Company Law
Page 1 of 2

Assessment Brief

Assessment 2: Case Study Assessment

Word Limit: 1500 words (excl. references)Assessment Type: Online Submission

Due date: 9:59am Weds 23 September 2020 (AEST)

Weighting: 40%

Background

You are a graduate rotating through the Commercial Law Department of a Flinders Partners, a national corporate advisory firm.

Task

See attached memorandum from your supervising partner.

Your submission is to be made on the Assignment Two page on Canvas.

Referencing guidelines

You must acknowledge all the sources of information you have used in your assessments.

Compliance with a specific citation style is not required. Harvard style (author, date) or Oxford Style (footnotes) can be used – but should be consistent throughout the document.

A full bibliography is not required.

Refer to the RMIT Easy Cite referencing tool to see examples and tips on how to reference in the appropriated style. You can also refer to the library referencing page for more tools such as EndNote, referencing tutorials and referencing guides.

http://www.lib.rmit.edu.au/easy-cite/
https://www.rmit.edu.au/library/study/referencing
Page 2 of 2

Grading Rubric

[ComLawDept: 21092020]

Internal Memorandum – Not For Distribution

Flinders Partners Consultants and Corporate Advisors

Memorandum Confidential

CC Sharon Murphy Alex Wong

HYDRO FRACKING LTD – CORPORATE GOVERNANCE ISSUES

Our client, Hydro Fracking Limited (‘HFL’), has received an information request from the Australian Securities and Investments Commission (‘ASIC’) relating to conduct of the company and some of its directors. The CEO of HFL has provided us with some instructions on the facts leading up to this request and raised other related corporate governance issues.

The CEO requires our urgent advice and we have a virtual meeting her later in the week.

I am tasking you with:

• Reviewing the client file and the client instructions (both attached); and • Providing me with a memorandum containing your written analysis in response to the

question that I have raised. Please keep your analysis to a maximum of 1,500 words.

Your analysis will help inform our client’s response to ASIC.

Please submit this for my review no later than 9:59am Wednesday 23 September 2020, so that I have sufficient time to consider your analysis on this matter prior to the meeting.

Note that I am on personal leave for the next two days and will not be contactable. If you have any questions or need further information to complete your analysis, please just include this in your memorandum and we can obtain further instructions from the client.

Thanks in advance.

Kind regards,

From To

Michelle M. Moorehouse Senior Partner Commercial Law Department

Date Monday 21 September 2020

Graduate Analyst

[ComLawDept: 21092020]

Internal Memorandum – Not For Distribution

Flinders Partners Consultants and Corporate Advisors

CLIENT FILE EXTRACT

Background

Hydro Fracking Ltd (‘HFL’) is an Australian company incorporated in 2012. The registered

office in is Melbourne and has offices in Adelaide and Perth. HFL does not have a written

constitution. HFL’s corporate mission is to introduce the “Shale Revolution” to Australia by

developing new unconventional gas projects.

Hydraulic fracturing (also known as ‘fracking’) is a process of stimulating oil and gas wells

through high pressure, fracturing shale rock formations and unlocking previously trapped oil or

gas. Fracking – a type of ‘unconventional gas’ – is controversial and is strongly opposed by

environmental activist groups. Generally, gas has a lower emissions profile compared to coal

for energy generation. This finding is disputed by some researchers and remains the subject of

scientific debate. Opponents of fracking also point to the fact that the hydraulic fracturing

process has environmental risks around water usage, water contamination, and other air

contaminants. Accordingly, in jurisdictions where it is permitted, hydraulic fracturing is subject

to stringent environmental regulations. However, the CSIRO notes that “Australia has vast

resources of unconventional gas”1 and Australia’s Chief Scientist has noted that the Federal

government considers natural gas to be a reliable transition fuel.2

The board of Hydro Fracking Ltd consists of five directors:

• Edward is the Chairman of the Board. He does not have any executive role. He is also a director of the South Australian Rural Finance Ltd.

• Louise is the Chief Executive Officer. • Richard is the Chief Financial Officer and the Company Secretary. • Philippa is a non-executive director as nominated by Global Fracking Corporation. • Monique is a non-executive director as nominated by NRG Super.

Shareholding:

HFL is a subsidiary of Global Fracking Corporation (‘GFC’) an American company incorporated in the state of Delaware and listed on the New York Stock Exchange. GFC own 60% of HFL’s shareholding. The remainder of the shares are held by institutional investors, including NRG Super, an Australian industry superannuation fund.

Insurance:

All directors hold a Directors’ & Officers’ Liability Insurance in the amount of $10 million each.

1 See eg, . 2 See eg, .

[ComLawDept: 21092020]

Internal Memorandum – Not For Distribution

Flinders Partners Consultants and Corporate Advisors

CLIENT INSTRUCTIONS

A number of issues are brought to our attention:

In February 2020, HFL concluded a deal for the grant of an exclusive license over land in the Cooper Basin in South Australia. This will allow HFL to begin exploratory assessments for unconventional gas. The owner of the land, Matheson Pty Ltd, will be paid $1.2 million per year for three years. Edward was in charge of the process of securing the land license as delegated by the board. Even though other land in the area was also available, Edward was only ever in discussions with Herbert Matheson, the sole director of Matheson Pty Ltd. It is now discovered that Herbert Matheson has significant personal debts that are owed to the South Australian Rural Finance Ltd, after a long drought. The license fees will allow Herbert Matheson to pay off all of his debts and avoid bankruptcy. Edward did not provide a formal report to the board but the other directors were pleased that access to land has been obtained. At a directors’ meeting, the directors voted to approve the deal and give Edward and Richard the authority to execute the contracts in HFL’s name.

In August 2020, HFL’s accountants discovered a number of financial irregularities. It was revealed that a total of seven false invoices had been paid by HFL’s accounts payable team –

amounting to $275,000. The invoices were discovered because the ABN and business name on the invoices had been faked and the GST component of the invoice was incorrectly calculated. It was revealed that the bank account on the fake invoices was traced to Edward’s wife. When Edward was confronted by Louise, he claimed that he had gambling debts and needed the extra money. He has agreed to pay all of the money back but is refusing to resign from the company.

Philippa and Monique are furious at this incident – not just because of Edward’s fraud but because earlier this year the board had delegated Louise and Richard the responsibility of implementing a new financial management system that was meant to use the latest Artificial Intelligence and Machine Learning technologies to immediately detect suspicious invoices. However, because Louise and Richard were too busy, this job was delegated to an external contractor to manage. Unfortunately there were several flaws in the computer software which a competent IT person would have recognised and fixed. Louise is embarrassed about this.

In September 2020, NRG Super made a formal complaint to ASIC that alleging that the executive directors are “unfit to hold office”. They also claimed that the company were full of “carbon criminals” that were wrecking the environment – although it did not provide any further evidence of this. NRG Super wants to pull its investment from HFL and cut any further association with the company. Accordingly, NRG Super directs Monique to resign. At 3:15pm on Friday 18 September 2020, Monique telephones Louise and says “I am calling to resign as a director of HFL effective immediately, please do not contact me again.”

[ComLawDept: 21092020]

Internal Memorandum – Not For Distribution

Flinders Partners Consultants and Corporate Advisors

REQUIRED QUESTIONS

1. Louise is worried about being called a “carbon criminal”. She recently heard a conference

presentation where the presenter emphatically claimed, “Directors have a duty under the

Corporations Act to ensure their company mitigates against the risks of climate change.”

Evaluate the truth of this statement.

(5 marks)

2. Advise Louise as to whether there is any merit to ASIC bringing any action against any or all

the directors for a breach of their statutory duties as directors of HFL. If ASIC are successful,

outline the potential penalties or remedies that a court could impose against the directors.

(Note: consider only statutory duties, but you should refer to case law as relevant)

(25 marks)

3. Louise wants to remove Edward from the Board of Directors. Consider each of the following

possibilities and discuss any procedural requirements.

(a) If Victoria Police charge Edward with “obtaining financial advantage by deception”

(an indictable offence under section 82 of the Crimes Act 1958 (Vic) carrying a maximum sentence of 10 years imprisonment), will he automatically cease to be

a director of HFL?

(b) Can the Board remove Edward as a director of HFL?

(c) Can GFC remove Edward as a director of HFL?

(2.5+2.5+2.5 = 7.5 marks)

4. Advise Louise as to whether Monique has validly resigned as a director of the company.

(2.5 marks)

(TOTAL: 40 MARKS)

LAW2450 Assessment Two Brief – S2 2020
Memorandum to Graduate – 21 September 2020
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Assessment2-BriefandCaseStudyProblem-21September20202.pdf
Home>Law homework help>Company Law
Page 1 of 2

Assessment Brief

Assessment 2: Case Study Assessment

Word Limit: 1500 words (excl. references)Assessment Type: Online Submission

Due date: 9:59am Weds 23 September 2020 (AEST)

Weighting: 40%

Background

You are a graduate rotating through the Commercial Law Department of a Flinders Partners, a national corporate advisory firm.

Task

See attached memorandum from your supervising partner.

Your submission is to be made on the Assignment Two page on Canvas.

Referencing guidelines

You must acknowledge all the sources of information you have used in your assessments.

Compliance with a specific citation style is not required. Harvard style (author, date) or Oxford Style (footnotes) can be used – but should be consistent throughout the document.

A full bibliography is not required.

Refer to the RMIT Easy Cite referencing tool to see examples and tips on how to reference in the appropriated style. You can also refer to the library referencing page for more tools such as EndNote, referencing tutorials and referencing guides.

http://www.lib.rmit.edu.au/easy-cite/
https://www.rmit.edu.au/library/study/referencing
Page 2 of 2

Grading Rubric

[ComLawDept: 21092020]

Internal Memorandum – Not For Distribution

Flinders Partners Consultants and Corporate Advisors

Memorandum Confidential

CC Sharon Murphy Alex Wong

HYDRO FRACKING LTD – CORPORATE GOVERNANCE ISSUES

Our client, Hydro Fracking Limited (‘HFL’), has received an information request from the Australian Securities and Investments Commission (‘ASIC’) relating to conduct of the company and some of its directors. The CEO of HFL has provided us with some instructions on the facts leading up to this request and raised other related corporate governance issues.

The CEO requires our urgent advice and we have a virtual meeting her later in the week.

I am tasking you with:

• Reviewing the client file and the client instructions (both attached); and • Providing me with a memorandum containing your written analysis in response to the

question that I have raised. Please keep your analysis to a maximum of 1,500 words.

Your analysis will help inform our client’s response to ASIC.

Please submit this for my review no later than 9:59am Wednesday 23 September 2020, so that I have sufficient time to consider your analysis on this matter prior to the meeting.

Note that I am on personal leave for the next two days and will not be contactable. If you have any questions or need further information to complete your analysis, please just include this in your memorandum and we can obtain further instructions from the client.

Thanks in advance.

Kind regards,

From To

Michelle M. Moorehouse Senior Partner Commercial Law Department

Date Monday 21 September 2020

Graduate Analyst

[ComLawDept: 21092020]

Internal Memorandum – Not For Distribution

Flinders Partners Consultants and Corporate Advisors

CLIENT FILE EXTRACT

Background

Hydro Fracking Ltd (‘HFL’) is an Australian company incorporated in 2012. The registered

office in is Melbourne and has offices in Adelaide and Perth. HFL does not have a written

constitution. HFL’s corporate mission is to introduce the “Shale Revolution” to Australia by

developing new unconventional gas projects.

Hydraulic fracturing (also known as ‘fracking’) is a process of stimulating oil and gas wells

through high pressure, fracturing shale rock formations and unlocking previously trapped oil or

gas. Fracking – a type of ‘unconventional gas’ – is controversial and is strongly opposed by

environmental activist groups. Generally, gas has a lower emissions profile compared to coal

for energy generation. This finding is disputed by some researchers and remains the subject of

scientific debate. Opponents of fracking also point to the fact that the hydraulic fracturing

process has environmental risks around water usage, water contamination, and other air

contaminants. Accordingly, in jurisdictions where it is permitted, hydraulic fracturing is subject

to stringent environmental regulations. However, the CSIRO notes that “Australia has vast

resources of unconventional gas”1 and Australia’s Chief Scientist has noted that the Federal

government considers natural gas to be a reliable transition fuel.2

The board of Hydro Fracking Ltd consists of five directors:

• Edward is the Chairman of the Board. He does not have any executive role. He is also a director of the South Australian Rural Finance Ltd.

• Louise is the Chief Executive Officer. • Richard is the Chief Financial Officer and the Company Secretary. • Philippa is a non-executive director as nominated by Global Fracking Corporation. • Monique is a non-executive director as nominated by NRG Super.

Shareholding:

HFL is a subsidiary of Global Fracking Corporation (‘GFC’) an American company incorporated in the state of Delaware and listed on the New York Stock Exchange. GFC own 60% of HFL’s shareholding. The remainder of the shares are held by institutional investors, including NRG Super, an Australian industry superannuation fund.

Insurance:

All directors hold a Directors’ & Officers’ Liability Insurance in the amount of $10 million each.

1 See eg, . 2 See eg, .

[ComLawDept: 21092020]

Internal Memorandum – Not For Distribution

Flinders Partners Consultants and Corporate Advisors

CLIENT INSTRUCTIONS

A number of issues are brought to our attention:

In February 2020, HFL concluded a deal for the grant of an exclusive license over land in the Cooper Basin in South Australia. This will allow HFL to begin exploratory assessments for unconventional gas. The owner of the land, Matheson Pty Ltd, will be paid $1.2 million per year for three years. Edward was in charge of the process of securing the land license as delegated by the board. Even though other land in the area was also available, Edward was only ever in discussions with Herbert Matheson, the sole director of Matheson Pty Ltd. It is now discovered that Herbert Matheson has significant personal debts that are owed to the South Australian Rural Finance Ltd, after a long drought. The license fees will allow Herbert Matheson to pay off all of his debts and avoid bankruptcy. Edward did not provide a formal report to the board but the other directors were pleased that access to land has been obtained. At a directors’ meeting, the directors voted to approve the deal and give Edward and Richard the authority to execute the contracts in HFL’s name.

In August 2020, HFL’s accountants discovered a number of financial irregularities. It was revealed that a total of seven false invoices had been paid by HFL’s accounts payable team –

amounting to $275,000. The invoices were discovered because the ABN and business name on the invoices had been faked and the GST component of the invoice was incorrectly calculated. It was revealed that the bank account on the fake invoices was traced to Edward’s wife. When Edward was confronted by Louise, he claimed that he had gambling debts and needed the extra money. He has agreed to pay all of the money back but is refusing to resign from the company.

Philippa and Monique are furious at this incident – not just because of Edward’s fraud but because earlier this year the board had delegated Louise and Richard the responsibility of implementing a new financial management system that was meant to use the latest Artificial Intelligence and Machine Learning technologies to immediately detect suspicious invoices. However, because Louise and Richard were too busy, this job was delegated to an external contractor to manage. Unfortunately there were several flaws in the computer software which a competent IT person would have recognised and fixed. Louise is embarrassed about this.

In September 2020, NRG Super made a formal complaint to ASIC that alleging that the executive directors are “unfit to hold office”. They also claimed that the company were full of “carbon criminals” that were wrecking the environment – although it did not provide any further evidence of this. NRG Super wants to pull its investment from HFL and cut any further association with the company. Accordingly, NRG Super directs Monique to resign. At 3:15pm on Friday 18 September 2020, Monique telephones Louise and says “I am calling to resign as a director of HFL effective immediately, please do not contact me again.”

[ComLawDept: 21092020]

Internal Memorandum – Not For Distribution

Flinders Partners Consultants and Corporate Advisors

REQUIRED QUESTIONS

1. Louise is worried about being called a “carbon criminal”. She recently heard a conference

presentation where the presenter emphatically claimed, “Directors have a duty under the

Corporations Act to ensure their company mitigates against the risks of climate change.”

Evaluate the truth of this statement.

(5 marks)

2. Advise Louise as to whether there is any merit to ASIC bringing any action against any or all

the directors for a breach of their statutory duties as directors of HFL. If ASIC are successful,

outline the potential penalties or remedies that a court could impose against the directors.

(Note: consider only statutory duties, but you should refer to case law as relevant)

(25 marks)

3. Louise wants to remove Edward from the Board of Directors. Consider each of the following

possibilities and discuss any procedural requirements.

(a) If Victoria Police charge Edward with “obtaining financial advantage by deception”

(an indictable offence under section 82 of the Crimes Act 1958 (Vic) carrying a maximum sentence of 10 years imprisonment), will he automatically cease to be

a director of HFL?

(b) Can the Board remove Edward as a director of HFL?

(c) Can GFC remove Edward as a director of HFL?

(2.5+2.5+2.5 = 7.5 marks)

4. Advise Louise as to whether Monique has validly resigned as a director of the company.

(2.5 marks)

(TOTAL: 40 MARKS)

LAW2450 Assessment Two Brief – S2 2020
Memorandum to Graduate – 21 September 2020
Applied Sciences
Architecture and Design
Biology
Business & Finance
Chemistry
Computer Science
Geography
Geology
Education
Engineering
English
Environmental science
Spanish
Government
History
Human Resource Management
Information Systems
Law
Literature
Mathematics
Nursing
Physics
Political Science
Psychology
Reading
Science
Social Science
Home
Homework Answers
Blog
Archive
Tags
Reviews
Contact
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