澳大利亚公司法：董事义务、关联交易和股东的救济

Directors’ duties1.Two sources of rules: a. General lawb.Statutory provisions (e.g. ss180 – 183; 191, 195,588G)2.Generally speaking, directors’ fiduciary duties are owed to the company rather thanindividual shareholders: Percival v Wright [1902] 2 Ch 421.3.However, A director may be treated as a “fact-based” fiduciary of an individual shareholderif the facts of the case warrants this conclusion: Brunninghausen v Glavanics (1999) 46NSWLR 536.4.The best interest of the company when the company is insolvent: the interests of thecreditors. Kinsela v Russell Kinsela (1986) 4 NSWLR 722:5.Care & diligence: s180Duty of care, skill, and diligence: s180(1)-Obligagee: directors and other officers-Standard of careFluid but objective: 1. Reasonable person in the def endant’s position2. responsibility within the company, etcIn determining the standard of care and diligence, Tort principles applied, how careful adirector should be in making decisions: ASIC v VineThe standard of care is determined by:-The magnitude of the risk of harm and the probability of it occurring-The seriousness of the loss that would result if the harm occurs;-And the expense, difficulty and inconvenience of taking alleviating actionCausation-Where a compensation order under s131H is sought, as was in Gold Ribbon, there is a need for the plaintiff to prove that loss or damage has been caused by the defendant through her breach of a civil penalty provision (s180 is a civil penalty provision)-Whether the plaintiff will suffer the losses because of the defendant breached the duty of care?-‘Business judgment rule’ defence: see s180(2)-Cases: Gold Ribbon (accountants) Pty Led v Sheers6.Good faith and proper purpose: s181Share issuance: Howard Smith Ltd v Ampol Petroleum Ltd [1974] AC 821. Permanent Power to enter into transactions on behalf of the company: Building Society (in liq) vWheeler(1994) 12 ACLC 674The power to register share transfer: Re Smith & Fawcett Ltd [1942] Ch 302Other cases: PBS V WHEELER; ASIC ADLER7.Improperly using of position: s182Improperly: R v Byrnes: TB[13.3.130]Gaining advantage for self or others OR causing damage to the companyCase: ASIC v soust; Adler, etc.Conflict of interests: Sections 182, 191, 194, 195➢Recall the Gildford Motor case;➢Transvaal Lands Co v New Belgium (Transvaal) Land and Development Co [1914] 2 Ch 488 Constitution: art 98:Directors or the firm where a director is a partner (“member”) can contract with the company, provided proper disclosure is made.Profits from office: Regal (Hastings) Ltd v Gulliver [1967] 2 AC 1348.Improperly using of information: s183ASIC V VizardR v ByrnesChew v R9.Insolvent trading: s588G-Obligagee: Directors: s588G(1)(a)-Circumstances where this head of duty may become an issue (the company’s state of solvency and reasonable grounds for suspecting, etc.: s588G(1)(e)-The circumstances in which the company is not permitted to incur a debta.The co is insolvent or becomes insolvent by incurring a debt s 588(1)(b), andb.There a reasonable ground for suspecting that the company is insolvent or would sobecome insolvent. S588G(1)(c)-The director will be personally liable for the company’s debts if he/she has breached the duty to prevent the company from trading when it is insolvent-Cases: Metropolitan Fire System Pty Ltd v Miller-Insolvencya.Cash flow test: s95A : a person is solvent if, and only if, the person is able to pay all theperson’s debts, as and when they become due and payable: s95A(1). A person who i snot solvent is insolvent: s95A(2)b.Presumption of insolvency: s588EContinuance of proved insolvency: s588E(3): when the company is being wound up and it has been proven that the company was insolvent at a point of time during the 12months ending on the filing of the winding up application – the company is presumed to be insolvent through that period.c.ASIC v Plymin (factors indicating the company’s state of solvency)-The ‘physical element (failure to prevent, etc)’: s588G(2)a.The contravening act. Failure to prevent the company from incurring a debt while thecompany is insolvent or to cause the insolvency.b.Example:•where a director acquiesced in the company continuing trading whileinsolvent(Lipton et al, 13.5.165)•Where a director refused to concur with the majority of the board but failed to take all practical steps to prevent the company from trading while insolvent: StatewideTobacco Services Ltd Morley (1990)•Where a director allows the company to continue to trade wile insolvent: Metropolitan Firec.How to prevent?•To stop the company from trading.•To take steps to have an administrator appointed (s588H(6))•To take steps to have the company wound up: Statewide Tobacco-‘Mental elements (be aware OR… ‘would be so aware’)’ : ss588G(2)(a), (b)a.The director must be aware at the time of the relevant transaction that there aregrounds for suspecting, etc (s588G(2) (a), ORb. A REASONABLE PERSON IN THE LIKE POSITION IN A COMPANY IN THE COMPANY’SCIRCUMSTANCES WOULD BE SO AWARE (s588G(2)(B))c.Actual awareness: subjective awareness. Harder to proved.Objective awareness: To illustrate: In Metropolitan Fire, Mr Miller had knowledge aboutthe facts listed above under ‘reasonable suspecting’. A reasonable person in Miller’sposition would have been aware that.-Defences: s588Ha.Reasonable grounds to expect company solvent. (s588H(2))•Expecting something requires a higher threshold of knowledge or awareness than to suspecting it. Expecting something implies a measure of confidence•Reasonable grounds – indicating factors(1)Whethe r the company’s creditors had already taken aggressive attitude towardsthe undischarged debts(2)Whether creditors have already taken enforcement actions(3)The likelihood that either the company or its directors to raise significant fundsin short orderb.Reliance on information from others (s588H(3)(a))•The defendant has reasons to believe:(1)That a competent and reliable person was responsible for the provision ofadequate information about whether the co is solvent; and(2)That the person was fulfilling that responsibility (s588H(3)(a))•And expected that the company was solvent at the time and would remain solvent if it incurred that debt, etc (s588H(3)(b))•The defendant made no reliance if:(1)The defendant’s opinion on the company’s solvency was formed on the b asis ofhis own observation – he did not rely on information provided by others.(2)No evidence shows that ‘other person’ has provided the defendant with anyinformation on the company’s state of solvency –which means that ‘otherperson’ has not ‘fulfilled that responsibility’(3)The defendant did not demand information from that ‘other person’, which isthe defendant’s duty•Director did not take part in management of co (s588H (4))•All reasonable steps taken (s588H(5))-Creditors’ s tanding to sue: ss588M; 588R-U-Remedies: ss588M(3) (s 1317H IS ALSO A POSSIBILITY)•The court’s power to issue a compensation order (to unsecured creditors) for a contravention of s 588G(2): s588J•Recovery of compensation against a defaulting director for loss resulting from insolvent trading (where the debt is wholly or partly unsecured and the co is beingwound up: by the liquidator (s588M (2)) AND CREDITOR (s588M(3))10.Duty of disclosure: ss191, 194,195-Directors who enter into a self-interested transaction with the company or otherwise put themselves in a conflict of interest situation which amounts to breach of their fiduciary duty must disclose the details of their personal interest and obtain the company’s full informed consent if they are to avoid liability for the breach. Examples of such conflict of interest situations include where a director:•Makes a personal profit that arises from their position•Diverts an opportunity from their company;•Or misuses confidential company information-As a general rule, directors’ fiduciary obligations require them to make full disclosure of their potential conflicts of interest to the company’s shareholders at a general meeting and obtain their consent.-Can also be reported to the board if the company’s constitution permit-S 194: permits directors of proprietary companies to have an interest in contracts with the company provided certain conditions are satisfied. The director must disclose the nature and extent of the interest at a directors’ meeting-S195(1), a director of a public company who has a material personal interest in a matter before the board is prohibited from voting on the matter and must not be present while the matter is being considered by the board meetingRelated Party transactions1.The basic rule: s208A public company must not give a financial benefit to a related party, and an entitycontrolled by a public company must not give a financial benefit to a related party of the public company-The obligagee: a public company or an entity controlled by a public company (controlled entity: s50AA)-Obligation: not to give financial benefit to ‘related parties’ and an entity controlled without the consent of the general meeting•Giving financial benefit: s229 (2)(1)Indirectly, i.e. through 1 or more interposed entities(2)Directly(3)By informal agreement that does not involve paying money•Financial benefit: s229(1)Giving or providing finance or property;(2)Buying an asset from or selling asset to the related party;(3)Leasing an asset from or to the related party (Cf the Kinsela case)(4)Supplying services to or receiving services from the related party;(5)Issuing securities or granting an option to the related party(6)Taking up or releasing an obligation of the related party•Controlled entity: the capacity to determine the outcome of decisions about the second entity’s financial and operating policies: s50AA•Related parties: s 228(1)Directors & their spouses: s228(2)(2)Relatives of directors & spouses:s228(3)(3)Entities controlled by other related parties: s228(4)(4)Related party in previous 6 months: s228(5)(5)Entity has reasonable grounds to believe it will become a related party in thefuture: s228(6)(6)Acting in concert with related party: s228(7)2.When is giving of a financial benefit permissible (s208(1))?-Approval by members-Gift must be given within 15 months of approval3.Exceptions: ss210 – 216 (where shareholder approval is not required)-Arm’s length terms: s210-Remuneration and reimbursement: s211-Indemnity, exemptions, insurance premium: s212-Small amount (up to $5000): s213(1)-Benefit to/from closely held subsidiary (100% ownership of all voting shares): s214-Benefits to members that do not discriminate unfairly: s215-Court order: s2164.Consequences of contravention of s 208: s209-Contravention does not invalidate the transaction: s209(1)-The public company or entity is not guilty of an offence: s291(1)(b)- A person involved in the contravention of s208 will contravene s 209(2), which is a civil penalty provision: s209(2)-Such a person commits an offence if the contravention involves dishonesty: s209(3)5.Cases: ASIC v Adler (2002) 41 ACSR 72Members’ remedies (ss236,237; see also the supplementary notes)1.Statutory derivative action: enables shareholders and other eligible applicants to bringlegal proceedings on behalf of a company where the company is unwilling or unable to do so itself.-Standing: s236(1)The following persons may bring proceedings on behalf of a company:• A member, former member or person entitled to be registered as a member of the company or of a related body corporate; or•Present or former directors and officers of the company-Conditions for granting the leave•Inaction on the part of the company: s237(2)(a)This may occur because a majority of shareholders or a liquidator have indicated anunwillingness to bring the action, the company has insufficient funds to bring theaction or the company is deadlocked by shareholder divisions;•Application in good faith: s237(2)(b)Requires the applicant to show that they would suffer a real and substantive injury ifa derivative action were not permitted, provided that the injury was dependentupon or connected with the applicant’s status as a shareholder or director: Cbabwanv Euphric Pty Ltd•Best interest of the company: s237(2)(c)This requires consideration of the company’s ‘separate and independent’ welfarerather than the applicant’s: Jeans v Deangrove Pty Ltd. Where the company is agoing concern, the interests of the company correspond to the interests of itsshareholders as a whole; whilst if the company is insolvent, its interests correspondto the interests of its creditors so the court will consider whether allowing theproceedings will in likelihood increase the return to creditorsSwansson v RA Pratt Properties Pty Ltd (2002) 42 ACSR 313.• A serious question to be tried: s237(2)(d)This requires the applicant to show an arguable case as the courts do not considerthe merits of the applicant’s case in depth at this stage: Carpenter v Pioneer ParkPty Ltd (in liq) (2004) 51 ACSR 299 at 360.Ragless v IPA Holdings Pty Ltd (in liq)•Cases: Ehsman v Nutectime International Pty Ltd; Swansson v Pratt; Ragless v IPA Holdings Pty Ltd (in liq); Charlton v Baber.-No need to consider remedies, as the crux is the conditions for obtaining a leave2.Section 461 winding up-The most useful provision under s 461 is s461(1)(k) (the just and equitable ground).-Standing: s462(2)Any one or more of the following may apply for an order to wind up a company •The company; or• A creditor (including a contingent or prospective creditor) of the company; or• A contributory; or•The liquidator of the company; or•ASIC•APRA-Circumstances on which a company can be wound up on the just and equitable ground •Deadlock: Re Yenidje Tobacco Co Ltd [1916] 2 Ch 426 (The only two members were equal shareholders and only directors. They became bitterly hostile to each other.The company constitution did not provide for a casting vote in case of a deadlock)•Failure of substratum: Re Haven Gold Mining Co (1982) 20 Ch D 151 (Coincorporated to run a given mine but it was unable to acquire the mine)Re Tivoli Freeholds Ltd•Loss of confidence: Ebrahimi v Westbourne Galleries Ltd [1973] AC 360; CB 529.•Public interest: ASIC v AS Nominees Ltd (1995) 52 FCR 504 (regular and repeated breaches of the former Corporations Law; mismanagement and misconduct in theconduct of the business of the company, the need for investor protection: Ford,14th:763).•Company incorporated to defraud: Re TE Brinsmead & Sons Ltd [1987] 1 Ch 406 (Co established to pass itself off as an existing reputable company to attract business). -For members’ remedies, the relevant circumstances include those where a deadlock exists (Re Yenidje Tobacco Co Ltd) and where the trust and confidence between members are lost (Ebrahimi v Westbourne Galleries Ltd).-Section 461 winding up is not fault-based3.Remedies for unfair & prejudicial conduct-S232 and 233 provides for a wide range of remedies that can be ordered at the instance of a person aggrieved by the oppressive or unfair conduct of a company controller or by the fact that the company was managed in a manner which is contrary to the interests of members as a whole, oppressive, unfairly prejudicial or unfairly discriminatory.-Standing: s234• A member of the company s234(a)• A person whose name has been removed from the registered as a member as a result of the selective reduction: s234(b)• A past member if the application relates to the circumstances in which they ceased to be a member: s234(c)• A person to whom a share has been transmitted by will or by operation of law: s234(d)• A person whom ASIC think appropriate, etc.: s234(e)-Oppressive or unfair conduct: ss232(a) – (e)-Matters amounting to unfairness: see supplementary notes•Exclusion from business: Mopeke Pty ltd v Airport Fine Foods Pty Ltd•Inadequate dividend payment whiles the directors obtains returns through directorial remunerations and other benefits: Re Sam Weller and Sons Ltd •Diversion of company profits: Sanford v Sanford Courier Pty Ltd•Directors’ failure to act in the best interest o f the company: Re Overton Holdings Pty Ltd•Improper share issue: Re Dalkeith Investments Pty Ltd•Diverting business opportunities: Fexuto Pty v Bosnjak Holding Pty Ltd-Available remedies: s233-Note that causes of action under s232 are fault-basedExternal administration – liquidation1.Types of liquidation•Voluntary liquidation (members’ and creditors’)•Compulsory (non-insolvent and insolvent)-Members’ voluntary winding up•Initiated by special resolution of the company: s491•And can only proceed as a members’ voluntary winding up if the company is solvent.A liquidator is then appointed by the members in general meeting: s495•Directors’ declaration of solvency: s494•Requires the leave of the court: s490-Creditors’ voluntary winding up•Only appropriate when the company is insolvent•When no declaration of solvency is made:(1)Liquidator to convene a meeting within 11 days after the day on which theresolution on voluntary winding up is made: s497(1)(2)7 days’ notice of meeting to creditors: s497(2)(3)Creditors may appoint their own liquidator: s497(11)•When the liquidator finds the co is insolvent -3 possibilities: s496(1)Compulsory winding up with court order: s496(1)(a), or(2)Appointing an administrator: s496(1)(b), or(3)Creditors’ voluntary winding up: s496(1)(c)•When the company is in a voluntary administration, the creditors either:(1)Fail to execute a Deed of Company Arrangement (DCA), or(2)Terminate the DCA and resolve to wind up the co, or(3)Resolve to wind up the co during the VA-Solvent compulsory winding up (s461 winding up)-Insolvent compulsory winding up•Proof of insolvency(1)Test of insolvency: s95A (Cash Flow)(2)Presumption of insolvency: see s459C. compare the presumption under s 588Ea.Failure to meet statutory demand;pany’s judgment debt not satisfied;c. A receiver or a receiver and manager appointed either under the contractualarrangement or under a court order for enforcing a floating charge;d. A person entered into possession or assumed control of corporate propertyto enforce a floating charge;e. A person was appointed to enter into possession or assume control.(3)Statutory demand: ss9 & 459E(1); Topfelt Pty Ltd v State Bank of NSW2.Standing to make an insolvent winding up application: s459P; Corporations regulations, reg5.4.01; Community Development Pty Ltd v Engwirda Construction Co.-Who may apply for order under s459A•The company;•The creditor, including a contingent or prospective creditor): Community Development Pty Ltd v Engwirda Construction Co (1969) 120 CLR 455 (A builderwho has done work but no Archi tect’s certification had been issued at the time ofapplication).• A contributory;• A director;• A liquidator or provisional liquidator;•ASIC;• A prescribed agent (i.e. APRA – Corp reg, 5.4.01).3.Effect of liquidation-On the co’s business – ceases to carry on business except where the liquidator believes that it is necessary for the beneficial disposal of the business: s477(1)(a)-On the directors and other officers – loss of management powers;-On members – loss of power of control, liable for call on the unpaid portion of the shares: s515-On creditors (Loss of individual right of enforcement (s468(4)) – the right of which is converted into one against a fund consisting of the co’s assets – proof of enforceable claims;secured creditor to retain its right to realise the security (s471C); note the position of the holder of a floating charge (s561).-On employees – winding up order = notice of dismissal: Re General Rolling Stock Co-On contracts – depends on the terms of the contract. (where there is an ipso facto (by the mere fact) clause that allows the other party to terminate the contract on the co’s winding up)-On other insolvency procedures•Receivership –receiver’s power of manage ment is revoked: Sheahan v Carrier Air Conditioner Pty Ltd4.Liquidators: qualifications, disqualification, appointment, powers and duties-Appointment by:•Members: s495•Creditors: s496•Courts: s472-Types and qualification requirements•Types(1)Unregistered (mem bers’ voluntary winding up for a Pty Ltd Co): s532(4);(2)Registered (registration with ASIC; creditors’ voluntary winding ups; members’voluntary winding ups when the co is a public co); qualifications in accounting(not less than 3 years) or commercial law including company law (not less than 2years): s1282(2)(3)An official liquidator: s1283. Only an official liquidator can be appointed by thecourt to be a provisional liquidator or liquidator: ss472(1)-(2); a compulsorywinding up must be carried out by an official liquidator: s532(8).•Disqualification of liquidators(1)Re National Safety Council of Australia [1990]. (a partner of the firm that hadprovided the company with accounting service could not be appointed as thecompany’s liquidator – conflict of interests.-Powers of liquidators: TB p.718In addition:•Sell the company’s legal actions (cause of actions), and•Disclaim property: s568 (i.e. property that is unrealisable and valueless and subject to rates or mortgage)(1)Re Nottingham General Cemetery Co [1955](2)A person whose rights are affected by the disclaimer can be treated as a creditorof the company: s568D(2)-Duties of liquidators•Commissioner for Corporate Affairs v Harvey(1)Duty of loyalty and duty of care –failure to put co’s money into liquidation tru staccount; unauthorised payments to own firm; used co’s money for personalexpenses, etc5.Voidable transactions-Unfair preference: s588FA•Rothmans Exports Pty Ltd v Mistmorn Pth Ltd (1994)-Uncommercial transactions: s588FB•Lewis v Cook-Insolvent transactions: s588FC•UP or UT that takes place when the co is insolvent or the co becomes insolvent because of the transaction-Relation back day (RBD): compulsory liquidation: the date on which the application for a winding up order is filed, etc; voluntary liquidation: the date on which the resolution on winding up is passed-Period of time permitted: see flowchart in lec. 10 ppt-‘Related entity’ see s9. Note the difference between ‘related entity’ and ‘related party’ for the purpose of the rules on related party transactions under ss208,209-Defences: s588FG-Remedies: s588FF(1)-Cases: Rothmans Exports Pth Ltd v Mistmorn Pty Ltd (unfair preference); Lewis v Cook (uncommercial transaction).Remedies and exoneration1.Civil penalty provisions (CPPs)-Certain provisions in the CA are enacted as CPPs. The first lot of CPPs were enacted in 1993.The breach of a CCP may result in more than one consequence. These include a civil penalty being imposed on and a compensation order being ordered against the defendant. In the exam, you will need to discuss consequences of a breach according to whether you arerequired to discuss remedies only or consequences of a breach generally.-You should try and summarise the CPPs we have studies (directorial duties including the duty re insolvent trading and duties of disclosure, related party transaction, etc).Three types of civil penalty orders to punish people who contravene designated civilpenalty provisions:• A pecuniary penalty of up to $200000 for contraventions of the corporation/scheme civil penalty provisions: s1317G(1). The pecuniary penalty for contraventions of thefinancial services civil penalty provisions is $1 m for bodies corporate and $200000for individuals: s1317G(1B)•Disqualification from management: s206C; and•Compensation for damage suffered: s1317H-For a complete list of CPPs, see s1317E- A civil penalty order cannot be made in the absence of a court declaration that a CPP has been contravened. On court declaration, see s1317E.- A compensation order can be made with or without a court declaration of contravention: S1317H-The court’s power of imposing a civil penalty is provided under s1317G-The court’s power of making compensation orders is stipulated in s1317H-On the standing of applying for a declaration or an order (civil penalty or compensation): s1317J2.Statutory injunction: s1324-Under s1324(1), the court has a discretion to grant an injunction restraining a person from engaging in conduct that contravenes the CA. in addition, the court may, if it thinks it is desirable to do so, require that person to do any act or thing.-The court may also order that the person acting in contravention of the CA pay damages to any other person: s1324(10)3.Remedies provided in specific duty regime. Example: remedies under the insolventtrading regime: s588M(3); REMEDIES FOR VOIDABLE TRASACTIONS: S588FF(1)4.Remedies that can be sought by members directly, see part 3above (ss232, 233, 236,237, 461, etc.)5.Note that remedies available depends on, among other things, the basis of the legalaction. For example, statutory remedies are available where the basis of the action is abreach of a statutory obligation. General law remedies (in our context mainly equitable remedies) are available where the allegation is that the defendant has breached ageneral law duty (such as fiduciary obligations).6.Exoneration and relief-For exoneration and permitted indemnity by the company, as well as relief for contravention of CA (except for criminal offences), see lec. 8 ppt-S191-Directors who breach their fiduciary duties to a solvent company may be excused from liability if ratified•By the general meeting: Furs v Tomkies•By the board: QLD mines Ltd v Hudson; ss191•No ratification where company insolvent: Kinsela•No ratification where misappropriation of corporate assets or diversion of corporate opportunity is involved: Cook v Deeks•Shareholders are unable to ratify a breach of directors’ statutory duties: Angas Law Services Pty Ltd v Carabelas•Fiduciary duties:(1)Act in good faith in the best interests of the company;(2)Exercise their powers for proper purposes;(3)Retain their discretionary powers; and(4)Avoid undisclosed conflicts of inters-Exemption: a company or related body corporate must not exempt an officer or auditor, directly or through an interposed entity, from liability to the company: s199A(1)-Indemnity(赔偿金) other than legal costs – permitted except for:• A liability owed to the co or related body corporate• A liability for monetary penalty• A liability owed to someone other than the co, etc incurred in bad faith: s199A(2) -Indemnity for legal cost allowed except where the defendant is found guilty or liable: s199A(3)-Court relief – possible except for criminal offence (ss1317S, s1318)Conditions:•The person has acted honestly.•Circumstances warrants it: s1317S(2)•Factors to consider in exercising discretion: ASIC v Vines(1)The degree of care with which the person has acted(2)The degree to which the contravening conduct departed from the standard ofreasonableness prescribed by statutory duties;(3)Contrition after the event(4)Seriousness of contravention(5)Competent advice obtained and followed?(6)Conduct in line with established practice?(7)Has the defendant been paid for engaging in the contravening conduct?。