Question 1

The safe harbour in s 588GA is intended to encourage directors to discourage directors from placing the company into voluntary administration prematurely.

Accepted Answer

A) True 
 B)False

Question 2

What are the directors' and officers' duties under common law and equity?

Accepted Answer

It is established in common law and equi

Question 3

Lulu, Victoria and Uda are the directors of Blue Sky Ltd ("BS"). BS owns a newspaper publishing business. Lulu is an expert in the publishing business whereas Victoria and Uda are investment bankers and have no experience whatsoever in the publishing industry. BS needs to purchase new printing presses as the ones it owned were old and were constantly breaking down. Without doing any due diligence whatsoever, the board pass a resolution to buy new printing presses from Nasty Presses Ltd. Unfortunately, the new presses can only use a very expensive type of ink that needs to be imported from Argentina. The cost of purchasing the ink has caused BS to cause tremendous financial losses. Which of the following is true:

Accepted Answer

A)  Victoria and Uda cannot be liable for this loss because they have no understanding of the printing industry and, therefore, can't have breach their duty of care and diligence. 
B)  None of the directors could be liable for breaching their duty of care and diligence because they didn't know that the presses required the expensive ink. 
C)  All the directors have potentially breached their duty of care and diligence because they should have undertaken certain minimum diligence before entering into the transaction, which would have highlighted the problem with the ink. 
D)  All the directors would probably be liable for breaching their duty under section 180(1) of the Corporations Act, but it would be highly unlikely they would have breached their common law duties of care and diligence. 
E)  While BS could pursue a cause of action against the directors for breaching their duty of care and diligence, ASIC has no standing to pursue such a cause if action. 
A)  Victoria and Uda cannot be liable for this loss because they have no understanding of the printing industry and, therefore, can't have breach their duty of care and diligence. 
B)  None of the directors could be liable for breaching their duty of care and diligence because they didn't know that the presses required the expensive ink. 
C)  All the directors have potentially breached their duty of care and diligence because they should have undertaken certain minimum diligence before entering into the transaction, which would have highlighted the problem with the ink. 
D)  All the directors would probably be liable for breaching their duty under section 180(1) of the Corporations Act, but it would be highly unlikely they would have breached their common law duties of care and diligence. 
E)  While BS could pursue a cause of action against the directors for breaching their duty of care and diligence, ASIC has no standing to pursue such a cause if action.

Question 4

Dale, Mary and Marcos are directors of Little Wave Ltd - a public company, which sells seashells. Dale is the managing director and Mary and Marcos are non-executive directors. Mary to the chair of the board and Marcos has extensive experience in the seashell sales industry. Which of the following is incorrect:?

Accepted Answer

A)  It is possible that the standard of care owed by the three directors differs due to their position and experience. 
B)  All the directors owe certain minimum duties to the company such as undertaking the business of the company. 
C)  Dale could never owe any higher duty of care compared to Mary and Dale as executive and non-executive directors owe the same standard of care. 
D)  Mary may owe a higher standard of care as she is the Chair. 
E)  Dale, as the managing director has overall responsibility for the day-to-day management of the company's business. 
A)  It is possible that the standard of care owed by the three directors differs due to their position and experience. 
B)  All the directors owe certain minimum duties to the company such as undertaking the business of the company. 
C)  Dale could never owe any higher duty of care compared to Mary and Dale as executive and non-executive directors owe the same standard of care. 
D)  Mary may owe a higher standard of care as she is the Chair. 
E)  Dale, as the managing director has overall responsibility for the day-to-day management of the company's business.

Question 5

What is a business judgement rule? Why did the government introduce such a rule in the Corporations Act?

Accepted Answer

The business judgement rule is one that

Question 6

What is the duty to prevent insolvent trading under s 588G Corporations Act?

Accepted Answer

Section 588G(1) and (2) set out conditio

Question 7

What is a business judgment rule? Why did the government introduce such a rule in the Corporations Act?

Accepted Answer

The business judgment rule is one that p

Question 8

As part of a director's duty of care, skill and diligence, they are expected to regularly attend directors' meetings.

Accepted Answer

A) True 
 B)False

Question 9

What are reasonable grounds for suspecting insolvency?

Accepted Answer

Recall that the wording of s 588G requir

Question 10

Luke, Maddi and Emily are the directors of a company that creates mobile phone apps called Angry Nerd Ltd. The board passed a resolution to retain an outside programmer to help with an app they were developing. The programmer did a poor job and the app was substandard. This caused the company to suffer reputational damage and this caused financial loss. Luke, Maddi and Emily are concerned they might by pursued for breaching their duty of care, skill and diligence. They would be able to rely on the business judgment rule in section 180(2) of the Corporation Act as a defence to any claim if:

Accepted Answer

A)  The decision was a business judgment as defined in section 180(3); 
B)  The decision was made in good faith for a proper purpose; 
C)  They did not have a material personal interest in the decision; 
D)  They reasonably informed themselves about the subject matter of the decision to the extent they reasonably believed to be appropriate; 
E)  They rationally believed that the decision was in the best interest of the company;
F) All the foregoing is necessary to be established. 
A)  The decision was a business judgment as defined in section 180(3); 
B)  The decision was made in good faith for a proper purpose; 
C)  They did not have a material personal interest in the decision; 
D)  They reasonably informed themselves about the subject matter of the decision to the extent they reasonably believed to be appropriate; 
E)  They rationally believed that the decision was in the best interest of the company;
F) All the foregoing is necessary to be established.

The safe harbour in s 588GA is intended to encourage directors to discourage directors from placing the company into voluntary administration prematurely.

What are the directors' and officers' duties under common law and equity?

What is a business judgement rule? Why did the government introduce such a rule in the Corporations Act?

What is the duty to prevent insolvent trading under s 588G Corporations Act?

What is a business judgment rule? Why did the government introduce such a rule in the Corporations Act?

As part of a director's duty of care, skill and diligence, they are expected to regularly attend directors' meetings.

What are reasonable grounds for suspecting insolvency?

Legal Issues in Events Promotion and Company Winding up

Business Organisations

Companies and Incorporation

Company Constitution

Membership, Members Power and Dividends

Members Remedies

Corporate Governance and Company Management

PART B: Directors and Officers Duties

Financing a Company Via Equity or Debt

Receivership and Administration

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Exam 8: PART A: Directors and Officers Duties

The safe harbour in s 588GA is intended to encourage directors to discourage directors from placing the company into voluntary administration prematurely.

What are the directors' and officers' duties under common law and equity?

What is a business judgement rule? Why did the government introduce such a rule in the Corporations Act?

What is the duty to prevent insolvent trading under s 588G Corporations Act?

What is a business judgment rule? Why did the government introduce such a rule in the Corporations Act?

As part of a director's duty of care, skill and diligence, they are expected to regularly attend directors' meetings.

What are reasonable grounds for suspecting insolvency?

Legal Issues in Events Promotion and Company Winding up

Business Organisations

Companies and Incorporation

Company Constitution

Membership, Members Power and Dividends

Members Remedies

Corporate Governance and Company Management

PART B: Directors and Officers Duties

Financing a Company Via Equity or Debt

Receivership and Administration

Filters