Ashoke, Bill, Cai, Dianne and Elvia were members of the Board of Directors of Cashmere Pty Ltd (CPL), a company engaged in the business of importing and supplying cashmere as wholesalers to the local market. Ashoke was also Managing Director. The board decided CPL needed to become more competitive by increasing the volume of its sales through lowering its prices. CPL obtained a loan of $4 million dollars from Loans Plus Ltd. The loan was secured by a floating charge over the assets of CPL. $3 million was used to buy more stock and $1 million to buy a large new warehouse and showrooms from Show Rooms Pty Ltd. Cai was not at the directors’ meeting when these decisions were made as he was in hospital. Elvia, as was her usual custom, had not been at the meeting but had signed the necessary documentation acknowledging her agreement to expand the business and to get the loan. Dianne chose not to vote at the meeting. She had said she did not know if she agreed with the decisions. Ashoke and Bill voted to go ahead with the expansion of the business and the loan. At about this time, Bill established contact with Leung, who was a retailer of clothing made from cashmere. Leung was looking for reliable suppliers, but said he would not deal with CPL as he did not like Ashoke. Bill did not wish to miss a good business opportunity and arranged to set up his own business as a wholesaler of cashmere. Bill entered a contract with Leung to supply cashmere to Leung.

 

Required:

Discuss whether EACH of Ashoke, Bill, Cai, Dianne or Elvia have breached any of their directors’ duties. You should support your answer with reference to relevant sections of the Corporations Act 2001 and to relevant cases. 

Answer rating: 100% (QA)

Requirements of the board of directors under Corporation act 2001 1 Act in good faith and for a prop... View the full answer