Business and Corporate Law

Introduction to Business or Corporate Law

The Business or corporate law can be understood as the legal practices that are made by tribunal for controlling all the activities that are conducted in corporate world. Different laws that are made in this sector cover shareholders, directors, workers and creditors of any organisation. It defines various acts and principles that govern activities related to companies so that no illegal practices can be followed within any firm. In the present report, there is a discussion over business and corporate law. As per this, there is a discussion over the case of Australia that has covered the corporation act and its different sections according to which duties of directors and officers within workplace have been defined. Besides this, there will be a critical discussion about the judgement given by tribunal in stated case so as to understand all the essential elements that are involved in corporations act.

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Introduction of case

James Hardie is a building material company which is headquartered in Ireland and founded in Australia. The stated organisation is a manufacturer of fibre cement building products firm that is listed in Australian Securities Exchange (ASX) as well. As per the case, in 2001, two auxiliary firms of James Hardie group were filed with large liabilities that were linked with asbestos claims. There were some of the sufferers who demanded for the compensation against the losses and diseases caused as a result of asbestos (Phillips, Turco and Zuckerman, 2013). Thus, a foundation was structured by cited enterprises so as to give the compensation to sufferers. After this, the members of board of directors made a declaration to Australian securities exchange entailing about the funds that were sufficient for meeting all claims of compensation. However, later it was found that the declaration made by firm was fake and as the structured foundation was underfunded by $1.5 billion. As a result, the Australian Securities and Investment Commission (ASIC) took an action against the entity’s directors and company secretary Mr. Shafron.

Duties and responsibilities under corporation act

It has been manifested that in recent years, the tribunal has closely looked into the matters of corporate governance and the role of directors and company secretaries as well (Page and Katz, 2010). As per this, it has been said that no director or officer of company make an argument about the organisation’s proceedings by saying that he/she was unaware of the duties and responsibilities. Prior to 1991, Australia had a state-based corporate law scheme,as it had a argument that the business laws comes under the jurisdiction of state. However, gradually many developments came across due to which the acts under corporation laws came into force which regulated the laws related with business world. The acts and rules made under this law were potential to raise a fear among the personalities of corporate against the litigation procedures that may take place against any illegal operations of the company. In Australia, there are particular laws that have been framed for a firm’s director and company secretary according to which they are supposed to fulfil various obligations and responsibilities. Thus, there are several duties of officers under the Australian law according to which they have been divided into three categories: a) Statutory duties b) Common laws that explain duty of care and due diligence and c) fiduciary duties (Meese and Oman,2014).

The Corporation act (CA) has various sections according to which different duties and responsibilities have been defined. As per the law, the breach of ss 180-183 under CA may lead to certain penalties. While, in case of some severe occurrences that implies any criminal liability may come under s 184. The above stated case of James Hardie group also demonstrates the similar conditions where ASIC charged the directors and company secretary under Corporation act where they were found to be failed of performing their duties with due care and diligence. Thus, under CA, they were fined with certain amount of penalties. The directors are the persons who use to work on the behalf of all shareholders of a company. Thus, they are expected to perform their duties in good faith and fulfil all expected roles and responsibilities. There are some major duties that are expected of the directors and officers of the organisation which were breached in case of James Hardie group. The major duties that are explained in the Corporation act, 2001 expected from the directors and other officers are as follows:

Care and diligence

As per the corporation act s 180, the company’s directors and officers are held responsible for acting with a highest degree of care and diligence in all its operations. The meaning of due care is to demonstrate the reasonable care in the act which also exhibits the best interest of organisation and all its related stakeholders. It also reflects to maintain the activities which are directed towards the formalised security that has systematic policies, standards and related guidelines which can help in maintaining the right procedure for carrying out legal works. Apart from this, the due diligence refers to the careful investigation and research of each and every activity that are conducted by firm so as to restrict any illegal practice. Both of these cares were not performed properly by stated enterprise because of which the directors were accused of penalties and case against them. In addition to this, the court also discovered that the mentioned firm’s directors had breached duties at the time of approving ASX announcement in board’s meeting.

Good faith

Section 181of Corporation’s act states that the business firm’s directors must act in good faith that refers to the best interest of organisation. This also demonstrates the duty of faith and trust which has been imposed by the law. According to this duty, the directors and officers are bound to act with all of their sincere attention. There should not be any belief or purpose of mischievousness that shows the desire of making any kind of fraud. According to this act, the cited venture was bound to reveal all of their information correctly without any intention of cheating to any party. While, the directors made concealment and revealed wrong amount of compensation to the ASX.

Improper use of designation

As per section 182 of corporation act, the officers of a company cannot make use of their position within firm in any illegal manner that results in gaining undue advantage for themselves or for any third party. It does not matter that the company has suffered any loss as a result of the improper use of position by directors and officers. The thing which matters is that their intention and performance which was not as per the legal acts. In case of James Hardie, The directors made wrong use of their position and power. The company secretary also did not perform his duties as per the rules (Letsou, 2010). Thus there was a serious breach of duties and responsibilities from the side of the directors and officers.

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Improper use of information

According to section 183, The company’s director or officers should not use the information they have for any purpose other than intended. They should not hamper with the information and data in any way for their own personal benefits . Also the use of information should be transparent and known to the individuals concerned with the company . This would not only be more easier to manage but would also be a good ethical act from the company’s part. With respect to the above case (Segrestin and Hatchuel, 2011). The directors concealed the right information ASX where they revealed the compensation amount wrongly as it was underfunded by 1.5 billion dollars.

Discussion on judgement of court

The decision on James Hardie’s case was filed in court where the final decision was made after various rounds. At first round of trial, the court gave its decision about the case that Mr Shafron who was the company secretary of mentioned enterprise has breached his duty. As per the position of Mr. Shafron, he was responsible to make right advices in an adequate manner. He was responsible for advising entire board of directors that the announcement made by organisation termed in very insistent way. Besides this, the court also made it clear that Mr. Shefron was expected to make all the activities legal as he was also involved in the decision making. According to the CS of any firm is responsible to look into the legal matters of organisation so that legal proceedings of enterprise can be brought on track. Failing to fulfil such responsibility may lead to serious results that may result inti any legal actions against the firm.

In the second round of court’s decision, several directors of organisation made an appeal that the supreme court should not have held the minutes have been approved. Therefore court overturned the NSW’s decision and the minutes presented by ASIC had a lot of inaccuracies. While, decision taken for Mr. Shafron was unchanged as he was held responsible to breach his duty. He also made an argument he was just acting in the capacity of general counsel not as CS so the laws related to Corporations act, 2001 should not apply. As per Dezalay and Garth, (2011), the directors and all other officers who are involved in decision making process are fully responsible for all the activities and decisions that are being undertaken in the meeting regardless of their capacity at that time.

The high court was also involved in this decision making where it overturned the decision of NSW. They held all involved parties to be responsible for the breach of their duties. The appeal made by CS off said entity was not accepted and corporation act was applied on him fully on the grounds of making him responsible for all decisions as he was acting as an officer at that time. In addition to this, the court said that due to the absence of any contradictory evidences, meeting held by board is a proof for entire matter along with decisions and resolutions contained in them. As per this, it was fully proved that the court and its decision regarding breach of duties was right in case of James hardy case as the directors did not fulfil their responsibilities in a right manner.


The above report has been made on business and corporate law according to which the various essential duties and responsibilities of an organisation have been discussed. The report has made a discussion over the case of James Hardie which was an Australian manufacturing company that has mentioned its compensation funds in wrong way. This was a case of breach of duty on the part of various directors and officers of stated fir. The above report concludes that the acts and rules made under Corporation act were potential to raise a fear among the personalities of corporate against the litigation procedures that may take place against any illegal operations of the company. As per the law, the breach of ss 180-183 under CA may lead to certain penalties. While, in case of some severe occurrences that implies any criminal liability may come under s 184. According to the duties, the directors and officers are bound to act with all of their sincere attention. There should not be any belief or purpose of mischievousness that shows the desire of making any kind of fraud. The final decision of court on this case came in 2010.


  • Baer, M.H., 2010. Organizational Liability and the Tension Between Corporate and Criminal Law.JL & Pol'y,19, p.1.
  • Bainbridge, S., 2015.Corporate Law. West Academic.
  • Dezalay, Y. and Garth, B.G., 2011. Corporate Law Firms, NGOs and Issues of Legitimacy for a Global Legal Order.Fordham L.
  • Johnson, L., 2012. Pluralism in corporate form: Corporate law and benefit corporations.
  • Letsou, P.V., 2010. Implications of Shareholder Diversification on Corporate Law and Organization: The Case of the Business Judgment Rule.
  • Meese, A.J. and Oman, N.B., 2014. Hobby Lobby, Corporate Law, and the Theory of the Firm: Why For-Profit Corporations Are RFRA Persons.
  • Muchlinski, P., 2012. Implementing the new UN corporate human rights framework: Implications for corporate law, governance, and regulation.Business Ethics Quarterly.
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