Assignment Two Option 3 Case Study Example | Topics and Well Written Essays - 2500 words

Assignment Two Option 3 - Case Study Example This provides a set of issues and matters that must be examined and critiqued on the basis of Australian law and other Common Law provisions. The issues involve: In order to provide answers to the various issues raised above, there is the need to draw into important statues and Common Law provisions that regulate actions related to the persons involved in the case. This will involve the identification of important elements and features that form the fundamental obligations and requirements of directors in the position of persons involved in the case illustrated above. Companies are formed by various shareholders who come together to pool their resources to raise capital. There is a complete separation of ownership and control in corporate law. Hence, companies are run by people who are nominated and by the shareholders, which is the board of directors. The board of directors are given power by the owners of the business (shareholders) to run a company and they do this by taking decisions and supervising activities in the organisation. The right to use the firms resources gives rise to the agency problem which involves the directors seeking to satisfy their own personal interest ahead of the interest of the company1. This is an issue that can be traced back to the early propositions of Adam Smith that sought to provide major regulatory systems for the control of affairs in corporate entities. This has reflected in the national legal systems which have evolved over the years to include various corporate laws and principles. Conflict of interest has been an issue that was prohibited and restricted by Common Law. In Cook V Deeks3 it was held that directors of a company will have to act in the best interest of the company. And where they subjugated the companys interest in favour of a personal interest of some of the directors, a fraud is committed on the shareholders who stand to