Law Of Business Organization And Their Case - Myassignmenthelp.Com

Question: Discuss about the Law Of Business Organization And Their Case. Answer: The corporate legal issues facing Rio Tinto Limited in Australia According to section 180 of the Corporations Act 2001 it can be said that the directors and officers of a company has to exercise their powers with due care and diligence while discharging their duties (Corporations Act, 2001). The duty of the director or the officer would be assessed from the point of view of a reasonable person. The exercise of power by the director or officer of a company would be considered to be without due care and diligence if it is established that a reasonable man acting as a director in his position would not have done the same in the given circumstance. However, to assess the same it is necessary to hypothetically place a reasonable person in the same position as a director. According to subsection 180(2) it is essential the decision taken and the powers exercised by the directors or officers of a company must be in good faith. Any of the powers exercised by the director or officers of a company cannot be in self interest of such director and officer. It i s to be mentioned that according to subsection 180(2d) of the aforementioned act, powers exercised by the director or officer must be in the belief that such exercise of power would be in the best interest of the company. In this case the former executives of the mining giant Rio Tinto, Tom Albanese and Guy Elliot have been charged with fraud by the U.S authorities (ABC News, 2018).They are accused of not following the accounting standards and concealing the losses suffered. It can be said that the aforementioned parties concealed from the investors about the loss suffered due to the unsuccessful deal which happened under the watch of the aforementioned parties. Therefore it can be said that the corporate legal issues faced by the officers of Rio Tinto are failure to act with due care and diligently. It can also be said that they had not taken due care to act in good faith and did not act in the best interests of the company. Therefore they failed to comply with the provisions stated in section 180 of the aforementioned act. The parties have also been charged with fraud as stated in section 596 of the Corporations Act 2001. According to this section an officer will of a company will be held to have co mmitted fraud if he has acted in a way to defraud the company and creditors of the company. Therefore the act of concealing the loss suffered t the investors would constitute fraud. Avenues open to the law authorities and Directors It is to be said that the government body which is responsible for governing the provisions of the Corporations Act 2001, is the Australian Securities and Investment Commission. It can be said that the powers of the Australian Securities and Investment commission is governed by the Australian securities and Investment Commission Act. Therefore, in reference to the chosen case it can be said that the Australian Securities and Investment commission can be appealed to for violation of the provisions of Corporations Law by the director and officer of Rio Tinto as mentioned before. The Australian Securities and Investment Commission and the Australian Competition and Consumer Commission and the Australian Taxation Office have a wide range of powers which includes conducting investigation to support the law enforcement authorities with the evidence (Shekhar Zheng, 2017). Some of the Investigation powers of the aforementioned bodies include power to inspect the books of production, the power to interrogate a person for obtaining relevant information, power to conduct inspection in the premises (Gilligan Bird, 2015). It is to be mentioned that there are some protections and privileges available to the corporation and its directors. The corporations and the directors of the corporations have the privilege of making claim over the documentation. It can be stated that the in the inspections conducted by the aforementioned Australian Security and Investment Commission, the officer and the director who is interrogated does not have the right to remain silent. However it can be mentioned that the directors and officers of a corporation are provided immunity which prohibits the investigator from using the answers obtained in civil and criminal proceedings. After conducting the investigation the regulators of the investigation may pursue law enforcement as ci vil and criminal proceedings (Bainbridge, 2015). It can be noted that Enforcement proceedings by the aforementioned bodies can include issue of interim orders and injunction to freeze the assets of the corporation. The injunction order is generally issued by the court at its discretion and the injunctive Relief can be obtained within 24 hours of application for such injunction. Some of the provisions of the Corporations Act 2001 have application in extraterritorial locations. Therefore, in this case The US Securities and Exchange Commission can appeal to the ASIC for conducting an investigation and can pursue enforcement of civil and criminal proceedings against the aforementioned parties. Relevant Case In the remarkable case ASIC v Cassimatis (No 8) [2016] FCA 1023 it was held that they had committed Beach of Duty of care according to section 180(1) of the Corporations Act 2001. It can be stated that Mr. and Mrs. Cassimatis had started a financial planner called Storm Financial. They had developed a scheme which involved borrowing of money from investors. However, the scheme developed by Cassimatis involved manipulation and concealing some of the provisions of the scheme which would make the investors invest more than they wished to for a period of not less than 5 years. The strategy or the Scheme devised by the defendant involved borrowing gainst security, obtaining margin loan and using the funds from the loan to invest in index fund. The aim of the strategy was to establish a cash reserve. It is to be stated that Storm Financial had collapsed with a loss in investment funds worth of three billion dollars. The liquidator found out that the aforementioned financial planner had no financial capacity of neither monitoring the debts of the clients nor manage their portfolios. The investors of the aforementioned financial planner had not been intimated of the deteriorating value of the investments made by them. The report by the ASIC found that Mr. and Mrs. Cassimatis were primarily responsible for the loss and collapse of the company. It was also found out that Mr. Cassimatis and his wife were paid $500,000 every year. In the Cassimatis case, it was held by the Federal Court that Mr. and Mrs. Cassimatis had breached the duties of the director as they failed to prevent the company from facing the loss which was inevitable. It was held that they had also failed to provide reasonable investment advice to Storm Financial. The court had stated that any reasonable man acting in the position of Mr. Cassimatis would have taken reasonable steps to prevent the loss suffered and would have realized that the operations of Storm Financial were breaching the law. It was also held that the reasonable man would have necessary precautions to prevent such loss. Justice Edelman further stated in this remarkable case he was doubtful whether any breach of duty by a corporation is an essential requirement for b reach of duty by a director. The ASIC is demanding: Emanuel Julie Cassimatis should pay a penalty for breach of duties as directors, both the parties should be disqualified from acting as managers of any company the parties should not be allowed to hold license of Australia Financial Service Reference List: ASIC v Cassimatis (No 8) [2016] FCA 1023 Bainbridge, S. (2015).Corporate Law. West Academic. Corporations Act 2001. (2018).Legislation.gov.au. Retrieved 4 January 2018, from https://www.legislation.gov.au/Details/C2017C00328 Gilligan, G., Bird, H. L. (2015). Financial Services Misconduct and the Corporations Act 2001. Rio Tinto, former execs face fraud charges over African coal losses. (2018).ABC News. Retrieved 4 January 2018, from https://www.abc.net.au/news/2017-10-18/rio-tinto-and-former-bosses-charged-with-fraud-over-mozambique-/9060898 Shekhar, C., Zheng, J. (2017). Corporate Fraud, Local Connections and Directors.