Problem -
Spa Town Builder Pty Ltd now has five directors: Trevor, Anant, Paul, Bruce and Melvin. Trevor and Anant are working directors. They manage the day-to-day operations of Spa Town Pty Ltd. Paul is an accountant and he helps out with the production of monthly financial reports for all the directors.
Bruce has attended University and holds an engineering degree and a Masters of Business Administration (MBA). He has a good knowledge of the building industry and the way company finances work.
Melvin is Anant's brother and has had a long history of depression and lack of self-esteem. Trevor and Anant supported Melvin's wish to become a board member even though he offered little by way of expertise. Anant and Trevor thought that it would help Melvin's personal development by giving him a different focus.
Spa town Pty Ltd had a record year in 2015. The directors met in July and decided to pay a dividend of 9c per share.
The company has experienced a severe decline in new contracts in the last two months. This is due in part to a number of cut-price businesses offering budget spa and Saunas. This has placed the company in financial difficulties. Trevor and Anant have been with the company since day one and are attached to the company. It is their main focus and provides them with emotional and financial wellbeing.
Melvin has never read any financial statements that have been sent to him. He did not check the company's financial returns for any of the years before he was appointed and he has never read any reports since he was appointed.
Shareholders of Spa town now number 15 and include the directors and members of the founding family who have held onto shares but take little interest otherwise.
Bruce's brother Doug has a building design company, Doug the Designer Pty Ltd, and Bruce attends its Board meetings and gives advice. Because of his educationand experience the Board of Doug the Designer Pty Ltd follows his directions. Recently, Spa Town Pty Ltd contracted with this company. It was Bruce that convinced the rest of the Board of Spa Town Pty Ltd to enter this contract. It was Bruce that had collected all the quotes for this work and they all exceeded the Doug the Designer Pty Ltd quote. This was due to the fact that Doug the Designer Pty Ltd had put in a quote below the cost price of the work because Bruce had promised more work from Spa Town Pty Ltd in the future.
Paul attended a Board meeting a few months ago and brought with him what he believed was a great idea. His proposal was that the company become involved in constructing cubby houses for children out of the leftover materials from around their building sites. The other Board members were not so convinced but Paul being an accountant produced some very impressive figures based on information from the company's files. The board voted against the proposal after Bruce, with hisMBA training, argued the company should focus on its main game of house building.
Paul is disappointed but yesterday signed a deal with another building company known as Antefixa? Pty Ltd. The deal involves Paul being paid a commission of 10% for every cubby house sold and a place on their Board.
Spa Town Builder Pty Ltd is having financial problems yet the Board continues to allow the company to trade without considering the consequences.
Discuss the statutory and common law positions each of the directors and advise has there been any breached of director's duties and if so by whom and which directors duty has been breached.
It need to be answered in the form of PIRAC base on corporate law.