The group had been liable for 70% of Australian asbestos consumption. However, in February 2007, ASIC had started to impose civil proceedings against James Hardie, the directors and the officers, as ASIC alleged that JHIL and both executive and non-executive had breached their statutory duty. This short research report had outlined the role of ASIC and various penalty that ASIC can impose under Corporation Act 2001. Besides that, we will also discuss the position that ASIC had held from 2004 until current date in relation to the directors of Hardie group.
At last, I had provided a summary of the ASIC’s media release that had been established on 13 May 2011, and indentified the element that ASIC is hoping the High Court to uphold. The Role of ASIC: The Australian Security and Investment Commission (ASIC) is a commonwealth statutory corporation that set up by Australian Securities and Investments Commission Act, and it is a regulator which in charge of monitoring the Australia’s Corporation, products, markets and financial services (Lipton, Herzberg and Welsh 2012, p.
On the other hand, ASIC is also a commonwealth authority that is responsible for governing the Corporation Act. ASIC Act provided that ASIC owned such powers and function that endowed by the corporation legislation to ASIC. Thus, what exactly is the corporation legislation means? Under Section 5(1), they had interpreted the term ‘corporation legislation’ to mean the ASIC Act and the Corporation Act (Baxt, Finnane and Harris 2012). Besides that, ASIC also owned the power to initiate prosecution for criminal offences or apply for civil penalty orders if they believed that there’s a contravention of the law.
ASIC is also able to ban a director from managing a company for a certain period if they contravened their general duties. For instance, in the case of ASIC v Stephen William Vizard , the court held that as a director of Telstra, Mr. Vizard has contravened the Corporation Act: Section 183, the duty of director to use the information in an improper purpose, and gain advantage for himself, thus, the court order pecuniary penalties and a disqualification order against Mr. Vizard (Price Waterhouse Coopers 2012).
As a result of that, ASIC actually played a significant role in relation to initiate prosecution against companies directors for misconduct in order to ensure corporation and those related parties are complied with the corporation legislation. Now, let us look at the duties of a corporation’s directors under Corporation Act and what penalty can ASIC can imposed if the directors do not comply with the Corporation Act. The duties of a company’s director: The term ‘director’ is a person who is appointed to manage control or govern the affairs of a corporation.
Under Section 9 definitions, the term directors extend to a person who is not formally appointed as a director, but they act as a director or whose instruction or whishes are followed customarily (Baxt, Finnane and Harris 2012). In chapter 2D. 1 of the Corporation Act, from Section 180 until Section 184, it dedicated that the principle duties of a director. They can be listed as followed: •Section 180 stated that a director or other officer of a corporation must exercise their power and discharge the duties in a manner with care and diligence (Mclnnes Wilson Lawyers 2011).
Section 181 declared that, a director should exercise their power and discharge their duties in good faith where it’s in the best interest of the corporation and for a proper purpose (Mclnnes Wilson Lawyers 2011). •Section 182 stated that, a director must not improperly use their position to obtain an advantage for themselves or other or cause lesion to the company. (Armstrong Lawyers 2007). Having understood the general duties of a company’s director, we can now look at the penalties that ASIC could impose if the directors had breach their duty or do not comply with the Corporation Act 2001. The penalties:
As we mentioned before, the Australian Securities and Investment (ASIC) is a national body that’s responsible to govern the corporation legislation and securities regulation in Australia. ASIC obtained the power to investigate potential contravention of the corporation law and significant penalties can be imposed on the directors who had failed to perform their duties. The section of the Corporation Act attracting civil penalties under Section 1317J (1), ASIC can apply to the court for a: •‘Declaration of contravention’ •‘Pecuniary penalties ‘ •‘Compensation order’ (Baxt, Finnane and Harris 2012) 1)Pecuniary penalty order:
The court may order a pecuniary penalty of up to $200,000 to a director who breaches his duty under Corporation Act. Once the declaration of a contravention by the person had been made (Section 1317E), and the contravention is a corporation penalty (Price Waterhouse Coopers 2012). (2)Compensation order: Under Section 1317H, the court may order a person to compensate the company where loss is suffered because the person had contravened a corporation civil penalty provision (Price Waterhouse Coopers 2012). (3)Disqualification from managing a company:
The Corporation Act Section 206C conferred ASIC the power to disqualify the directors from managing a company for a certain periods of time due to the contravention of their general duties (Price Waterhouse Coopers 2012). This concept can be illustrated by the following case: ASIC v Vines , it had been found that Mr. Vines had breached his duty of care and diligence by misleading and an inadequate disclosure of material information to the board of directors and failure to ensure the statement was incorrect. The board was relying on Mr. Vines to make complete disclosure to all material matters.
The court held that, as the director had breach their duties of care and diligence b providing fault statement, thus, he had breach civil penalty provisions. The court decided that, Mr. Vines will have to receive a 3 years disqualification, pay a pecuniary penalty of $100,000 and 22% of the ASIC cost (Price Waterhouse Coopers 2012). ASIC’s position that held from 2004-2012: The position of ASIC held from 2004-2012 in relation to the directors of James Hardie case had not altered. Why would I say that? Below is the details of ASIC’s position in relation to the directors of James Hardie:
On he 27th February 2004, the NSW government had authorized Mr. David Jackson to conduct a special commission of Inquiry into James Hardie newly founded foundation-Medical Research and Compensation Foundation (Australian Council of Trade Union 2007). At first instance, it had been found out that, the foundation was in fact had a nearly 1. 5 billion of shortfall, and a media release saying that the MRCF is ‘fully founded’ to meet all the current and future asbestos claims to the Australia Securities Exchange through the approval of the board directors during the directors meeting.
Thus, ASIC had alleged that JHIL had made a misleading and deceptive statement. As a result of that, it had raised a principle issue for the board of directors of JHIL, whether or not they had knowingly voted in favor of releasing the ‘misleading’ announcement to ASX (Alcorn 2011). In addition, the sub issues that had been raised are under Section 180(1), was a general counsel can be treated as an officer? The Original Decision: In April 2009, ASIC held that all of the executive, non-executive and company officer had breached their duty of care by approving the media statement to be made in ASX.
In particularly, ASIC had alleged that, the company chief executive officer and company secretary or general counsel, Mr. Macdonald and Mr. Shafron had breached the director’s duty of care and diligence under Section 180(1) as they had failed to advice the board to disclose the DOCI information to ASX (Hargovan 2009). Thus the court had imposed penalties on both of them: •Mr. Macdonald was disqualified from managing a company for 15 years and a pecuniary penalty of $350,000.
According to the Corporation Act 2001, Section 180(1), an officer obtain the power in decision making which affected the whole or substantial part of a business, thus, Mr, Shafron had a positive obligation to advise the board of the disclosure of DOCI. In relation, he was given a disqualification order for 7 years and a pecuniary penalty of $75,000 (Baxt, Finnane and Harris 2012). •Mr. Morley had been banned from the management for 5 years and paid a pecuniary penalty of $35,000. •However, all of the seven former non-executives directors were disqualified from management for 5 years each and a pecuniary penalty of $30,000.
The Appeal: In December 2010, the NSW court of Appeal overturned the finding in relation to liabilities and penalties of the non-executives directors, the CFO and secretary general counsel of James Hardie Industries Ltd as ASIC had failed to prove that the ASX media statement was approved by the board, and as the appellate court had established that some of the directors had acted honestly without any intention to gain benefit from themselves, which is under Section 1317 of the Corporation Act 2001 (Hargovan 2011).
Thus, amendment had been made in relation to lessen the liabilities and penalty of the directors and officer can be found in later section (summary of media release). Nevertheless, it’s worth noting that Mr. Shafron, Mr. Morley and ASIC had filled application for special leave to appeal the decision of the Court of Appeal. In May 2011, ASIC had issued media release that stated that they had granted a special leave to appeal the James Hardie decision.
ASIC didn’t change their position in relation to the directors of James Hardie and they are still seeking to uphold the finding that the directors of James Hardie had breached their duty by approving the ASX announcement made by the company (ASIC 2011). Media Release’s Summary: This article talk about the ASIC had granted a special leave from the High Court to appeal the decision of the New South Wales Court of Appeal in the James Hardie matter in relation to the former non-executive directors and the former company secretary and general counsel of James Hardie Industries Limited.
The ASIC has actually filled his application in the High Court on 14 January 2011. The purpose of ASIC to strive for a special leave is they are seeking clarification about the nature, content and scope of ASIC’s obligation, while the Court of Appeal had concluded that ASIC had breached their duty of fairness, as they failed to call the witness Mr. Rob in the trial judge of James Hardie case (ASIC 2011).
The failure to call the witness, Mr.Rob had make a tremendous impact on the decision of the court, as they cannot attest the non-executive directors had voted in favor of the ASX announcement’s draft (Thomas 2011). As a result of that, ASIC is hoping the High Court to uphold the finding if the trial judge that the directors had acted in favor in regards of the ASX announcement made by the company (ASIC 2011). Decision: As a result of that, in August 2009, the NSW Supreme Court had imposed pecuniary penalties on JHIL and all the non-executive officers and executive officers, plus a disqualification order on them for an extensive period.
Cite this essay
Corporation Rules and Regulations. (2018, Oct 03). Retrieved from https://studymoose.com/corporation-rules-and-regulations-essay