Has Freddy breached his statutory obligations under the Corporations Act (Cth) 2001 - Explain

Home, - Marketing campaign to attract new clients

Question: Freddy is a director of Ace Finance Ltd. The board of directors for Ace Finance Ltd have unanimously agreed to have a marketing campaign to attract new clients to their financial business. Freddy's nephew - Frank - is a marketing executive who runs his own business. Freddy informs his nephew of the possibility of obtaining the marketing contract with Ace Finance Ltd.

Freddy also discloses to Frank the price range that the company will consider. Freddy attends the board meeting where they consider who will get the marketing contract, but he does not disclose his connection with his nephew. After looking at all the potential candidates, the board of directors have selected Frank's business to do the marketing campaign for Ace Finance Ltd.

Has Freddy breached his statutory obligations under the Corporations Act (Cth) 2001?


There are certain duties laid down by the corporations act 2001 where the directors of a corporation are required to

1. always act in good faith to protect the interest of the organisation.as per the provisions mentioned in section 181 of the corporations act, there is a civil obligation on every director of the organisation to discharge their responsibilities with utmost good faith and for a purpose do not benefit their personal or third party interest. It shall be considered as a criminal offence as it would amount to his breach of duty and be considered as intentional dishonesty.

2. Perform his duties with professionalism, diligence and scepticism. He should make rational judgements that serve the objectives of the organisation and reveal clear understanding of the business entity

3. Prohibit using confidential information for non-business uses to attract personal profits. This shall amount to criminal offence where the confidentiality, integrity and availability of such information shall be breached

4. Disclose his personal interest in defence of the organisation. It is significant for the director to express his interest in a particular business transaction or event and make other executives aware of the same which may otherwise be considered as a breach of his statutory duties

In the given case study, Freddie is the director of an organisation named Ace finance Limited.The board of directors plan to hire services from external organisation for their marketing campaign and decides to fix a price range acceptable for the organisation. The director has a nephew who is involved in the same business and thereby discloses all necessary information to him. He has breached his stature and duties as mentioned under section 181 and 191 of the corporations act. Not only has he failed to serve the corporation to its best interest, he has also failed to disclose material personal interests to his colleagues.

This amounts to breach of his century duties under the relevant legislation of the Corporations Act, 2001. He failed to comply with the provisions of the Act and en charged of violating the regulations mentioned there under.

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