Question One

What is corporate governance and why is it so important?

Question Two

The Haynes Final Report focused on aspects of CG.Discuss briefly.

Question Three

Answer the following about directors' duties:

a)What does it mean to act with care and diligence

b)What does good faith mean? (you may need to research this and also look at case of Chew v R).

c)What does "acting in best interests" mean?

Question Four

For each of the situations below, separately describe the directors' duties that are relevant to each set of facts and any breaches that may have occurred. As authorities to support your answers, include references to sections of the Corporations Act.

(a)Construction Ltd builds houses. The directors of Construction Ltd have registered their own home building company and have been diverting Construction Ltd customers over to their own company. What if the company was Construction Pty Ltd?

(b)Expansion Ltd required additional capital and the company had decided to borrow funds from its bank instead of issuing shares. However, an opportunity arose whereby the required capital could be raised by issuing shares to an investor who agreed not to sell the shares should a takeover bid ever be made for the company. The directors considered that even though the shares would be issued at a discount it was a better arrangement than borrowing funds.

[You are not required to consider any takeover laws in your answer.]

(c) Fred, an investment expert, has a horse running in the Melbourne Cup which has taken up all of his attention. Due to this distraction, Fred fails as a director of Hi-risk Ltd to properly read his directors' documents. As a result an investment is made which results in a significant loss to Hi-risk Ltd.