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VIC Has Second Director Committed Fraud?

Discussion in 'Commercial Law Forum' started by Jason peal, 8 August 2016.

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  1. Jason peal

    Jason peal Member

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    A friend of mine for a number of years has been refused access to the books of a company in which he is a director. He is also a minor shareholder of this company. (He is easy going and continued to work and own the Business despite not being allowed to view the books by the larger shareholder)

    Recently, he discovered some employees who work for a separate company which is owned by the second director are actually paid by my friend's company. Is this fraud?

    While my friend's company pay the wages, these people do not work for his company and there is no invoicing between companies to account for this.

    The second director controls access to the books and creates shareholder loans for himself as he pleases, lots of things about their Bussiness just doesn't sound right, the problem is my friend has been so trusting hoping things are OK ?

    Any thoughts ?
     
  2. Victoria S

    Victoria S Well-Known Member

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    Directors owe a number of specific duties to their company. Two of these duties are that the director must:
    • act in good faith in the best interests of the company and for a proper purpose, including to avoid conflicts of interest, and to reveal and manage conflicts if they arise. This is a ‘fiduciary duty’ imposed by general law and a duty required in legislation;
    • not improperly use their position to gain an advantage for themselves or someone else or to the detriment to the company.
    Therefore, the other director may be in breach of his duties as a director for which he can be sued by shareholders and penalised / fined by ASIC.
     
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  3. Matthew Karakoulakis

    LawTap Verified Lawyer

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    Hi Jason,

    Victoria is correct. Under law Directors are subject to various duties, which have likely been breached. Please feel free to contact me if your friend would like legal advice and representation. I can be contacted on Matthew Karakoulakis, Lawyer, AMK Law - Melbourne, VIC - LawTap - Find a Lawyer & Book Online Instantly.

    Yours faithfully,
     
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