The present stage of economic cycle we will see more companies to get delisted from ASX due to corporate failure and due breach of duty from director side. With amid fear from global recession Director must be worried that their duty will be scrutinised and they have to perform their duty with proper and intelligent manner. Australian Security exchange acknowledged the best governed companies and according to Australian Security Exchange company who lack in corporate governance or in performing director duties can collapse any time. In this project I’m summarising an aspect of corporate governance and legal provision which are necessary for the control of corporation. Here I will provide information about two companies which were listed with Australian security Exchange. One of the companies is Cazaly Resources Limited and other one is Clive peeter’s . Cazaly is still listed with Australian Security Exchange, but Clive peeter’s is now delisted due to corporate governance failure. Therefore we will summarise the aspect of corporate governance in this report and analysis the importance of director role their duties.
Cazaly Resources Limited is an Australian based diverse mineral resource company which was listed with Australian Security Exchange in October 2003. Company controls the large number of Gold, Iron ore, Uranium and base metals which are grounded in Western Australia. Cazaly Resources Limited in total control 1500 square kilometres of ground and successfully performing the project which they think will be significant in the future. According to Cazaly there company Key assets include;
PARKER RANGE IRON ORE
PILBARA IRON ORE
WESTERN KALGOORLIE GOLD
THERE POSITION IN ASX LISTED COMPANIES
THERE MANAGEMENT TEAM AND CORPORATE GOVERNANCE
There Equity position in ASX listed companies
There for according to Cazaly following the Corporate Governance is significant to achieve the objectives in future.
Corporate Governance does not have any legal term, but it describes the rule and practices put in place within the company to deal with its board of directors. The main aim of corporate governance is to ensure Board accountability towards its Shareholders and management accountability towards its directors.
Incentives for board and management
Economic monitoring within the company
To encourage lower capital in company
Resources can be used more effectively
Cazaly resources limited are following good corporate governance wit in their company.
Cazaly resources limited are performing the principle of Recognise and manage risk in proper manner. Financial internal controls are managed in such a manner that company can cope with financial crisis in 2009. They are so strong from the point of view of their fund handling and performing it really well. Company has made Insurance such as: Worker Insurance Liability Insurance Travailing Insurance IT sector is also protected by backed up functions and can be solved by backed up files.
Operational Management The company has such a project that if there is any problem the managing director is approachable at any time to solve the problem. Safety in standing items will be addressed by managing director to the board. This report is review by board of directors every year. Management is given the power to overcome any non profit making objectives and to make decision which will take company towards future benefits so that they can give their opinion to the directors about what future changes should be done to make Cazaly resources limited toward profit making company in future as well
Financial status of Cazaly resources is not complex; Equity funds have been raised and exploited for the project they are performing or project them will perform in future. With these funds they will perform the business development in future. The managing director monthly report includes details of monthly spends, companies actual spend to budget and show month end cash balance, Board handles all major projects and calculate their expenditure. Financial reporting should also give the clear picture of benefits being derived from current money making project and future money making projects.
Cazaly resources limited says that the right of share holders are being the most important aspect of their company and directors are the one who are liable to answer the shareholders. Disclosures of balance sheet or future projects or market criteria are being address to shareholders by the board of directors. Directors are also giving the current market criteria and share market as share holders are depends upon the share of the company.
Management in Cazaly resources limited make timely disclosure to board about the projects which are going on or about the market criteria, what changes showed is done to overcome the problem. Board has a duty to tell their stakeholder about the current situation of the company.
In Cazaly resources limited the board has an effective composition and the discharge their duties in proper manner company director Mr David McMahon has adequate responsibility toward the company. He makes joint venture with other companies to make company pillars more solid. Mr Jones managing director operation is making such adequate role in company which is helping Cazaly resources limited to grow. He is the one who help Cazaly resources limited to get listed with Australian security exchange.
Cazaly resources limited have made such environment in the office that there management act with due care and responsibility and that their management should comply with law and work with in standard of law. The management of comply share trading rules in proper and respective codes of conduct. The best part of this company is that there is never a conflict between the management and the board of directors. Directors of this company are obliged in their judgement to be independent and they also ensure steps to be taken reasonable to ensure soundness to board of directors.
Executive directors receive fixed remuneration such as salary, even superannuation are given to directors. Board set the salary for management within the aggregate limit approved by shareholders. Reward for performing work with time and well manner is also given to the management by the directors.
Clive peeter’s was first listed with ASX in 22 /09/2005.Clive PEETER’S is the company which got suspended from Australian Security Exchange On Wednesday 19th May, 2010 Steve Peteers’ was suspended from ASX due to fraud.
See full size image Clive Peeter’s opened their first store in Melbourne in 2003 they where retailers in electrical and computers. After opening their store in Melbourne they opened their store in Brisbane and Sydney they were ash rival to JB HI FI and HARVEY NORMAN. Clive peeter’s stores carry more than 140 brands and having model of each product once they were having more than 20000 models in their store. The chairman of Clive Peeter was Mr Brain Pollock and Mr Greg Smith was appointed as managing director of the company. Company operates under two names Clive peters in Queensland, Sydney, and Melbourne, Victoria and in Western Australia as Rick Hart. The staff work for Clive Peeter’s was around 1300, and revenue of $535 million FY 2008. Success behind Clive Peeter’s is their innovation in products, commitment towards customers, customer satisfaction and growing brand recognition. Buying power of this company was very strong which was their biggest plus point. Their warehouses were located across whole Australia there for the delivery time was minimum. Their main business was building industries, Government, Education, Hospitality, Real Estate and many more. If we take their sales revenue it was $457.2 million in 2007 and gone up +17% in 2008 to $534 in 2008, and gross profit from $120.5 in year 2007 to $141 in year 2008.
The reason behind collapse of Clive Peeter’s was its failure to cope up with corporate governance. In the year 2009 it was discovered that the Clive Peeter’s payroll manager, Sonya Causer has inflated company payroll expense falsely to her account. She had done this by using company online banking system. Sonya has stolen around $20million from company account and by that money she purchased 43 properties and 3 cars. Under ASX corporate governance Clive peeter’s failed the duty of corporate governance which was structure the board to add value Structure the board to add value means: Companies should have board of an effective composition, size and commitment to adequately discharge its responsibilities and duties. In this board was failed to cope the duties of there. As the fraud was done this should not done as directors should perform their duties well. Each principle of corporate governance is important in his on aspect.
Directors have fiduciary relationship with their company and their management there for any fraud is being in company in any level director of the company is responsible for that. Directors has power to solve any problem related to management and company. The duties of directors come under sec 180-184 of corporation act and this sec also imposed to the officers of the company. Employees of the company also come under sec 182.
The main aim of this duty is that director should follow the duty of their in good faith and in best interest of the company and proper purpose. With good faith directors should take into consideration that stake holders of the company which specially are share holders are dependent upon their good faith and company is working well due their good faith. Bribes should not be taken or given for the purpose to increase the profit of the company.
This sec states that officers and employees should not take advantage of their position to gain profit. They should not take advantage of their lower rank officer or employees. Therefore it is very important that this duty should be performed by officer in proper and legalised manner.
Directors should not use information against the company, as any important material of the company should not be given out to its competitors. Therefore it is important that companies should follow the proper criteria of this sec.
Directors should exercise the duty of care and diligence, this means that directors should in this sec 180(1) should be taken into consideration will performing the duty of care. If we take a case example of Daniel v Anderson of (1995) 37B NSWLR 438, this case makes it clear that directors should perform their duties in care and diligence.
By this we mean that director should not indulge with any traction if he thinks that company is going toward insolvency. Sec 588 says insolvent trading is against the ASX rule and the director of the company is liable for insolvent trading even if he knows the company will be liquidised at any stage. Unsecured creditors ask director of the company about the compensation for the damaged suffered by the company. And directors are liable for the civil penalty order pursuant to Pt 9.4 B or criminal offence under Sec 588 G(3)and director at time of insolvent trading is liable for penalty.
In this Clive Peeter’s manager Sonya causer made a fraud of $20 million as she made improper use of her position, there for she is liable for the delisted of company from Australian Security Exchange.
In this case directors made use of their position to make profit from the company for there personal use there for it was a breach of the sec 182. Court in this suggested that directors or any officer working for the company cannot make profit from organisation for its personal use.
Even in Clive peeter’s case misuse of company funds was also there. In this director cannot use the company funds for their personal use, officer of the company cannot mix company funds with their own fund. But Sonya Causer mix the company fun with her own funds even she use the funds for her personal needs like purchasing of the property and cars.
In this case director’s uses the funds of company for their personal use and even mix company funds with their own funds.
The director’s makes fraud and use money for their own interest and from the company funds made assets for themself.
From this case study we have discussed the importance of corporate governance. Importance to learn lesson from both the companies why it is necessary to work according to the corporate governance. ASX rule and regulation should be followed to insure that company is going towards right path and direction. If we take Cazaly resources limited it is an Australian based company which work as company with all corporate governance acts and directors duties are also being followed by board of directors as well as the directors of the company, manager and officer perform their duties with good faith and due care which is necessary for a good corporate governance. In case of Clive peeter’s, one of the biggest retailing company was for Electronic and computers got liquidised due to improper communication. The corporate governance of the company lacked in many ways and breach of duty from manager was the main issue which lead the down fall of the company. One of the manager of Clive Peeter’s once said that “Drop of price of product in Clive Peeter’s lead to drop of salary of management in the company”.
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