Instructions:

Answer the following questions, citing relevant legal authorities (law and cases) in support of your answer. Answers not supported by any legal authorities will not receive any credit.

Legal problem-solving questions must be answered using the IRAC (Issue, Rule, Application and Conclusion) method taught in class.

Reference sources must be cited in the text of the report (either in-text or footnotes, AND listed appropriately at the end of the assignment in a Reference List following the AGLC (Australian Guide to Legal Citation) style.

Failure to cite references when reproducing the work of someone else without attribution amount to plagiarism. Please read the attached Academic Integrity Policy for further guidance.

All work must be submitted on Blackboard by the due date along with a completed Assignment Cover Page.

Word counts for each answer are indicated after the question. Word count limits are strictly enforced. A deduction of two (2) marks will be imposed for every 50 words over the word count for either part of the report. Anything over the word count will not be read by your lecturer.

Question 5 (11 marks)

A company secretary works for a small company and is also the financial officer for the company who generally advises the directors on the day-to-day operations of the company. The company has a constitution, which limits the ability of the company secretary from borrowing any amounts over $5,000 without the matter being referred to a meeting of the board of directors. The company specifically created a constitution because the shares are all held by family members and the company secretary is not a family member.

The company secretary does in fact organise a line of credit for the company for some $50,000, which is directly in breach of the company constitution. When the directors discover the company has a liability to a bank for nearly the full amount of $50,000, they take action to suspend the company secretary and inform the bank that, due to the company secretary exceeding his authority, the company is not responsible for inappropriate lending by the bank, and that the bank needs to find some solution against the company secretary personally.

What is the liability of the company for the actions of the company secretary?

(Maximum 200 words)