Reference no: EM133407951

Case Study: ASIC has been investigating Den and Smith , the directors of Football Australia ('FA'), the peak body for the sport of football in Australia. FA is a company limited by guarantee. Smith is a former professional football player and vice president of FA. The CEO is Kate , whom ASIC is not investigating.

FA stages a number of football tournaments in Australia. One of FA's major sources of revenue is the fees that it earns from the licensing of rights to broadcast its tournaments both domestically and internationally. In 2018, the right to broadcast within Australia was held for 20 years by the Special Broadcasting Service ('SBS'). The agreement with SBS was due to expire in November 2019. Under the SBS agreement, the broadcast fees payable were $50 million over the course of the agreement.

The public interest in football had begun to increase, and as a result, many of SBS' competitors (including Seven and ABC Sport) were keen to obtain the broadcast rights once the agreement with SBS had expired. Both companies had put in expressions of interest with Smith.

Seven offered FA a guaranteed minimum of $60 million a year for the domestic rights for five years, plus a split of between 90% and 100% of anything above $60 million in revenue from the broadcaster. This offer was conditional on approval by the Seven board and acceptance by FA of a concurrent offer for its international broadcast rights. FA's CEO gave copies of this offer to the two directors, Dan and Smith.

Seven's board subsequently approved the offer, and this was reported to FA's CEO, Kate. Kate then told Dan and Smith. However, neither director put Seven's offer to FA's board. Instead, FA's board was told about the offer by Kate, who said that it was for millions of dollars, but subject to several conditions. But before Kate could say any more, Smith interjected to dismiss Seven's offer and to say that FA should be dealing with SBS. Nothing more was said at the board meeting as to Seven's offer. Later, the CEO of ABC approached Kate and offered $65 million a year for the domestic broadcast rights. Kate reported this to Dan and Smith, but they did not report it to FA's board.

Meanwhile, negotiations between SBS and FA for the renewal of their agreement continued. SBS made a number of written offers, which included fees of no more than $25 million a year. Notwithstanding the low level of these offers, Smith repeatedly pressed Kate to do a deal with SBS. Not only was Smith pressuring Kate to finalise the deal, but he was also reporting to SBS on FA's internal deliberations. Smith also told the CEO, 'Just get the deal done with SBS, we're not going to work with Seven or ABC.' FA then approved SBS' offer.

Question: Kate is very concerned about Smiths' actions and thinks that he may have breached the Act. What are Kates' available options here? Which one would be preferable, and why?

you must rely on the provision of the Corporations Act