Eiffel Towers Ltd, a listed company, was a builder and property developer specialising in projects in Melbourne’s central business district. It has five directors. Giscard (Eiffel Towers Ltd’s managing director) and Henri (the company’s chief finance officer), were the only executive directors on the board. The others, all experienced business people, were non-executive directors and attended the monthly board meetings. Over the past two years, Eiffel Towers Ltd’s financial position had worsened. Apart from Henri, the directors were unaware that Eiffel Towers Ltd’s liabilities vastly exceeded its assets and that it had difficulties paying its subcontractors and suppliers on time. Henri made sure the other directors were kept in the dark about this and did not give them meaningful or accurate financial information. The directors were satisfied with Henri’s false assurances that the company’s finances were satisfactory. Several months ago at an Eiffel Towers Ltd’s board meeting Giscard asked the board to approve the acquisition of a development site owned by Blue Sky Pty Ltd for $90 million, to be borrowed from Eastpac Bank. He explained that this site was suitable for a 50-storey office building. The board agreed with his suggestions, notwithstanding that Giscard provided only sketchy details. In particular, the directors were unaware that Blue Sky Pty Ltd was controlled by Henri’s wife and the company had been trying unsuccessfully to sell the development site for $20 million. The board was also unaware that the zoning laws did not permit the construction of a 50-storey building on the site. Not long ago the non-executive directors ordered an investigation of Eiffel Towers Ltd’s finances and for the first time became aware of the zoning laws. They forced Giscard to resign and reported the matter to ASIC. Henri was last seen at the airport boarding a plane to Brazil. Advise ASIC whether there have been breaches of the Corporations Act in the above circumstances. In your answer consider the positions of each of the directors. Vineyard Ltd operated a wine-producing business and owned vineyards around Australia. It had the following five directors on its board: a. Adam, the company’s non-executive director chairman; b. Barbara, the company’s managing director; c. Jonathan, the company’s chief financial officer; d. Felicity and Paul, non-executive directors. Paul was previously the managing director of Vineyard Ltd and had a detailed knowledge of the company’s business operations and the wine industry generally.
Eiffel Towers Ltd, a listed company, was a builder and property developer specialising in projects in Melbourne’s central business district. It has five directors. Giscard (Eiffel Towers Ltd’s managing director) and Henri (the company’s chief finance officer), were the only executive directors on the board. The others, all experienced business people, were non-executive directors and attended the monthly board meetings. Over the past two years, Eiffel Towers Ltd’s financial position had worsened. Apart from Henri, the directors were unaware that Eiffel Towers Ltd’s liabilities vastly exceeded its assets and that it had difficulties paying its subcontractors and suppliers on time. Henri made sure the other directors were kept in the dark about this and did not give them meaningful or accurate financial information. The directors were satisfied with Henri’s false assurances that the company’s finances were satisfactory.
Several months ago at an Eiffel Towers Ltd’s board meeting Giscard asked the board to approve the acquisition of a development site owned by Blue Sky Pty Ltd for $90 million, to be borrowed from Eastpac Bank. He explained that this site was suitable for a 50-storey office building. The board agreed with his suggestions, notwithstanding that Giscard provided only sketchy details. In particular, the directors were unaware that Blue Sky Pty Ltd was controlled by Henri’s wife and the company had been trying unsuccessfully to sell the development site for $20 million. The board was also unaware that the zoning laws did not permit the construction of a 50-storey building on the site.
Not long ago the non-executive directors ordered an investigation of Eiffel Towers Ltd’s finances and for the first time became aware of the zoning laws. They forced Giscard to resign and reported the matter to ASIC. Henri was last seen at the airport boarding a plane to Brazil.
Advise ASIC whether there have been breaches of the Corporations Act in the above circumstances. In your answer consider the positions of each of the directors.
Vineyard Ltd operated a wine-producing business and owned vineyards around Australia. It had the following five directors on its board:
a. Adam, the company’s non-executive director chairman;
b. Barbara, the company’s managing director;
c. Jonathan, the company’s chief financial officer;
d. Felicity and Paul, non-executive directors. Paul was previously the managing director of Vineyard Ltd and had a detailed knowledge of the company’s business operations and the wine industry generally.
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