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Section of the Corporations Act Assignment

ASSIGNMENT GUIDE

Introduction: I mark

Introduce the section of the Corporations Act are you asked to discuss.

What duty does the section impose?

Who will take the action?

In brief, what kind of penalties would be imposed?

Section 183

Use of information--directors, other officers and employees

(1) A person who obtains information because they are, or have been, a director or other officer or employee of a corporation must not improperly use the information to:

(a)gain an advantage for themselves or someone else; or

(b)cause detriment to the corporation.

Note 1: This duty continues after the person stops being an officer or employee of the corporation.

Note 2:This subsection is a civil penalty provision (see section1317E).

(2)A person who is involved in a contravention of subsection(1) contravenes this subsection.

Note 1:Section79 defines involved .

Note 2:This subsection is a civil penalty provision (see section1317E).

Preliminary issues: 7 marks

In order to breach s 183, the person/s said to have breached the section must be a director, officer or employee of the company.

Are Dr Dawes, Mr Foster, Mr Huckenfusser and Mrs Duck directors, officers or employees of the company?

Who is a director?

Section 9

"director " of a company or other body means:

(a)a person who:

(i) is appointed to the position of a director; or

(ii) is appointed to the position of an alternate director and is acting in that capacity;

regardless of the name that is given to their position; and

(b)unless the contrary intention appears, a person who is not validly appointed as a director if:

(i) they act in the position of a director; or

(ii) the directors of the company or body are accustomed to act in accordance with the person's instructions or wishes.

Who is an officer?

"officer " of a corporation means:

(a) a director or secretary of the corporation; or

(b) a person:

(i) who makes, or participates in making, decisions that affect the whole, or a substantial part, of the business of the corporation; or

(ii) who has the capacity to affect significantly the corporation's financial standing; or

(iii) in accordance with whose instructions or wishes the directors of the corporation are accustomed to act (excluding advice given by the person in the proper performance of functions attaching to the person's professional capacity or their business relationship with the directors or the corporation); or

(c) a receiver, or receiver and manager, of the property of the corporation; or

(d) an administrator of the corporation; or

(e) an administrator of a deed of company arrangement executed by the corporation; or

(f) a liquidator of the corporation; or

(g) a trustee or other person administering a compromise or arrangement made between the corporation and someone else.

Note: Section201B contains rules about who is a director of a corporation.

Section 201B

Who can be a director

(1) Only an individual who is at least 18may be appointed as a director of a company.

(2) A person who is disqualified from managing corporations under Part2D.6may only be appointed as director of a company if the appointment is made with permission granted by ASIC under section206F or leave granted by the Court under section206G.

Possible breaches of the Corporations Act: 15 marks

According to the decision in Commissioner for Corporate Affairs v Green [1978] VicRp 48; [1978] VR 505 (16 February 1978) http://www.austlii.edu.au/au/cases/vic/VicRp/1978/48.html

the following elements of s 183 must be proven:

(1) That the person was at the relevant time an officer of the corporation.

(2) That the person acquired the relevant information.

(3) That he acquired that information by virtue of his position as officer of the corporation.

(4) That he made improper use of that information.

What does ‘improper’ mean?

(5) That he made that improper use in order to gain directly or indirectly an advantage.

(6) That such advantage was either for himself or for some other person.

(7) Alternatively to (5), that he made that improper use to cause detriment to the corporation.

Apply these to the facts for each possible director/ officer/ employee

Defences: 4 marks

According to s 1317S, the court may relive the person from liability as the court thinks fit, if the director can satisfy the court that the s/he

  1. has acted honestly and that,

having regard to all the circumstances of the case, including those connected with the person's appointment,

  1. s/he ought fairly to be excused

Section 1317S

Relief from liability for contravention of civil penalty provision

(1) In this section:

"eligible proceedings " :

(a) means proceedings for a contravention of a civil penalty provision (including proceedings under section588M, 588W, 961M, 1317GA, 1317H, 1317HA or 1317HB); and

(b) does not include proceedings for an offence (except so far as the proceedings relate to the question whether the court should make an order under section588K, 1317H, 1317HA or 1317HB).

(2) If:

(a) eligible proceedings are brought against a person; and

(b) in the proceedings it appears to the court that the person has, or may have, contravened a civil penalty provision but that:

(i) the person has acted honestly; and

(ii) having regard to all the circumstances of the case (including, where applicable, those connected with the person's appointment as an officer, or employment as an employee, of a corporation or of a Part5.7 body), the person ought fairly to be excused for the contravention;

the court may relieve the person either wholly or partly from a liability to which the person would otherwise be subject, or that might otherwise be imposed on the person, because of the contravention.

(3) In determining under subsection(2) whether a person ought fairly to be excused for a contravention of section588G, the matters to which regard is to be had include, but are not limited to:

(a) any action the person took with a view to appointing an administrator of the company or Part5.7 body; and

(b) when that action was taken; and

(c) the results of that action.

(4) If a person thinks that eligible proceedings will or may be begun against them, they may apply to the Court for relief.

(5) On an application under subsection(4), the Court may grant relief under subsection(2) as if the eligible proceedings had been begun in the Court.

(6) For the purposes of subsection(2) as applying for the purposes of a case tried by a judge with a jury:

(a) a reference in that subsection to the court is a reference to the judge; and

(b) the relief that may be granted includes withdrawing the case in whole or in part from the jury and directing judgment to be entered for the defendant on such terms as to costs as the judge thinks appropriate.

(7) Nothing in this section limits, or is limited by, section1318.

Apply this section to the facts for each director/ officer/ employee

Remedies: 2 marks

Civil Penalty: s1317E

Conclusion: 1 mark

Have there been any breaches of s183?

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