Restraint of trade clauses in commercial contracts

A restraint of trade occurs where one party (Covenantor) agrees with another party (Covenantee) to restrict their liberty in the future to carry on trade with other persons who are not parties to the contract see: Petrofina (Gt Britain) Ltd v Martin [1966] Ch 146 at 180.

Restraints of trade clauses are prima facie void, however, the presumption can be rebutted if the restraint is justified because it is reasonable in the circumstances.    Note that there is a significant divide between restraints in commercial contracts and those in employment contract with the latter being widely accepted as only being enforceable for a far shorter period of time. [Read more…]

Loans from Directors – can they be recalled at will?

It’s not uncommon for Directors or family members to loan money to a proprietary limited company which they are on the board of or where they are related to the major shareholders.  In most of these cases the Director is also a representative of the shareholder.  In a lot of cases, there is no express written terms of the loan and where there are multiple directors that represent all equity holders, they have all contributed funds equally.  Subsequently the question often arises as to whether or not the loan is repayable on demand. [Read more…]

Can a third party be made to account for a breach of director’s duties?

It is an unfortunate reality that some directors of companies of all sizes engage in conduct that breaches their legal responsibilities.  In circumstances where a Court finds that the conduct of the director breached the standard of care that they owed, the Court has the power to award damages.  What happens, however, where a third party has received a benefit (knowingly or unknowingly) as a result of the director’s breach – can that third party be held accountable? [Read more…]

Holding company liability for debts of subsidiary

When advising on the suitability of corporate structures, we are commonly asked whether a holding company can be liable for the debts of a subsidiary.  The answer (of course) depends on a number of factors. [Read more…]

ASIC v Macdonald – have the lessons been forgotten?

The case of Australian Securities and Investments Commission v Macdonald (No 11) [2009] NSWSC 287 (ASIC v Macdonald) decided in the New South Wales Supreme Court, highlights the importance of strict adherence to the requirements of the Corporations Act 2001 (Cth) (Act) when preparing minutes of Directors’ meetings (Board Meetings) for them to be relied upon as evidence in a proceeding. [Read more…]

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