Legal Regulations of Business Structures

Question: Discuss about theLegal Regulations of Business Structures. Answer: Introduction The section of the Corporation Act that is being discussed in this paper is section 183. Under this section, the main point of focus is duty to avoid the improper utilization of the information. As per section 183, any person who acquires information since they are or have been corporations director alongside other officer or employee must never use such an information improperly to obtain an advantage for themselves or someone else or trigger detriment to the corporation. The duty is specifically important in cases where the director, employee or officer has interest in the industry to which the Government Board links. The owners of the company, the board, the ASX and the ASIC has the responsibility of taking an action against these directors, officers or the employee who improperly use the acquired information to serve his interest. As reflected in the case, the board did not take any action but the ASX took it upon themselves to investigate the matters and made a report to the ASIC. Under section 183, a breach of statutory attracts penalties as outlined in the Corporation Act that range up to 200, 000 dollars. Based on both Corporations Act and common law, a director, employee or officer may as well as be required to pay compensation or account for profits. In certain cases, the officer, the director or the employee may as well get disqualified from holding any office. Preliminary Issues As required by the section, a person will only be said be in a breach when he is a director, employee or officer of the company. Dr. Dawe was at the relevant time still serving as a consultant director of GML since the board had appointed him even after his resignation as the director. Dr. Dawes still had all the privileges such as attending all the board and committee meetings, fully involved himself in discussions as well as votes. Moreover, Dr. Dawe continued to draw directors fees. This situation puts Dr. Dawe as a director of the GML since he was not undischarged due to his expert mineralogical knowledge. Mr. Foster was not a director at the time of the breach, but Section 183 require that he had a duty to avoid improper use of the information since he had been a director of GML. Mr. Huckenfusser was an employee at the relevant time since he had been employed as Audio Visual Technician by GML for five years. He had a duty of assisting during the board meetings and was present in the board room with Mr. Boon when the issue of MMM shares purchase was raised. Mrs. Duke was neither a director, officer nor an employee of the GML, but a sister-in-law to Mr. Huckenfusser at the relevant time. Possible Breaches of the Corporation Act As reflected in Section 183, certain elements of section 183 have to be proven for a breach to be committed. The person has to be at the relevant time an officer of the corporation. Looking at the four people, Mr. Huckenfusser and Mr. Dawes were officers at the relevant time while Mrs. Dawes and Mr. Foster were not officers of GML at the relevant. Therefore, Mr. Huckenfusser and Mr. Dawes breached the Corporation act when the acquired the information and improperly used it to serve their own self-interest. Even though Mr. Foster was not an officer of GML at the relevant time, he obtained the information and improperly used it by virtue of the previous position he held at GML, and he also had a duty to avoid improper use of information since he had been an officer of GML. Mr. Foster, Mr. Dawe, and Mr. Duke all breached the Corporation Act since they all made improper of the information to gain either directly or indirectly an advantage. As for Mr. Huckenfusser, he gained directly being improperly giving his sister-in-law (Mrs. Duke) the information he had acquired as an officer at the relevant time since he was forgiven the personal debt of $5,000 in exchange of the useful information. Mr. Huckenfusser breached the Corporation Act by telling Mrs. Duke about the board meeting thereby making Mrs. Duke to purchase 5,000 MMM shares for $5.20 per share on 15th May 2016. As for Mr. Foster, he breached the Corporation Act by recommending to his new employer (QECG) to buy shares in MMM anchored upon confidential intelligence. Mr. Foster did this to cause detriment to his previous employer, GML thereby gaining an advantage indirectly. As for Mr. Dawes, she breached the Corporation Act by recommending to his wife, Mr. Dawes to buy 20,000 shares of MMM at $5.00 per share even in her name without telling her why. Mr. Dawes did this to gain indirectly from the shares through his wife to gain an advantage. Mr. Dawes further instructed Mrs. Dawes via a phone call, ten minutes after the end of board meeting to sell her shares at $12.70 to escape the loss due to share price collapse. As for Mrs. Duke, she did not breach the Corporation Act since she was neither an employee, an officer, nor director of the GML at the material time (Hill, 2014). Even though she acquired the information to gain directly an advantage, she did not get the information by virtue of her position neither was she a previous officer in GML. She had no duty to avoid improper use of information under section 183 of the Corporation Act. Defenses As anchored in the Corporation Act, the employee, director or an officer can only get relieved by the court from liability as it deems fit. This is where the officer shows a satisfaction to the court that she honestly acted and fairly ought to be excused once the court has considered all the conditions of the case alongside the ones linked to the appointment of the officer. For a relief from liability for contravening civil penalty as outlined in section 1317S focuses on honest actions by the director and the circumstance surrounding the appointment. Accordingly, for Mr. Foster, he can based his argument on section 1317S (2). Mr. Foster could show that he had resigned from GML and that he acted honestly to benefit his new employer and not for himself either directly or indirectly (Rees, 2006). He can show pray that the court deem it fit to relieve him his liability of contravention of civil penalty provision by considering all the circumstances of the case beside the ones circumventing his appointment as office in the QECG. Also, Mr. Foster may use section 131S (4) where he thinks that the eligible proceeding may commence against him by applying for a relief to the court. The court will have the decision to grant Mr. Foster a relief under Section 1317S (5) under Section 1317S (2) as if the eligible proceeding had commenced in the Court. Under Section 131S (6) (a, b), Mr. Foster may have his relief granted by the Court including withdrawing the case in entirety or part from the judge. As for Mr. Huckenfusser and Mr. Dawes, they will have defense under section 1317S. Mr. Dawes may get relieved from the liability as the courts deems it appropriate if he persuades the court that he acted honestly and after considering all the conditions of the case, incorporating the ones linked to his appointment, he ought to be reasonably excused. Based on section 131S (1) (a) and 2 (a, b), he can argues his case for relieve. Also, Mr. Huckenfusser will argue his case based on Section 1317S and ask the court to relieve him from liability for contravention of civil penalty provision. However, it would be extra hard for Mr. Dawes and Mr. Huckenfusser to satisfy the court that they acted honestly since it is apparent and clear from the onset that their actions were dishonest (Welsh, 2009). They had the primary intention of serving their self-interest at the expense of the company by giving their relatives information that both knew very well to have a duty to avoid improper use of information. Remedies Under section 1317E, a Court once satisfied that an officer contravened a civil penalty provision, the court has to declare the contravention by specifying the civil penalty provisions. The ASIC will subsequently seek a pecuniary penalty order as outlined in section 1317G. ASIC can as well as seek a disqualification order as described in section 2016C. The remedies under the disqualification order help protect the GMLs shareholder against further abuse, by way of punishment as well as for general deterrence. The directors who contravened a civil penalty may also pay for the losses to the company (Ciro Symes, 2013). Conclusion There was a breach of section 183 by Mr. Foster, Mr. Dawes, and Mr. Huckenfusser. 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