Governance-defences & relief from liability summary PDF

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Relief from liability General law—Ratification = excused by company in general meeting after full & frank disclosure: Regal (Hastings) Ltd v Gulliver (HL); Winthrop Investments Ltd v Winns Ltd [1975] Limitations Cannot ratify—  Illegal  Fraud on minority—where majority of shareholders & directors involved in breach: Hannes v MJH Pty Ltd o eg—by misappropriation of resources: Cook v Deeks  Infringes personal rights of members: Residues Treatment and Trading Co Ltd & Anor v Southern Resources Ltd & Ors (1988) (directors issuing shares to dilute voting power for an improper purpose—infringes member’s personal equitable rights  cannot ratify)  Where interests of creditors at risk & coy insolvent or almost insolvent: Kinsela v Russell Kinsela Pty Ltd  Breach of statutory duty (ss180-184): Angas Law Services Pty Ltd (in liq) v Carabelas per Gleeson CJ & Heydon J, also Forge v ASIC (because of public interest considerations) Corporations Act—Discretion to Excuse: ss 1317S & 1318 s1317S(2) (statutory duty) If: (a) eligible proceedings [for a contravention of a civil penalty provision] are brought against a person; and (b)in the proceedings it appears to the court that the person has, or may have, contravened a civil penalty provision but that: (i) the person has acted honestly; and (ii) having regard to all the circumstances of the case … the person ought fairly to be excused for the contravention; the court may relieve the person either wholly or partly from a liability to which the person would otherwise be subject, or that might otherwise be imposed on the person, because of the contravention. s1318(1) (general law) If, in  any civil proceeding o against a person to whom this section applies o for negligence, default, breach of trust or breach of duty in a capacity as such a person,  it appears to the court before which the proceedings are taken that the person is or may be liable in respect of the negligence, default or breach but o that the person has acted honestly and o that, having regard to all the circumstances of the case, including those connected with the person's appointment, the person ought fairly to be excused for the negligence, default or breach, the court may relieve the person either wholly or partly from liability on such terms as the court thinks fit. 1. Relevant proceedings

 Contravention of civil penalty provision → ‘eligible proceeding’ for s1317S: s1317S(1)(a) o Does not include criminal proceeding: s1317S(1)(b)  Contravention of general law duty → s1318 o Does not include criminal proceeding—‘civil proceeding … for negligence, default, breach of trust, breach of duty…’: s1318(1) o ‘to whom this section applies’ = officer, employee, auditor, expert, receiver, liquidator etc: s1318(4)  Only where breach is in that capacity 2. Honest & Ought fairly to be excused  for contravention of s588G (insolvent trading), consider— (s1317S(3)) o whether person took any steps toward appointing administrator o when that action was taken o the results of the action Pre-emptive application  Person can apply to court if they think those proceedings will be brought: s1317S(4) | s1318(2)  Court can grant relief as if the proceedings had begun: s1317S(5) | s1318(2) Effect  Can excuse wholly or partly: s1317(2) | s1318(1)  can apply to court for relief in anticipation of proceedings: Prohibition on restriction of liability Prohibitions Company cannot restrict liability of directors in constitution or by contract by—  exempting director from liability to the company: s199A(1)  giving indemnity to director for o liability to the coy or liability under s1317G, H or HA: s199A(2) o legal costs arising out of defending suits in 199A(2): s199A(3) Company cannot pay insurance premiums  pay or agree to pay insurance premium for insurance against liability from wilful breach of duty or breach of ss182, 183: 199B(1) Effect of breaching prohibitions—instrument void Anything that purports to indemnify or exempt or insure in violation of s199A and s199B is void: s199C(2)...