Australian Securities and Invest commission †MyAssignmenthelp

Question: Discuss about the Australian Securities and Invest commission. Answer: Introduction: Class action had been led against the firm Slater and Gordon as it had misrepresented its financial prospects. The Rival firm Maurice and Blackburn had led the class action. This class action involved 250,000 dollars and 3000 members. It was alleged by the share holders that the firm had misrepresented its financial position after it suffered a loss by acquiring a division of the company Quindells. It had been alleged by Plaintiff Matt Hall that he had relied on the misrepresentation of the Law Firm and subsequently lost a million dollars as the price of the shares had fallen drastically. He further accused the firm to have knowledge about the financial trouble it was likely to face, however it failed to disclose the same to the public. It had been accused by Mr. Watson, a shareholder of the firm that the firm had misrepresented its financial prospects. The rules regarding the operations of the company are governed by the Corporations Act 2001 (Cth) It is the duty of the Australian Securities and Invest commission (ASIC) to implement the rules as provided in the Corporations Act[1]. Section 183 of the aforementioned act states that it is the primary duty of the directors to act in good faith and in the best interest of the company and the shareholders. It has been provided in section 674 if the Corporations Act 2001 (Cth) that companies and corporations are required to continuously disclose information and material facts in accordance with the listing rules. . Section 728(1)a states that a person cannot offer securities by disclosing any document which is misleading or deceptive in nature. Section 728(2) of the Corporations Act states that any person who provides a statement about a future event without reasonable grounds or information to believe that such statement is likely to have effect in future, would be considered to be a mis statement. It can be said in accordance with the provision as provided in section 728(3) that any person who produces misstatement or omits to mention new circumstances that have arose will be held to have violated the provision of 728(1). Section 1041 A states that any person who is engaged in business must not undertake any act which is likely to effect the creation of an artificial prince for the purpose of trading the financial market or financial product. It has been clearly provided in section 1041B that a person should not commit any act or omit to do any act which is likely to have a misleading and false appearance. It has been provided through the facts of the case study that the Law Firm Slater and Gordon mis represented the financial prospects of the firm. The shareholders of the firm had relied on such statements and had sustained losses subsequently. Thus the firm breached the provision of 728(1) of the Corporations Act. The firm also did not comply with the legal provisions as mentioned in section 674 of the corporations act which makes it mandatory for businesses to continuously disclose material facts and information. The directors of the firm also did not act in good faith and in the best interest of the company and the shareholders and therefore breached the provision of section 183. The issue that exists in the given scenario is what options are available to the law enforcement agencies and the directors of the firm in relation to the legal issues as discussed above. It is to be stated that the Australian Securities and Investment Commission has obligation to enforce the legal provisions as provided in Corporations Act 2001 and regulate the operations of the companies Australia. The case Australian Securities and Investments Commission v Sino Australia Oil and Gas Limited (prov liq apptd)[2] in which siilat issues had been raised and discussed. It has been clearly provided in section 1041H that no person should indulge in activity which is likely to mislead or deceive people especially in relation to disclosure of information about the financial products and services. If it is found that any person has contravened this section, such person is likely to incur civil liability. The court has the authority to disqualify a person to hold the post of a director if it is notified by the ASIC and if it is convinced that the director breached his duty in accordance with section 206 of the CA. In order to assess whether a director should be disqualified or not the courts generally take into consideration: The directors conduct in relation to managing the company Any matter which is necessary to be taken into consideration and held to be relevant by the court. Section 1317e of the Corporations Act lays down the provisions of civil penalty. It has been provided in this section that courts have the power to make a declaration of the convention. However, the declaration of the court is required to have the civil penalty provision that had been breached, name of the breaching party and the name of the court which is passed the declaration.. It has been provided in section 1317s that the courts have the option to relieve a director of his liability partially or fully if it is convinced that the director had acted honestly while breaching his duty and contravening the civil liability provisions. Thus by analyzing the facts of the given scenario, it can be stated that the law firm Slater and Gordon had given statements about its financial prospects which were likely to mislead and deceive the public in accordance with the provision of section 728 of the Corporations Act. Therefore as provided in section 1041H the directors of the firm would incur civil liability. The Australian Securities and Investment commission can start proceedings against the company for breaching the aforementioned sections. Further it can be stated that the ASIC can bring charges of breach of directors duty to act in good faith and in the best interest of the share folders of the company as per the provisions of section 183. If it is established that the directors had breached their duties, they will incur a civil liability as per the provisions of section 1315e. The principle of the corporate veil had been established in the landmark case Salomon v. Salomon and Co. Ltd.[3] In this case it had been held that a company should be treated as a separate legal entity and it should be differentiated from its owners. This had given rise to the concept of the corporate veil. The courts in general bound by this principle they do not hold the members of the company liable for the liabilities incurred by the company. However, in the case Jones v. Lipman[4] the courts had decided to pierce the corporate veil and disregarded the principle of the separate legal entity of the company. The courts generally lift the corporate veil if it assesses fraudulent activity is being carried on behind the veil of the company.. In this case Prest v Petrodel Resources Ltd[5] it had been held that the corporate veil can be lifted under statutory provisions. Therefore in accordance with section 1041H of the CA it can be said that the director would incur civil liability fo r breaching the section 728 of CA. In the given case study it has been provided that there had been misrepresentation of the financial prospects of the law firm. The shareholders had relied on such information and suffered major loss. It is evident in this case that the directors breached the provision section 728 and incurred civil liability as provided in section 1041H. Further in this case the directors had failed to act in good faith and in the best interest of the company of the company and the shareholders of the company according to section 182 of the Corporations Act. It has been provided in this section that any person who contravenes the provisions of this section will be personally liable. Thus it can be stated that the corporate veil in this can be lifted due to the statutory requirements of Corporations Act. Reference List: Corporations Act 2001 (Cth) Salomon v. Salomon and Co. Ltd. (1897) A.C 22 Securities and Investments Commission v Sino Australia Oil and Gas Limited (prov liq apptd)[2016] FCA 42 Jones v. Lipman [1962] 1 WLR 832 Prest v Petrodel Resources Ltd [2013] 2 AC 415.