Advise asic whether the directors have breached the duty

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Reference no: EM133474413

Case: Interactive Markets Ltd (IM) is a brokerage firm established in Perth, Western Australia. The company is constantly upgrading its IT systems and adopting new technologies to provide innovative services for their clients.

Three directors were officially appointed mainly: Charlie, Lucas, and Oprah. Charlie is the founding shareholder and the managing director (MD). Lucas was appointed as the company's financial officer (CFO) and Oprah is the non-executive director although she rarely attends the meetings because of her busy schedule and family commitments.

Charlie is aware that IM is in financial difficulties, but he thinks that the company can still make profit if it continues trading. He decided to pay dividends for the shareholders although the company did not meet its financial objectives for the year 2021-2022.

IM does not maintain proper financial records and provide no regular updates to the shareholders. The non-executive directors (Lucas, and Oprah) are also unaware of the exact financial position of the company.

A million-dollar contract was discussed at the latest Annual General Meeting (AGM) and the CFO (Lucas) prepared a financial report about the business prospect, However, the board of directors failed to read the report that contained errors and still resolved that IM should conclude the business transaction and enter into the contract.

IM was experiencing financial difficulties for the past two years and its financial reports have indicated that it has low cash flow. The shareholders asked to conduct a meeting to discuss the business affairs of the company, but the board decided to postpone the meeting until further notice. During the years 2021-2022, the company financial position worsened and eventually it went into voluntary administration.

Question: Advise ASIC whether the directors have breached the duty of care and diligence and any available remedies that can be taken against them in accordance with the Corporations Act. Your answer should also consider if any of the directors can rely on any available defenses.

Reference no: EM133474413

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