able to bring a claim
under the section. This potentially significantly extends the scope
of directors duties.
LIABILITY FOR SUBSIDIARY - CHANDLER
The court in this case held a parent company liable for damages
incurred by its defunct subsidiary by extending to its parent the
duty of care originally owed by the subsidiary to a third
D&O INSURANCE - STEIGRAD
The directors of an insolvent company tried to access their
D&O policy to cover the costs of defending criminal charges
against them, but were prevented by the receivers of the company
who wanted to claim the proceeds of the policy as compensation in a
separate claim for damages. This has potentially serious
consequences for the way D&O insurance is structured in
DIRECTORS DUTIES - CENTRO
Directors are now expected to have sufficient knowledge of
accounting practices to enable them to read and understand key
financial statements. Directors can no longer use information
overload as an excuse, nor can they simply delegate their duties to
an audit committee or management.
The new Personal Property Securities Register is scheduled to be
implemented nationwide in early 2012. The register covers secured
financing involving personal property, which includes any property
other than land or buildings, including intangible property like
intellectual property. Once the PPS Act is implemented, all
security must be registered on the PPS Register to ensure priority
and enforceability of the security.
BUSINESS NAME REGISTRATIONS
Look out for a new national business name database arriving in
early 2012. This is good news for business owners, as they will no
longer be required to register their business name separately in
each State in which they trade.
LISTED COMPANIES - REMUNERATION REPORTS
This year saw the commencement of operation of the "two
strikes" rule. Those companies which received a vote of more
than 25 per cent against their remuneration reports in 2011 will
potentially be vulnerable to a forced board spill if the same
happens at their 2012 AGM.
PUBLIC COMPANIES - NO VACANCY RULE
Where the number of directors in a company holding office is
less than the maximum specified in the company's constitution,
the board cannot reduce the maximum number to prevent new directors
from standing for election. Any reduction in the constitutional
maximum now requires shareholder approval.
LISTED COMPANIES - DIVERSITY POLICIES
All listed companies must have a diversity policy relating to
gender in place in 2012. These policies must be designed to
encourage diversity in the workplace and should have measurable
objectives and appropriate timeframes to achieve the
RULES ON PROSPECTUSES
The recently published Regulatory Guide 228 states that
prospectuses and other company documents should be "clear,
concise and effective". Section 715A of the Corporations Act
gives ASIC power to issue a stop order on a disclosure document
which does not comply.
RELATED PARTY TRANSACTION
A public company must obtain shareholder approval before it can
enter into a related party transaction. Related party transactions
include any transaction concerning related companies, directors,
their spouses and certain other relatives. No approval is required
where the transaction is on arm's length commercial terms, but
since the release of Regulatory Guide 76, in March 2011, ASIC has
placed greater focus on investigating alleged arm's length
Swaab Attorneys was the highest ranking law firm and the
13th best place to work in Australia in the 2010 Business Review
Weekly Best Places to Work Awards. The firm was a finalist in the
2010 BRW Client Choice Awards for client service and was named the
winner in the 2009 Australasian Legal Business Employer of Choice
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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