Company Law, ASIC, entering into a contract, authority, statutory duty, insolvent trading, validity of contract, directors

4 Found helpful • 11 Pages • Essays / Projects • Year: Pre-2021

Many years ago, Raymond set up a company to manufacture and sell smaller motorised fishing boats. He had been a fisherman all his life, loved boats and decided to try and create a business for the benefit of his sons, Paul and Mark. The company was Motorised Minnows Pty Ltd. Raymond was appointed as managing director, Paul was a director and Mark was the company secretary. ASIC’s records also reflected these positions and that each had consented to the appointments. The three of them held almost all of the shares in the company but Raymond’s brother, Eddie was a minor shareholder as well. When the company was registered it lodged a constitution which indicated it would make and distribute small motorised fishing vessels and had intended to be a boutique supplier to the discerning people who enjoyed fishing. It set out the purpose and goals of the company in this regard but was silent on any other matter about the running of the company. The company did very well for a long time but in the last year or so things have been going downhill. Raymond was the driving force behind the company but had fallen ill and could no longer participate in the management of the company. All had agreed that Mark should step in and take greater responsibility as managing director to replace Raymond, to bring in new ideas and try and turn things around. Nothing was formally done about this change. Mark decided as one of his strategies to use their manufacturing equipment to produce at least parts of other forms of leisure craft including the hulls for sailing vessels and related equipment. Without the approval of anyone else Mark contracted to supply these materials to Dream Builders Pty Ltd. He simply signed the contract “for an on behalf of Motorised Minnows Pty Ltd”. The representatives of Dream Builders Pty Ltd were happy with this because they knew of Mark and had dealt with him before. They did not know, however, that Raymond was no longer involved. When the work started on the new products and equipment the cost of production was a lot higher than anticipated and it looks like the performance of the contract could cause the company significant losses. There is a falling out between Raymond, Paul and Mark however Raymond and Paul agree to simply warn Mark about his actions. Mark is so upset by the confrontation though that he approaches other boat builders to seek new employment. Fast Fishing Pty Ltd offers Mark a high paying position in the company but only on the basis that he help it to secure new contracts to supply to the clients of Motorised Minnows Pty Ltd. Mark knew the existing clients where the supply contracts were due to expire so he approached them on behalf of Fast Fishing Pty Ltd to convince them to swap suppliers. Mark was not concerned about the ethics of all of this because there was no guarantee they would have continued with his old family company anyway. Many of the clients agreed to go with the new company as Mark guaranteed cheaper supply and in return the clients gave him a personal commission. Now Mark is under considerable pressure because of these events. The specific issues are as follows:

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