ZXA Engineering Pty Ltd has five directors: Vienna, Serge, Ivan, Mitchell and Zaide. Mitchell and Zaide are working directors. They manage the day-to-day operations of ZXA Engineering Pty Ltd. The company is engaged in all types of mechanical engineering.

Ivan is an accountant and he helps out with the production of monthly financial reports for all the directors.

Vienna has attended University and holds an engineering degree and a Master of Business Administration (MBA). She has a good knowledge of the mechanical engineering industry and the way company finances work.

Serge is Zaides brother and has a long history of depression and lack of self-esteem. Zaide supported Serges wish to become a board member even though he offered little by way of expertise. Zaide thought that it would help Serges personal development by giving him a different focus.

ZXA Engineering Pty Ltd had a record year. A grant scheme sponsored by the government meant that the company had many engineering contracts. The directors met in July of the current year and decided to pay a dividend of 9c per share.

Since then the company has experienced a severe decline in new contracts. This is due in part to cessation of the government grant scheme and to a fall in customers due to difficult financial times. This has placed the company in financial difficulties.

Mitchell and Zaide have been with the company since it began and are attached to it. The company is their main focus and provides them with emotional and financial wellbeing.

Serge has never read any of the companys financial statements that have been sent to him. He did not check the companys financial returns for any of the years before he was appointed, and he has never read any reports since he was appointed.

The shareholders of ZXA Engineering Pty Ltd number 18 and include the directors and members of the founding family who have held onto shares but take little interest otherwise.

Viennas brother Doug has a building design company, Designer Pty Ltd, and Vienna attends its Board meetings and gives advice. Because of her education and experience the Board of Designer Pty Ltd follows her directions.

Recently, ZXA Engineering Pty Ltd contracted with Designer Pty Ltd. It was Vienna who convinced the board of ZXA Engineering Pty Ltd to enter into this contract. It was also Vienna who collected the quotes for this contract work, which always exceeded Designer Pty Ltds quote. This was due to the fact that Designer Pty Ltd put in a quote below the cost price of the work because Vienna promised there would be more work from ZXA Engineering Pty Ltd in the future.

Ivan attended a ZXA Engineering Pty Ltd board meeting a few months ago and brought with him what he believed was a great idea. His proposal was that the company become involved in constructing mechanical toys for children out of the leftover materials from around the companys building sites. The other board members were not so convinced, but Ivan being an accountant, produced some very impressive figures based on information from the companys files. The board voted against the proposal after Vienna, with her MBA training, argued that the company should focus on its main area of skill.

Ivan is disappointed but yesterday signed a deal with another building company known as Canwefixit Pty Ltd. The deal involves Ivan being paid a commission of 10 per cent for every mechanical toy sold and a place on their board.

ZXA Engineering Pty Ltd is having financial problems, yet the board continues to allow the company to trade without considering the consequences.

Required:

Discuss the statutory and common law positions of each of the directors.