Organizations and Markets in Emerging Economies - Free Samples

Question: Discuss about the Organizations and Markets in Emerging Economies. Answer: Introduction: Under section 157A of the Companies Act(CA), the fiduciaries duties of the directors have been discussed. The directors make the decisions of the business that are in accordance with their duties under law. Every director has fiduciary duties to their company. When a director is said to have personal interest that has chances of conflicting with his existing fiduciary duties, he should be able to make sufficient disclosure to the company. Such duties have been highlighted in the case of Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134. Therefore, according to the Companies Act, following are the fiduciary duties of a Director: Duty to disclose interests in transactions As per section 156 of the Companies Act, a director of a company needs to disclose in the meeting if he or she is interested in a proposed transaction within the company. Therefore, this particular disclosure is not needed when the interest of the director includes only being a member of an undertaking that is interested in a transaction. There are exceptions as well when the directors will seem to be interested. The duty of the director is also to disclose the kind, extent and character of any sort of conflicts with other directors. Such duties arise because of holding any office or any property (Lyman 2016). If the director fails to disclose such information then he will be liable for a fine not exceeding $5000 or it will result in imprisonment for a term not exceeding twelve months. Duty to act being honest and use reasonable carefulness - As per section 157 of the Companies Act, the directors are bound to act with honesty and use reasonable diligence while discharging the duties during his office. Therefore, a director should not make inappropriate or indecent use of information that are obtained by the virtue of his position as an officer (Wai 2016). However, if he fails and is found to be guilty of breaching the provisions, the director will be held liable for any kind of profits made by him to the company. Duty to execute power in good faith for the interests of the company Every director has to exercise and execute this fiduciary duty towards their company and therefore they should act as per the interests of the company (Mark 2017). Avoiding conflicts of interest A director of a company has no power to seize the opportunity of a business that he had come across because his designation as the director without the existing consents of the company. Duty to take care Directors of a company will be held liable under the tort of negligence if he fails to carry out his fiduciary duties (Brenda 2015). Directors also have negative duties that he cannot exercise while carrying out his duties. This has been discussed under the Companies Act. As per section 162 of the Companies Act, directors can deal with loans as well. In case of any default and subject to exceptions, a company cannot form a loan to a director of the company. In Singapore, the companies are governed under the principles of the Companies Act. As per this Act, there are relevant provisions and sections relating to loans and borrowings. In this given scenario, the director of S Ltd wanted to purchase a truck that belonged to Cynthia, Shawn and Ming. However, there are specific sections relating to such a situation. According to Section 186(1) of the Corporation Act, a company is restricted from making certain purchases or investments through more than one layers of the investment companies. The directors of the company while borrowing loans should follow the specific restrictions or purchasing objects from other people (Boyer, Martin and Tennyson 2015). Under the Corporation Act, loans or purchases made or security provided must be given related to the director of the company. Therefore, certain parties are required to take approval from the Government. This section imposes a total prevention on companies that provide loans and guarantee to the director or any other individual working in the company. Such restrictions and rules are imposed on the inter-corporate loans that are widely viewed to usher the transactions of a company. As per the recent developments in the Act, it has increased the disclosure norms to rise the level of transparency in the commercial dealings (Lynn and Margaret 2017). For purchasing any object, a director of the company cannot use his personal money to procure it. If the object is being obtained for the use of the company, the company will fund for the object. The director can also opt for a loan from the company if he wishes to purchase anything. Every loan made by a member to the company will be subjected to the specific requirements as mentioned in the Chapter V and the deposit rules of the Act. The purpose of deposit rules is to exempt loans from being provided by the directors of a company. If the director furnishes a declaration to the effect that a loan is generally not given out of th e borrowed funds. In case of private companies, there is severely restricted process of accepting the deposits from the members. The restriction imposed upon the companies for purchasing any object with the monetary help form the company is known as a basic principle of company law. This has been observed in the case of Law Society of Singapore v Ong Cheong Wei [2017] SGHC 293. The issue of this case is to decide whether V Ltd. will have the ground to take action against the director over their conduct while deciding upon a new range of product. As per section 152 of the Corporation Act, a company has the right and power to remove its directors before the expiration of their term of office. This does not constitute any kind of agreement between the company and the director. In certain cases, when the director who was removed represented the interests of the shareholders then there will be a resolution to remove him but it will not take effect until his successor has been appointed. According to section 149B of the Corporations Act, a director of a company is appointed by passing an ordinary resolution passed at a general meeting. After the appointment of the director, he inherits the duties and responsibilities of taking decisions at the board meetings of a company. However, if the company undergoes any kind of massive loss or gets insolvent due to the decision of the director, the company can take actions against the director. Lim Kok Leong v Seen Joo Company Pte Ltd and others discusses the fact that a company can take act ion against the director over any kind of conduct. As witnessed from the given case study, one of the directors of Sales and Profit V Ltd held a meeting for discussing a launch of a new product and makeover. The director gave this responsibility to an employee. Kim, the new employee was asked to determine and decide the product range. For the introduction of this new product, $5 million was borrowed from Last Chance Bank Ltd. Thereafter, V Ltd winded up since the new product was proved unsuccessful. Therefore, the V Ltd has the power to take actions against the director for the insolvency and winding up of the company. The director will be solely responsible for such a condition. A company is a separate legal entity and therefore it can take actions against the director even if he has shares invested in the company. The new product range was decided by a new employee and not by the director himself. However, the director should not have given such responsibility to the new employee, Kim. According to the Corporation Act, a company is treated to be distinct from its members as it is known as a separate legal entity. However, there are exceptional circumstances when the director can be held liable personally for the debts of the company. Corporate veil is a concept that is applicable in such a situation. Firstly, when the corporate form and the limited liability are abused at the expenditure of the third parties. Secondly, when statutory provisions that are imposed on the liabilities on the directors for the obligation of the company. When a company is pretense, the shareholders are enable to enter into the transactions. In the matter of Alwie Handoyo v Tjong Sumito (2013) the sole of a companys director and shareholder were personally liable for an amount of $550,000 for which the company had received this unjustly from a third party. Therefore, it is important for the directors to make sure that the separate legal personality of a company is not abused and is general ly used for evading the law. Otherwise, they will be held liable personally for the obligation of the company. It can be observed from the rule that a director can be liable for the debts of the company of the company has suffered a huge loss because of his fault. When the debt is owed by the director to the third party or another company due to his fault, he or she will be held liable and should clear the amount suffered. V Ltd will be liable to clear the debts and loss suffered by the company because of him (Stefan 2017). The last chance that can be put to use is by clearing the debts as a company cannot allow that director to work if the debts are not cleared by him. Hence, the company directors in Singapore must be aware of the circumstances that can arise under the Corporation Act. References: Anggusti, Martono, Bismar Nasution, Mahmul Siregar, Suhaidi Tan Kamello, Benny Tabalujan, and Hikmahanto Juwana. "Corporate Governance for Employee's Welfare."Int'l J. Soc. Sci. Stud.3 (2015): 257. Boyer, M. Martin, and Sharon Tennyson. "Directors' and officers' liability insurance, corporate risk and risk taking: New panel data evidence on the role of directors' and officers' liability insurance."Journal of Risk and Insurance82, no. 4 (2015): 753-791. Dodd, E. Merrick. "For whom are corporate managers trustees?." InCorporate Governance, pp. 29-47. Gower, 2017. Hannigan, Brenda.Company law. Oxford University Press, USA, 2015. Johnson, Lyman. "Relating Fiduciary Duties to Corporate Personhood and Corporate Purpose." (2016). Law Society of Singapore v Ong Cheong Wei [2017] SGHC 293. Lim Kok Leong v Seen Joo Company Pte Ltd and others [2014]SGHC239 Lo, Stefan HC. "Piercing of the corporate veil for evasion of tort obligations."Common Law World Review46, no. 1 (2017): 42-60. Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134. Schwartz, Mark S.Corporate social responsibility. Routledge, 2017. Stout, Lynn A., and Margaret M. Blair. "A team production theory of corporate law." InCorporate Governance, pp. 169-250. Gower, 2017. Van Tuan, Nguyen, and Nguyen Anh Tuan. "Corporate governance structures and performance of firms in Asian markets: A comparative analysis between Singapore and Vietnam."Organizations and markets in emerging economies7, no. 2 (2016). WAN, Wai Yee. "Corporate claims against directors or officers following the companys unlawful conduct." (2015). Wan, Wai Yee. "Recent Developments in Singapore on Company Law and Regulation: Review of the Singapore Companies Act." (2014).