Corporations Law Assignment
i. Advise the shareholders of OI Ltd whether the directors have breached any duties. Discuss fully.
Optimum Insurance Ltd (OI Ltd) is registered as a public company and is operated by a board of 5 directors. The board includes 4 executive directors, one of whom is the managing director - Frances and another non-executive director, Greg who is also the company's financial planning consultant. A number of issues have arisen whereby the actions or failure to act by the directors have seen a breach of their duties owed to each other and the shareholders. In ascertaining the rights of shareholders against the breach's of fiduciary and statutory duties by the 5 directors, we must first consider the nature and type of company OI Ltd is operating as.
Firstly, it is important to establish whether the directors of OI Ltd can be personally liable for their breach of duties with regards to the company being a 'separate legal entity' and the 'lifting of the corporate veil'.
As application of the principle in Saloman's case to a public company, OI Ltd is a separate legal entity and is distinct from its directors and shareholders. This prevents the courts from looking beyond the corporate structure as seen in Lee v Lee's Air Farming Ltd and creates what is a 'veil of corporation'. It aims to give shareholders and directors some protection against being personally liable for any debts incurred. However, because the directors accepted Greg's proposal to issue a $500 000 cheque to the motor racing team knowing the he had some material interest as a 'manager' undisclosed to shareholders, they actively participated in a breach of their fiduciary duties. Therefore we are able to 'lift the corporate veil' and go beyond the faÃÂ§ade of the legal entity...