Australian Securities and the Investments - Myassignmenthelp.Com

Question: Discuss about the Australian Securities and the Investments. Answer: Introduction: This report discusses the announcement made by Federal Court against the Sino Australia Oil and Gas Limited (Sino) in context of infringement of the Corporations Act. This company was the formerly listed at ASX. ASX also made the declaration against the chairman of this company for the purpose of publishing misleading and false statement in the prospectus of the company and also for breaching the obligations related to continuous disclosure. In this Court also state the useful guidance in context of failure of former chairman of the company in act properly with due care and diligence as a director of the company as sign the prospectus which was published in English and he was unable to speak or read the English language[1]. This report states facts of the case; duties breached y directors of the company and reasons behind such infringement. This report also critically discusses the decision of the Court/Tribunal and how this decision helps in the development of the Corporation Act in Australia. Lastly, paper is concluded with brief conclusion. Facts of the Case: Sino Australia Oil and Gas Limited (Sino) was the Australian Company which holds the Chinese operating company, and this Chinese company provides the specialized drilling services to the oil and gas industry. As stated above, Sino was listed on the Australian Securities Exchange (ASX) in December 2013 after an IPO issued by the company which raised almost $12 million funds for the company. During the period of March 2014, investigation was initiated by ASIC against the Sino and the directors of the Sino who infringe number of obligations under Corporation Act in context of IPO. Investigation conducted by ASIC mainly focus on the accuracy in context of the statements published by directors of the company in the prospectus of the Sino documents about contracts related to services of oil and this contract was entered into by one of its subsidiaries, HuaYing Oil Drilling Service Company Limited (HuaYing), with Chinese based oil companies. On the fourth day of May, resolution was passed by Board of Directors of Sino for the purpose of appointing administrators to the company, and they also pass number of resolution which also includes that the company was likely to become insolvent in the near future. During the period of 4th May and 21st May 2015, investigation was initiated by administrators related to the operation of the company, and for this purpose administrators held meetings with the ASIC and also submit the proposal for a deed of company arrangement. On the fifteenth day of 2015, ASIC applied for an order under section 447A of the Act, in this ASIC wants to terminate the administration of Sino. ASIC seeks the declaration that the administration appointment in the company was not valid, and also for an order under which provisional liquidator appointed to the Company. On 21st May 2015, after the application of ASIC provisional liquidator appointed to the company, and this appointment was not contested by the administrators. Breach of directors Duties: Davies J in this case provide the decision in the favor of ASIC in lieu of claims stated by ASIC, and stated that Sino contravened the Section 728[3](1)(a), 728(1)(b), 728(1)(c), 1041H and also Section 674(2)[4] of the Act. Additionally, Davies J stated that Mr. Shao was also involved in the failure of the company in making disclosures on continuous basis under section 674(2) of the Act and also contravened section 674(2A) of the Act[5]. ASIC also alleged that Mr. Shao breached the duties of directors of Sino in different perspectives. Davies J provided judgment in favor of ASIC in respect of allegations made by ASIC and further made declaration that Mr. Shao contravened section 180(1) of the Act by following acts: Director approved the prospectus of the company without understanding the text stated in the prospectus in English language and also without making the translation of English language in Chinese. In context of failure of Mr. Shao in understanding the language of the document such as Prospectus, and for this Davies J considered the comments made by Middleton J in case law ASIC v Healey (2011[6]). In this judge stated that while reading the financial statements of the company, directors of the company was under the duty to ensure that information stated in the documents must be accurate and director fully understand the content of the document. Davies J stated that comments made by Judge Middleton J was also applied in case of prospectus documents, and Mr. Shao as the director of the company was under obligation to exercise his powers with due care and diligence. He was also under obligation to ensure that he fully understands the content stated in the prospectus documents and informat ion stated in the prospectus was accurate in nature. She further stated failure on part of Mr. Shao by signing the prospectus without understanding the contents stated in the document even in general way was considered as breach of directors duties under section 180 of the Act[7]. Director also failed in fulfilling his obligations in making continuous disclosures requirement in case of public listed companies under law of Australia. In context of Mr. Shao failure to get the knowledge of disclosure requirements, Davies j stated that in his defense Mr. Shao stated that he received advice from the two directors of Australian and he also depends on the advice he received from these professional advisers. Against this defense Davies J stated that Mr. Shao was unknown from the English language and he was not able to read and speak this language and he also not understand the legal requirements of Australia, and because of this he leave all the things on others but this does not provide him excuse to perform his duties with reasonable diligence and care. In this allegation, Davies J considered the noting of case Goldberg J in ASIC v Citrofresh International Limited (No 2) (2010)[8]. On the basis of the rulings of this case, Davies j stated that Mr. Shao fails to info rm himself about the disclosure requirements, and also fails in discharging his duties as directors with due degree of care and diligence Director also failed in disclosing the Sinos board that situations had arisen because of which it was not possible to achieve the profit forecast for Sino for the year 2013. Director also seeks to cause Sino to transfer the proceedings of IPO to an account hold by company in China, and for this Mr. Shao does not provide any adequate information to the Board of Sino. Mr. Shao also failed in complied with the regulatory requirements of China which are important for the purpose of ensuring that the funds would be recoverable by Sino. Director also permit the Sino to contravene the section 728(1)(a), s 728(1)(b), s 728(1)(c), s 674 and s 1041H[9] of the Act. On the basis of above facts it can be said that Mr. Shao breached his duties under Australian Corporation law. Critical analysis of Courts Decision: In this case, federal Court of Australia ordered that Sino was liable to pay the pecuniary penalty of $800,000, and the former chairman of Sino that was Mr. Shao must be disqualified for the purpose of managing the corporation under section 206C of the Corporations Act 2001 for the period of twenty years. The order related to penalty and disqualification was provided by the Court on 11th august 2016. In this order, court declared the pecuniary penalty against first defendant that was Sino and disqualification against second defendant that was Mr. Shao for breaching the provisions of Corporation Act 2001[11]. In this context justice Davies J stated following explanations: Shao provides the explanation that he was not able to understand the English language and because of this he fails in understanding the legal requirements of Australia. Lack of knowledge of Mr. Shao shows the lack of diligence and care by him in informing himself properly and completely about the legal obligations of the company and also the serious lack of understanding in lieu of continuous disclosures. While imposing the pecuniary penalty on the Sino, Court considers the maximum amount of available penalty that was $1 million, and the increasing trend in the organizations for obtaining listing on the ASX[12]. Davies J also considered the statement made by commissioner of ASIC, provision related to accurate and timely information ensures the integrity and efficiency in the financial markets, and these principles were breached in this case clearly. Court further stated that penalty imposed in this case must provide the strong message to the organizations and people who were entering in the market of Australia must aware from the rules and regulations of the market. While making the decision in this case, Davies J failed in providing the proper guidance for those directors who does not understand the English language such as what requirements they must complied while translating the English language, documents they must file, etc. Court also fail in providing the exact and accurate reasoning for imposing that much heavy penalty on the company, and reasoning provided by the Court that through this Court give strong message to the organizations and people who were entering in the market of Australia was not considered as accurate and sufficient reasons to impose such heavy penalty on company. Impact of courts Decision: Decision of the court in this case is considered as important decision because it mainly focus the directors of the company who are not aware about the rules and regulations of Australian market because of the lack of understanding of English language. This decision also imposes obligations on foreign directors to understand the rules of the market before entering into the Australian market, and they cannot use the lack of information as the defense while performing their duties as directors. Conclusion: After considering the above facts, it can be said that decision taken by Davies J in case law ASIC v Sino is the important decision and this decision provides important knowledge in regards of understanding of foreign directors in context of rules and regulations of Australian market. In this Court also state the useful guidance in context of failure of former chairman of the company in act properly with due care and diligence as a director of the company as sign the prospectus which was published in English and he was unable to speak or read the English language. BIBLIOGRAPHY Website WR, An ounce of prevention is worth a pound of cure Lessons from ASIC v Sino, https://www.williamroberts.com.au/News-and-Resources/News/Articles/An-ounce-of-prevention-is-worth-a-pound-of-cure---Lessons-from-ASIC-v-Sino, accessed on 4th January 2018 ASIC, (2016), 16-255MR Court finds against Sino Australia Oil and Gas Limited and its former chairman Tianpeng Shao, https://asic.gov.au/about-asic/media-centre/find-a-media-release/2016-releases/16-255mr-court-finds-against-sino-australia-oil-and-gas-limited-and-its-former-chairman-tianpeng-shao/, accessed on 4th January 2017. Minter Ellisson, (2016). Discussion of Directors' Duties in the Recent Sino Australia Oil and Gas Decision, https://www.minterellison.com/articles/discussion-of-directors-duties-in-the-recent-sino-australia-oil-and-gas-decision, accessed on 4th January 2018. Federal Court of Australia, Australian Securities and Investments Commission, in the matter of Sino Australia Oil and Gas Limited (in liq) v Sino Australia Oil and Gas Limited (in liq) [2016] FCA 934, https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2016/2016fca0934, accessed on 4th January 2018. Bright Law, CASE NOTE: LIABILITY OF NON-ENGLISH SPEAKING DIRECTOR, https://www.brightlaw.com.au/case-note-liability-of-non-english-speaking-director/, accessed on 4th January 2018. ASIC, (2016), 6-431MR Court fines Sino Australia Oil and Gas Limited and disqualifies former chairman, Tianpeng Shao, https://asic.gov.au/about-asic/media-centre/find-a-media-release/2016-releases/16-431mr-court-fines-sino-australia-oil-and-gas-limited-and-disqualifies-former-chairman-tianpeng-shao/, accessed on 4th Jauary 2018. Case law Australian Securities and Investments Commission v Healey and Others (No. 2) [2011] FCA. 1003. ASIC v Citrofresh International Limited (No 2) (2010). Statute Corporation Act 2001 Journal Smith, D. (2016), ASIC obtains declarations that Sino Australia Oil and Gas Ltd (in Liq) and its former chairman breached the Corporations Act, Australian Resources and Energy Law Journal, Volume 35 (2). [1] Smith, D. (2016), ASIC obtains declarations that Sino Australia Oil and Gas Ltd (in Liq) and its former chairman breached the Corporations Act, Australian Resources and Energy Law Journal, Volume 35 (2). [2] WR, An ounce of prevention is worth a pound of cure Lessons from ASIC v Sino, https://www.williamroberts.com.au/News-and-Resources/News/Articles/An-ounce-of-prevention-is-worth-a-pound-of-cure---Lessons-from-ASIC-v-Sino, accessed on 4th January 2018. [3] Corporation Act 2001- Section 728. [4] Corporation Act 2001- Section 674. [5] ASIC, (2016), 16-255MR Court finds against Sino Australia Oil and Gas Limited and its former chairman Tianpeng Shao, https://asic.gov.au/about-asic/media-centre/find-a-media-release/2016-releases/16-255mr-court-finds-against-sino-australia-oil-and-gas-limited-and-its-former-chairman-tianpeng-shao/, accessed on 4th January 2017. [6] Australian Securities and Investments Commission v Healey and Others (No. 2) [2011] FCA. 1003. [7] Corporation Act 2001- Section 180. [8] ASIC v Citrofresh International Limited (No 2) (2010). [9] Corporation Act 2001- 1041H. [10] Minter Ellisson, (2016). Discussion of Directors' Duties in the Recent Sino Australia Oil and Gas Decision, https://www.minterellison.com/articles/discussion-of-directors-duties-in-the-recent-sino-australia-oil-and-gas-decision, accessed on 4th January 2018. [11] Federal Court of Australia, Australian Securities and Investments Commission, in the matter of Sino Australia Oil and Gas Limited (in liq) v Sino Australia Oil and Gas Limited (in liq) [2016] FCA 934, https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2016/2016fca0934, accessed on 4th January 2018. [12] Bright Law, CASE NOTE: LIABILITY OF NON-ENGLISH SPEAKING DIRECTOR, https://www.brightlaw.com.au/case-note-liability-of-non-english-speaking-director/, accessed on 4th January 2018. [13] ASIC, (2016), 6-431MR Court fines Sino Australia Oil and Gas Limited and disqualifies former chairman, Tianpeng Shao, https://asic.gov.au/about-asic/media-centre/find-a-media-release/2016-releases/16-431mr-court-fines-sino-australia-oil-and-gas-limited-and-disqualifies-former-chairman-tianpeng-shao/, accessed on 4th January 2018.