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ASIC v Hellicar- Corporate Social Responsiveness

Question :

The directors of the company have obligatory duties and responsibilities which they must fulfil and abide. In the case of ASIC v Hellicar, the directors of the company breached their duties and responsibilities towards the company, shareholders and stake owners. There were six non-executive directors in the company and none of them fulfilled their duties. They all were equally responsible for the breach of duty towards the company.

  • What is the case of ASIC v Hellicar?
  • Explain the duties and corporate social responsiveness of a director towards the company in Australia?
  • Application of Section 180 of Corporation Act 2001 in ASIC v Hellicar.
Answer :

Facts

An Australian case of ASIC v Hellicar is related to the Directors of the company named: James Hardie Company. In this case, there were six non-executive directors who crossed their limits, breached their duties as Directors and did not perform their responsibilities towards the company.

In the year 2012, an appeal was filed against the company that each director of the company is involved in misleading of the shareholders of the company and also the stakeholders by non-performance and breach of the duties & responsibilities of the director. The appeal included that the Directors were liable for the funding of the Asbestos disease liability to which they were short of one billion dollars. The directors also did not follow the board minutes and also they did not formally record the whole meeting. The directors did not inform about the meeting that was supposed to take place and later they were misleading the facts.

Under the Corporation Act 2001 of Australia, there are majorly four responsibilities of the directors mentioned. Firstly, it is the duty of the directors to act with due care and diligence. Secondly, directors must always act in good faith of the company and in best interest of the company. Thirdly, it the main duty of the directors to not misuse the position as directors. Lastly and fourthly, they must not use the information of the company in an improper way.

Apart from the above duties of a director, there are many more duties and responsibilities for which directors are obligatory under the Companies Act 2006. The directors must always promote the success of the company. If there are many directors in one single company then they must avoid the conflicts which may arise while making decisions or any management related activities. They must not indulge in any activity which involves any benefits from third party.

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Section. 180 of the corporation Act 2001

Section. 180 is all about the duties and responsibilities of a director in a company.

This sections provides with the civil obligations of the directors or other authorities of the company. Under this section it is the duty of directors to exercise care and diligence. The directors must discharge their duties reasonable. The directors of the company must act in good faith and for the best interest of the company. The directors must always make decisions which is for the best interest of the company and the judgements must not affect the operations of the business activities in a corporation.

Also Read: Mobil Oil Australia v Wellcome International

Legal Issues

  • Whether there was breach of duties by the directors?
  • Whether there was misleading advertisement of information in the case?

Decision

It was held by the supreme court that all the directors were involved in the breach towards the company as they mislead the shareholders and stakeholder that they had created a trust for funding Asbestos-related disease. They also made people believe that the fund sthat sufficient balance to meet all the future and present claims for the same. Later on finding that they were short of amount they actually claimed. The court imposed fine along with an order to disqualify all the directors for breach under section. 180(1) of the Act.

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Appeals were made by the parties in many other courts and at last the final appeal was heard by the high court.

The High court of Australia after considering all the facts and information related to the case analysed that the directors while performing their duties ignored the company's benefit. Court ordered directors to recheck all the slips and errors made by them.

It was held by the High Court that the directors failed to contravene with their obligations towards the company under section. 180 of the corporation Act 2001.

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