ROMANO Review Online

Volume 1 Issue 2 June 1997

This Biannual Issue

Corporations Law

Romano & Co ~ On the Internet

Wills

Inside

Directors Duties and Responsibilities

Canberra’s Newest Legal Web Site

Do You Have a Valid Will?

Company Directors ~ Do You Know Your Duties?

The Courts & the ASC are imposing severe penalties for breaching your duties.

Directors Duties

Perhaps you set up your two dollar company to purchase an asset, run a small business or as trustee to administer a family trust. During incorporation, no doubt, you appointed yourself and your spouse or business partner as Directors to ensure you had control of the company. But do you realize that people acting in the capacity of Director of a company are subject to a number of Common Law and Statutory duties. Those that believe the limited liability status of a company will allow them to do as they please with minimal risk are in for a shock. Apart from owing duties to the company, shareholders and even creditors, Directors may also be criminally and civilly liable for their actions or those of the company.

The Common Law duties of Directors include, to;

Act in good faith,

Exercise power for a proper purpose,

Avoid conflicts of interest,

Exercise care, diligence and skill,

Not to make secret profits,

Have more than a scant regard for creditors,

Shareholders (in limited circumstances).

Further statutory provisions such as section 232 of the Corporations Legislation impose on Directors duties to;

Act honestly,

Exercise a reasonable degree of care and diligence,

Not to make improper use of information,

Not to make improper use of position.

Breaching the duties owed may leave a Director liable to be;

Prohibited from managing a company,

Fined up to $200,000.

Ordered to pay compensation,

Ordered to account for profits.

Furthermore where the court is satisfied that the acts were done knowingly, intentionally or recklessly and dishonestly or with the intention to defraud, it may also impose Criminal liability.

Most actions for breach of duties belong to the company itself. But it must always be remembered that the Australian Securities Commission and Director of Public Prosecutions can prosecute a Director . Bear in mind liability may arise under other statutes as well i.e. Trade Practices Act & various Environmental legislation.

Most importantly it must be noted that the mere fact that a Director did not actually partake in the decision making process that led to the breach, will not necessarily allow them to escape liability for the act.

In some cases a decision of the board will be regarded as a decision of each of the directors thus a passive Director who just signs forms as they are put in front of them, without regard to their duties, responsibilities or the position and interests of the company, may be civilly and/or criminally liable for their actions.

It cannot be stressed strongly enough, that a person should not allow themselves to simply be a passive Director of a Company without an active and informed input in decisions.

Whilst in the past this situation may have arisen to assist a family member, because of the requirement that there be at least two directors, now the Corporations Law has changed to allow, provided that the articles of the company permit, a company to have only one director & shareholder.

It is most important that company Directors are aware of their potential liability. If you are unsure of the duties required as an office holder of a company or wish to minimize your liability, contact one of our commercial Solicitors on (06) 247 6277 to further discuss the matter. z

Law on the Net @ Romano & Co’s New Web Page

No doubt many of you have heard of the information super highway, commonly known as the internet. For those who have not, simply put, the internet is a connection of millions of computers world wide allowing access to an enormous amount of information on almost every topic under the sun.

Romano & Co, in keeping with the latest technology, will be providing a world wide web page of information intended for clients, prospective clients and law students.

It is proposed that our web page will contain information about our firm and staff as well as providing electronic access to the Romano Review with links to relevant articles elsewhere on the internet.

We are hoping to provide an unrivalled number of links to an array of legal pages and databases. A service that law students and other practitioners should find invaluable.

An important part of the electronic super highway is its E-mail capabilities. Romano & Co is now able to send and receive electronic letters, files, pictures and documents instantaneously from around the corner or around the globe.

One of the features available is the ability to hold a video conference with clients anywhere in the world.

Romano & Co’s internet site will be up and running soon. Bookmark our web page now and keep an eye on it at:- www.romano.com.au

Our email address is:-

mail@romano.com.au z

Do You Have a Will?

Every person over the age of 18 years should have a will, without one, your family will undoubtedly suffer a great deal of stress and hardship after your death trying to determine what your intentions were.

Without a will the Court can decide who administers your estate and who will be the guardian of your children. This lengthy process is extremely inconvenient and much more expensive than simply appointing an executor in your will.

When you die without a will your assets will be divided according to a set pattern laid down in the law. Your assets may not necessarily go to the people that you intended to leave them to.

Wills may be contested after your death and if not properly advised, your wishes may not be implemented, especially if you intended to exclude a family member.

It is possible for a married person to make a will without the knowledge of his or her partner or to make mutual wills, at the same time.

It is inexpensive to make a will. In real terms the cost is minimal compared to the time and hardship your family will have to go through if you die without leaving one.

There are a number of do-it-your-self wills available. Great care must be taken if you choose to use one. Quite often the wording is vague and ambiguous, possibly requiring interpretation by the court at a later date. This too can end up being a very expensive exercise.

There are a numerous traps that need to be avoided when drafting a will. With a document as important as this you need to make sure your wishes are clear and precise. Only a professional can draft a will with the correct wording needed to ensure your wishes are carried out as you desired and with a minimum of stress to your family.

Your will should be updated on a regular basis and whenever your circumstances change, such as; if you have more children, when you marry or divorce, or when you purchase or dispose of property. Marriage will, unless you have made your will in contemplation of that marriage, revoke your will.

One issue often neglected is the effect of Capital Gains Tax on the assets bequeathed. If you are intending on distributing individual assets, of similar value, to particular beneficiaries, you may find that one beneficiary is penalized because of the effect of Capital Gains Tax.

To ensure your wishes are carried out, with a minimum of fuss, contact one of the Solicitors at Romano & Co to assist you with your will, today. z

Romano & Co Canberra + Level 4 Colonial Building 161 London Cct Civic ( (06)2476277 : http://www.romano.com.au , mail@romano.com.au

ã Romano & Co Canberra ~ Client Newsletter ~ June 1997

Disclaimer ~ The articles in this newsletter are for general information only and are not intended to be relied upon as legal advice. Before acting obtain further detailed legal advice.