Company Law Essay

Submitted By zhangxinfang
Words: 2457
Pages: 10


In this essay, through disclosure of corporate events to discuss the relevant interests of the directors and minority shareholders. Due to the constant improvement of the social and legal system, to protect the interests of vulnerable groups has been a concern of the community. To perfect the capital market and to ensure the benign development of economy, it is necessary, in the legislation on Australian enterprises, to establish measures that protect and relief the interest of minority shareholders to control director's various violations on minority shareholder's rights and interests, so as to balance the power of director and minority shareholders and fully guarantee various interest and rights of the minority shareholders, which will promote the improvement of society and legal system and the continues progress of society. The phenomenon that the legitimate rights and interests of the minority stock holder in Australia are infringed by big shareholder and operator can be found everywhere (Tsuk, 2006, p. 1503). The essay mainly discusses the benefits relationships between director and minority shareholders. First directors’ duties are discussed and through analysing this case to show what the duties that director breached. Second analysis the consequences for breaching duties. Finally provide some step to could be taken to protect the benefit of minority shareholder. Through the above analysis, in some cases, the directors may abuse their power, as members, they should protect their rights and interests through legal means.

Directors’ Duties

Director a person who is nominated to the position of a director; or is nominated to the position of an alternate director in a company or other body and directors should act in the light of identity guidelines; regardless of the name that is given to their position. (s 9, Corporations Act 2001). Directors is responsible for the protection of shareholders from the risk of harm to the company caused by the directors, including any of its property or assets, as well as its reputation. Ciro and Symes stated, ‘The directors’ duties fall into three broad categories: the duties of care, skill and diligence; the duties of good faith and proper purpose; the duties to avoid conflicts of interest and to provide proper disclosure’ (2011, p. 209). According to Mills v Mills (1938) 60 CLR 150 at 185 (Dixon J), directors do not owe their duties to the individual members, but to the company as a whole: Percival v Wright [1902] 2 Ch 421.

Whereas, directors may misuse their controlling position to squeeze out minority shareholders in lack of effective mechanism of supervision and balance (Loderer, 2010). In the case, the directors take advantage of the position to do unequal connected transactions. The connected transaction, in nature, is transaction conducted by the company and parties with a stake (Reese, 2002). Therefore, it can harm the interest of the company. Other companies or an enterprise which signed the connected transaction contract is called connected enterprises. In practice, the connected enterprises mainly is: the company's shareholder, especially the directors; other companies in which directors and managers serve important positions; other companies in which directors and managers are partners or shareholders; other companies which have relation of 3 / 7 Distributing interest with directors and managers (Walter,2001). As Stonewalls Ltd and Sand Blocks Pty Ltd have common directors, Stonewalls Ltd sell valuable land to Sand Blocks Pty Ltd is a connected transaction. The price of the land is substantially less than the real value. It has posed a threat to the company and other shareholders' interest. Directors are in a fiduciary relationship with the company. Ciro and Symes indicated that, ‘All fiduciaries, including directors,are under a duty to avoid actual or potential conflict of interest situations’ (2011, p.270). The directors of Stonewalls Ltd have