Identifying the Issue
There are a number of legal issues Mentioned in ILAC Method:
Issues 1: One of the major issues is “Breach of Directors Duties” that has been provided in the ASIC Rules under section 9. Another major issue is Insider trading or divulging about the company secret to the public or relative. One of the directors of SEPL Patricia called her sister about the acquisitions. Patricia has used the information in ILAC Method to do something inappropriate. (Legal issues for managers PPT , 43 slides)
Issues 3: Apart from that, due to insider trading, DAN owner of FPPL has purchased expensive machine worth of 300,000 in company’s credit. Dan has uses the information created large current bills that increase the cost of acquisition by 1000,000.
Laws regarding the breach of duties:
Law 1: Section 181 CA- Duty to act in faith will be applied in the case of breach of duties. Here Patricia has failed to act in best and appropriate interest of the company because she has conducted failure in good faith she had share insider information of the company that has cost the company more than $1000,0000. (Legal issues for managers PPT , 44 slides)
Law 2: Section 182 CA- Improper use of position: Patricia has used improper use of her position that has led the SEPL to incurred loss of 1000,000. She has divulged the major information that has increased the share of FPPL. (Legal issues for managers PPT , 44 slides). Dan as one of the directors of the company of FPPL has uses his position improper way to purchase a machinery worth of 300,0000 on credit that led to increasing the cost of acquisitions.
Application of law Of ILAC Method
Application 1: Section 181 will be applied here because Patricia has share the information that was not in best interest of the company. It has ultimately leaded the company to incur huge loss. As per the law, the director will be discharged from the duties because of its breach of failed to act in good faith and best interest of the company. (Legal issues for managers PPT , 45 slides)
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Application 2: As per section 182, the director has misused its position to avail the major benefit for themselves or for the some else. Section 182 prevents the director to choose give an advantage or partial to one will be pleaded for guilty and will be a charge for sentenced or penalty. Therefore, both Dan and Patricia will be discharged from their duties.
AISC investigate the issues regarding the sudden price increase of the FPPL in the marketing assignment. Apart from that ASIC will also examine the sudden price of shares by one person that will lead them to Patricia and DAN. Insider trading and improper use of position will be released in public after the investigations.
For a remedy, Patricia has to pay the required compensation or else she will go for imprisonment for a period of 2 years. DAN will be eligible to penalty worth of total shares+ compensation, as he was a willingly purchasing the high-cost machine. Creditors would sue the Dan as per 81(1) of the Bankruptcy Act and he has to pay compensation including total debt or otherwise his property will be seized as per the given act.