Be Gone Pty Ltd was incorporated in 2015. It has two fully issued shares at $1.00 each, and two directors. Jack and Jill, the directors, each hold one share and each work in Be Gone’s pest control business. Jack is an industrial chemist by profession, and now is responsible for both making Be Gone’s pest repellent sprays and spraying customers’ commercial premises. Before 2015 Jill was the marketing manager of a medium sized enterprise. Since 2015 Jill has had responsibility for managing the marketing and finance requirements of Be Gone. During the first half of 2019 business at Be Gone was good and Jill was able to place $20,000 on deposit in the company’s bank account. In June 2019 Jill saw an advertisement for a get rich quick scheme, and decided it would make a good investment for the company. Neither Jack nor Jill had any accounting knowledge – but Jill was aware it was the end of the financial year and so acted quickly. Without investigating the scheme or discussing her proposal with Jack, Jill withdrew funds from the company’s bank account to invest in the get rich scheme. The scheme was a scam and the money was lost. Jack rarely asks about the company’s financial arrangements and was not aware of the investment until Jill told him of the investment loss. Required: a) Advise whether either director has breached their statutory duty of care - s180(1). Consider the position of each director. (12 marks) b) Would either director be able to rely on the business judgment rule – s180(2)? (8 marks)
Be Gone Pty Ltd was incorporated in 2015. It has two fully issued shares at $1.00 each, and two directors. Jack and Jill, the directors, each hold one share and each work in Be Gone’s pest control business. Jack is an industrial chemist by profession, and now is responsible for both making Be Gone’s pest repellent sprays and spraying customers’ commercial premises. Before 2015 Jill was the marketing manager of a medium sized enterprise. Since 2015 Jill has had responsibility for managing the marketing and finance requirements of Be Gone. During the first half of 2019 business at Be Gone was good and Jill was able to place $20,000 on deposit in the company’s bank account. In June 2019 Jill saw an advertisement for a get rich quick scheme, and decided it would make a good investment for the company. Neither Jack nor Jill had any accounting knowledge – but Jill was aware it was the end of the financial year and so acted quickly. Without investigating the scheme or discussing her proposal with Jack, Jill withdrew funds from the company’s bank account to invest in the get rich scheme. The scheme was a scam and the money was lost. Jack rarely asks about the company’s financial arrangements and was not aware of the investment until Jill told him of the investment loss. Required: a) Advise whether either director has breached their statutory duty of care - s180(1). Consider the position of each director. (12 marks) b) Would either director be able to rely on the business judgment rule – s180(2)? (8 marks)
