QUESTION FOUR- Directors duties

Part a) - 10 marks (from chapter 13.2/20th edition equivalent chapter 15) The directors of BPS Ltd have become increasingly concerned that Shel Ltd will make a takeover bid for their company. The shareholders of BPS Ltd have recently expressed their dissatisfaction with the company's performance and the directors are concerned that an offer by Shel Ltd will be accepted by the shareholders because of this dissatisfaction. BPS Ltd does not have a constitution and the directors consider the following two possible courses of action: 1) To issue $1 million ordinary shares to Carltex Ltd (8 marks) 2) To refuse to approve any transfers of shares from existing shareholders to Shel Ltd. (2 marks) REQUIRED Discuss whether the two courses of action above are potential breaches of directors' duties.

Part b) - 10 marks (from chapter 13.3/20th edition equivalent chapter 16) Christine, Sharni and Mandy are the directors of Layabout Ltd, a company that manufactures camping equipment. Sales are falling and the directors are worried about the future prospects of the company. At a directors' meeting it is resolved that a marketing campaign to promote the company's products will be put out to tender. Part of the campaign will involve television advertising and Christine wants the company to employ her husband Sunil to appear in television commercials as he has experience modelling and has taken acting lessons. It is expected that Sunil will be paid $100,000 by Layabout Ltd to be the 'face' of the company in the television commercials. REQUIRED Using your knowledge from studying directors duties, describe the procedure under the Corporations Act the company and Christine must follow in order to employ Sunil for the advertising campaign.

Part c) - 10 marks (from chapter 13.4/20th edition equivalent chapter 17) Part c) is a real exercise in understanding the development over time of the duty of care and diligence as well as understanding liability for breach in order to determine whether the statement is correct or not. Note that, in either the introduction or the conclusion, you must state whether the statement is correct or not.

"Company directors have to exercise a very high standard of care and diligence under both the Corporations Act and case law because if they make a decision that causes any damage to the company, they will be personally liable to creditors."

REQUIRED: Using your knowledge from studying directors duties, discuss the correctness of this statement