ORGANIZATIONAL LAW

Organizational Law

Organizational Law

Introduction

The author basically covering the aspect of organizational law, and thus paper is divided into two parts. The first part of the paper mainly focusing on the job roles of the directors of the Free Spirit Pty Ltd. The scenario presented is very much critical and thus a very deep analysis of the situation is necessary. To cover all the relevant areas, the author covers the Corporations Act 2001 for the appropriate information. To give readers the better understanding, the author presented the two different relevant cases for the readers understanding and at last the author concluded the first part by mentioning the defences in support of the directors.

Whereas in the second part of the paper, the author covered the aspect of loan that has been taken by one of the director of Free Spirit Pty Ltd and due to that loan all the problems arose. Therefore, in this regard, the author discussed the companies' relation with outsiders means how well reputed and how well the company maintained the relations with the outer world. Similarly, to get a proper understanding, the author highlighted the Corporations Act 2001 in this part as well and at last the author concluded the paper with the relevant examples.

Part A

Directors Role

Free Spirit Pty Ltd is team building organization specialized in conducting short courses at various locations all around Australia. The company conducts and organize the special weekend retreats that basically involved the adventurous activities which promote the team building spirit. The company ran by three directors. Yana operating as the managing director of the company. Su acting as the financial director of the company. Both Yana and Su controlling the company and the third director was William, who was working as a non-executive director. The only reason behind William's appointment as director was that he was Yana's boyfriend and also he showed little bit interest in the business as well.

Corporations Act 2001

The regulated by the law duties of directors are:

Any activity must be carried out with reasonable care and skill (§ 180 para 1 of the Corporations Act). The scope of care to be applied is measured by the degree of a prudent person would use this in fulfilment of their duties as a director in the company's affairs. Accordingly, the Directors, subject to certain Circumstances to direct their powers or their obligations under this objectified scale. This scale is in favour of the directors restricted by the "rule for corporate decisions (Business Judgment Rule)", in case of breaches of the duties granted some protection (Section 6);

Any activity must be performed in good faith in the best interests of the company (§ 181 of the Corporations Act). This means that the directors may do anything that a reasonable person would consider as contrary to the purpose and activities of the firm. The directors have a duty to avoid conflicts of interest, or should such arise, these must be disclosed and to ...