Answer To: The purpose of the assignment is to get you engaged in research into laws relating to company and...
Robert answered on Dec 29 2021
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a)
SYNOPSIS
In the given case study, ABC Pty Ltd is a company situated in Australia and has three directors,
viz., David, Sarah and Chen. David has engaged in an act of forgery and forged Sarah’s signature
on the documents to obtain the clearance of loan from Easyloan Bank Ltd. ABC Pty Ltd’s land in
Ballarat has been mortgaged by David to the banking company Easyloan Bank Ltd, as security
for the loan given to David. The constitution of ABC Pty Ltd has clearly mentioned that such
mortgages can be executed only with the authorized approval of all the three directors. However,
it remains unknown to Sarah and Chen that David has engaged in the act of borrowing a loan
against the company’s land in Ballarat as security. While David failed to repay the loan and has
left Australia, the banking company holds the company ABC Pty Ltd responsible for the failure
to repay the loan, and enforces the guarantee and mortgage.
The legal actions which are to be taken against David should be according to the laws and
regulations of the Corporation Act, 2001. David has engaged in an act of forgery and fraud as he
did not have the consent of the other directors of the company. Therefore, the bank can take a
legal action against the company as a whole by enforcing the mortgaged property and a separate
act of forgery against David as well.
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MATERIAL
As per details mentioned in the case, Easyloan Bank Ltd had provided a loan to the company
ABC Pty Ltd. According to the Corporations Act 2001, Section 766A, Easyloan Bank can be
defined as a financial service provide since it is engaged in provision of financial
recommendation, dealing in and making a market for financial product, which can be widely
defined to use various banking services. The Easyloan bank can easily enforce the guarantee
against the ABC Pty Ltd Company as per the Corporations Act 2001 – Section 192. It has been
clearly mentioned in the provisions of the Corporations Act 2001 of the Australia, that any
company which is unable to repay loan taken on mortgage to the bank, a strict action will be
taken against the same. In the Section 191 of the Corporation Act of 2001, in Australia, the
lender of the money (Easyloan Bank Ltd in the mentioned case) can take the responsibility or the
initiative of enforcing the guarantee that has been given by the borrower of the money against the
borrowed amount of loan (ABC Pty Ltd.) Therefore, the action taken by the Easyloan Bank
against the company ABC Pty Ltd is very much appropriate and should help them in recovering
the amount of loan given by them to the director of ABC Pty Ltd Company, David.
David was one of the directors of the firm, and he had taken the loan without the
consent of the rest of the two directors of the company. As per the Articles of Association of the
company and also regarding the section 260E of the corporation act, a company or a firm can
take loan from a financial institution of the money only if there is presence of consent of at least
2 directors of the company. In the given case of ABC Pty Ltd, there is the signature of only 2
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directors, viz., David and Sarah in documents relating to mortgage of the company’s land in
Ballarat. Though, the other director was unaware of the whole transaction, yet the signature of
the same was found in the contract between the Easyloan Bank and ABC Pty Ltd. David had
made sure that he has forged the signature of at least one of the other two directors of the
company. No company or a bank will grant a loan to the individual or the official who has
applied for a loan until and unless, the signature of at least two directors of the company is
provided on the necessary documents. David had forged Sarah’s signature in the required
document and had taken loan from the bank. Sarah, the other director of the firm was totally
unaware of this particular transaction which was exercised by David. It is mandatory for David
to inform the other two directors about the loan taken by the company against the mortgage of
the company’s land in Ballarat. This is provided in Section 191 of the Corporation Act, 2001.
The loan taken by David was for his personal use and benefit and that is why he had taken the
loan in the name of the company, and had thought of not informing the other directors of the
company. So, when David was unable to pay the loan back, the Easyloan Bank was bound to
take a strict action against the company ABC Pty Ltd which was in all angles unfavorable for
them. And moreover, David had left Australia on failure of repayment of loan, when the
Easyloan Bank took legal action against the company.
As per the rules of ABC Pty Ltd Company, an act committed by the directors will be
considered as an act committed by the company. And for this reason, it is the ABC Pty Ltd
Company which has to face all the difficulties and the legal actions by the Easyloan Bank. The
loan was taken in the name of the company, all the legal issues regarding the transaction has to
be faced by them, as a result. This is why the Easyloan bank had decided to take legal action
against the company on failure of repayment of loan. Also, the land of the company in Ballarat
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was now lying in the possession of the bank as it was the guarantee and has been confiscated by
the bank. As per the Corporations Act 2001, it is mentioned under Section 129, that if any
company is not being able to pay the required amount of installment or the total loan, the bank
should...