The corporate veil refers to a company being a separate legal entity from members and directors.

In Saloman v Saloman Lord MacNaughten held that a company is a

different person from the subscribers, even where incorporation occurs from earlier business, and it is substantially the same, the company is not at law, an agent of the
original party. This is reflected in s124(1) CA which gives a company all the legal capacity and powers of a legal person plus all the powers of the body corporate. Here, the
effect of the corporate veil is that [company] will be responsible for its own debts. Additionally incorporation means that: Holding and subsidiary companies are treated as
separate legal entities: I ndustrial Equity Limited v Blackburn;Even within a corporate group, such as holding/subsidiary, directors owe duties only to the company in which
they are a director: Walker;A company may contract with its controlling members: Lee v Lees Air Farming Ltd; Controlling members can be a secured member of the
company and have preference over unsecured members: Saloman v Saloman;A member has no legal or equitable interest in the property of the company: Macaura v
Northern Assurance Co;A company can commit an offence (Hamilton v Whitehead) lifted/pierced Here, [plaintiff] may be able to pierce the corporate veil, which would
make any act or omission of the company, an act by its members, and therefore escheat responsibility to members. Note that under the Common Law, the courts were reluctant
to pierce the veil. (See 8)Here, the relevant exceptions may be:Duty of directors to prevent insolvent trading by the company: s588G-U CA; Liability of holding company for
permitting a subsidiary company to trade while insolvent: s588V CA; Liability of directors for debts incurred by body corporate acting as a trustee: s197 C. If [director] is
found to have traded while insolvent, the corporate veil will be lifted and [director] will be liable. In addition to compensation, s588G CA is a civil penalty provision under
s1317E CA and may attract criminal penalties under s588G(3) CA.Compensation The court may, on application for a civil penalty order, make an order requiring [director] to
pay compensation: s588J CA. The court must be satisfied that: The person committed the contravention in incurring the debt: s588J(1)(a) CA; The debt is wholly unsecured:
s588J(1)(b) CA; The person the debt is owed suffered loss or damage as a result of companys insolvency: s588J(1)(c) CA. The value of compensation is equal to the amount
of that loss or damage.** Directors Director is defined in s9 CA as a person who:1.Is appointed to the position of a director 2. Is appointed to the position of an alternate
director and is acting in that capacity; regardless of the name that is given to their position//Unless the contrary intention appears, a person who is not validly appointed as a
director if:1.They act in the position of a director or 2. The directors of the company or body are accustomed to act in accordance with the persons instructions or wishes
IF De facto Director Here, [director] is a de facto director in that they have resigned as a director but continue to exercise top level management functions: DCT v Austin;
Natcomp Technology Australia Pty Ltd v Graiche. Therefore, [director] is a director. IF Shadow Directors Here, [director] is a shadow director as they are part of a holding
company which acts as a shadow director of its subsidiary: Standard Chartered Bank of Australia Ltd v Antico. Therefore, [director] is a director // IF person is not a
director but acts in the capacity as one Here, [director] does not meet the clear definition of director, however they may still fall within s9(b). [Director] will only be
classified as a director if they acted in that capacity and the board accepted the advice, and acted on it without their own discretion: Re Hydrodam. **Duties of Directors
Directors owe duties under the general law and under the CA. The general fiduciary duties owed by directors include: The general fiduciary duties owed by directors
include:1.Duty to act bona fide in the interests of the company 2.Duty to exercise powers for proper purpose 3.Duty to avoid conflicts of interest 4.Duty not to misuse position
or information 5.Duty to act with due care and diligence 6.Duty to retain discretionary powers// owes the duty? The relationship between director and company is established
as giving rise to a fiduciary duty, but only between the director and their company: Mills v Mills. Under the general law both directors and senior executives are subject to
fiduciary obligations: Drysdayle. However, under the CA directors and officers are subject to the duties. ACT BONAFIDE : Directors are under a duty to act bona fide (in
good faith) in the best interest of the company as a whole: ASI C v Whitlam. While the courts are reluctant to review business judgements of directors and substitute their own
judgements on merits unless required by statute: Harlowes Nomines Pty Ltd v Woodside (Lakes Entrance) Oil Co NL, they will interfere when a director fails to act bona
fide in the best interests of the company. Duties are owed under the general law and the Corporations Act. Here, [plaintiff] would argue that the [decision] of [director] was
not in the best interest of [company] as a whole. Generally the duty will be owed to the members as a collective whole (not a minority) that should be considered by directors:
Kinsela v Russell Kinsela. IF company is solvent :Here, [director] would owe the duty to the members as a collective group or whole, as [company] is solvent and has no real
risk of insolvency - does not include the interests of the company as a commercial entity (Ngurli v McCann). IF company is insolvent :Here, [director] would be more
interested in the interest of the creditors as [company] is insolvent or there a real risk of insolvency: Kinsela v Russell Kinsela. This does not mean that the directors owe a
separate duty to creditors: Spies v The Queen. IF Breach There will be a breach of this standard where [director] considers the company interest but expends [companys]
money irrationally (referred to as the honest lunatic director). There will also be a breach when the director acts in a way that no reasonable director would have considered to
be in the best interests of the company: ASI C v Adler. IF no Breach There will not be a breach of this standard even if [director] subjectively failed to consider [companys]
interest, if objectively it was for the commercial benefit of [company]. Here this is applicable as [director] [acts done]. Therefore, on balance it would seem that there [is/is
not] a breach by [director] to act bona fide in the best interests of [company]. Remedies: If there is a breach, [directors] action is voidable at the instance of [company].
Other remedies may be available to members including:0 Statutory Derivative Action: s236 CA 0 Injunction: s1324 CA. 0 Oppression (individual shareholder right to pursue):
s232 CA. Breach under the Corporations Act[Director] may also be liable under a breach of s181(1)(a) CA, which mirrors the general law above, and requires directors to
act in good faith in the best interest of the corporation, and has no effect on the equitable duties: s185 CA. Section 181(1)(a) mirrors the general law or equitable duty
everything is the same. The section is a civil penalty provision, so only ASIC can enforce it: s1317E(1)(a) CA. The court may: 0 Make a declaration of contravention: s1317F
CA.0 Impose a pecuniary Penalty: s1317G CA 0 Disqualify [director] from bearing office: 0 Make a compensation order, for any loss or damage resulting from the breach:
s1317H CA. //IF action is reckless or intentionally dishonest : Here, [director] has acted recklessly or intentionally dishonest, which would also make them criminally liable
for their actions: s184(1) CA. However, ASIC will address civil penalty provisions before considering criminal action. Therefore, [director] [may/may not] be liable under the
Corporations Act for the breach if ASIC choose to begin proceedings. Powers for a Proper Purpose : As director [director] must exercise their powers for a proper purpose,
not for a purpose foreign to the power or to obtain some private advantage: Mills v Mills. The onus of establishing that there was an improper exercise of power rests on
[plaintiff] as they are asserting misuse: Ascot I nvestments v Harper. Duties are owed under the general law and under the Corporations Act. Here, [director] has exercised
their power for [purpose]. In considering this purpose an objective test is used involving 2 steps: Howard Smith v Ampol Petroleum. 1.What are the purposes for which the
power may be exercised? 2. Why was it exercised by the directors? The court will need to ascertain the nature of the power and the purpose for which it was conferred:
Howard Smith.0 This is a question of law for the courts. 0 Must be exercised in the proper interests of the members generally. IF purpose to raise capital required by
company. Here, [director] would argue that the purpose was to raise capital required by the company. It has been held that this is a proper purpose, but it would be too narrow
a purpose to be the only reason to issue shares: Howard Smith; IF purpose to secure the financial security of company Here, [director] would argue that the purpose was to
secure the financial security of the company. It has been held that this is a proper purpose: Harlowes Nominees. IF power destroys a majority interest. Here, [plaintiff]
would be arguing that the purpose was to destroy a majority voting power. If the directors are motivated by a desire to relegate a majority interest into a minority power by
issuing more shares it will be held to be an improper power: Ngurli v McCann and Howard Smith. Therefore on balance, the purpose of the power exercised [may/may not]
have been done for a proper purpose. If the need for shares is finance based, the court will consider a variety of factors. IF defending hostile takeover bid : Here, similar to
Howard Smith, they sought to increase share numbers to defend a takeover bid. While it was conceded that capital was needed, no other means was sought, and it was held
that, but for, the takeover, the share issue would not have happened. This is not considered an improper purpose if designed to maximise the value of members shares or
advance the commercial interests of the company. IF no other sources of finance have been sought : Here, [directors] have not pursued any other means of raising capital,
such as loan capital or selling assets. This would indicate that but for the improper purpose the shares would not have been issued: Howard Smith. IF other sources of
capital pursed : Here, [directors] have pursued other means of raising capital, such as loan capital or selling assets. This evidences that the financial factor was main reason
behind the share issue, and the issuing would have occurred even without the effects on the majority voting control: Howard Smith. IF amount of share issue greater than
15% :Here, the share issue is more than 15% which requires a resolution of support from members in the general meeting: ASX Listing Rules. Therefore, if the majority
members were in danger of losing their majority, they would vote against such a proposal. IF Directors support the Majority : Here, it will be relevant that the directors
support the majority voting power. This shows an intention to carry out the issuing despite the affect on the majority power. Remedies If there is a breach, [directors] action is
voidable at the instance of [company]. Other remedies may be available to members including: 1. Statutory Derivative Action: s236 CA 2. Injunction: s1324 CA. 3. Oppression
(individual shareholder right to pursue): s232 CA. under Corporations Act : [Director] may also be liable under a breach of s181(1)(b) CA, which mirrors the general law
above, and requires directors to exercise their power for a proper purpose and has no effect on the equitable duties: s185 CA. The section is a civil penalty provision, so only
ASIC can enforce it: s1317E(1)(a) CA. The court may: 0 Make a declaration of contravention: s1317F CA. 0 Impose a pecuniary Penalty: s1317G CA 0 Disqualify [director]
from bearing office: 0 Make a compensation order, for any loss or damage resulting from the breach: s1317H CA. IF action is reckless or intentionally dishonest : Here,
[director] has acted recklessly or intentionally dishonest, which would also make them criminally liable for their actions: s184(1) CA. However, ASIC will address civil
penalty provisions before considering criminal action. Therefore, [director] [may/may not] be liable under the Corporations Act for the breach if ASIC choose to begin
proceedings. CONFLICT OF INTEREST: [Directors] duty is not to have an interest in a contract, trust or other transaction with a company, unless the director makes full
disclosure of the nature of the transaction to the members of the company in general meeting, and they approve of it by ordinary resolution: Aberdeen Railway Co v Blaikie
Bros; Woolworths v Kelly. The test of whether it is a breach is an objective test, generally tested by considering whether a reasonable man, looking at the circumstances of the
case could see a real sensible possibility of conflict: Phipps v Boardman. IF director contracts personally with companyHere, the breach would be a direct breach as
[director] has contracted personally with [company], and has obtained a direct benefit. [Director] may be liable unless full disclosure has been given. IF director is a
shareholder as well and contracts with company Here, the breach would be an indirect breach as [director] is also a shareholder, and contracts with [company]: South
Australia v Clarke. An indirect breach will still be considered a breach of conflict. [Director] may be liable unless full disclosure has been given. IF director is a partner in
a partnership which contracts with company Here, the breach would be an indirect breach as [director] is a partner in a partnership which is contracting with [company]:
Aberdeen Railway Co v Blaikie Bros. An indirect breach will still be considered a breach of conflict. [Director] may be liable unless full disclosure has been given. IF
director receives a salary from the other company Here, [director] receives a salary from the other company; however this in itself will be insufficient to constitute a
conflict: Baker v Palm Bay. There needs to be something more than an ephemeral association and [director] being personally involved in both transactions QLD MinesVhudson.
Here, [director] receives a salary from the other company; however this in itself will be insufficient to constitute a conflict: Baker v Palm Bay. There needs to be something