Decide to take the first step and call us today 1300 LEGAL HELP

Blog

Our recent articles

Subscribe here for articles and podcasts on all the latest and most relevant legal issues. If you need some info for your SMSF, you’re being chased by a regulator or someone has slapped you with a law suit, there is something here than can help you get started. If you can't find your answer here, call us on 1300 LegalHelp and we will get an answer for you.


Network Ten's Shark Tank backed iCapsulate feeling the bite for breaching director duties

Simon discusses the breach of director duties in failed iCapsulate - the biggest on camera deal for Network Ten's Shark Tank - which has recently gone into administration

Hailed as the single largest ever capital raise by an investor on the often over-hyped Shark Tank Australia TV show, iCapsulate looked to have secured a $2.5m injection from Shark member Andrew Banks, founder of Morgan & Banks recruitment firm.

However, things are rarely as they seem. After more than 8 months following the on-air deal, due diligence was ongoing. Banks ultimately pulled out.

Things went from bad to worse with iCapsulate placing itself in administration over what was alleged to be a dispute between its shareholders and directors. After careful examination, the administrator concluded that there were a number of potential grounds upon which an action for breach of directors duties could be brought.

The purported breaches concerned the questionable movement of assets shortly before the time of the company was placed into administration. It is further alleged that a director registered security interests in his personal capacity claiming to be acting as agent for international creditors. Finally, evidence was uncovered that suggested the company may have been trading while insolvent.

Actions of this kind may be considered an attempt by the directors to secure personal gain by seeking to be ranked as a priority creditor, obstruct asset recovery and frustrate the role of the administrator.

This event serves as a timely reminder to directors of the statutory duties imposed upon them at all times throughout their directorship. Directors ought to ensure they are mindful of their obligations and must avoid exercising their powers for personal gain or attempting to frustrate the recovery rights of creditors.

Directors should regularly remind themselves of the duties the law imposes on them. Directorship creats a fiduciary relationship - one of trust and responsibility - between a director and the company’s shareholders and stakeholders. Key director duties include:

  • to act in good faith in the best interests of the company and for a proper purpose;
  • to exercise care and diligence;
  • to avoid conflicts between the interests of the company and their personal interests;
  • to prevent the company trading while insolvent (i.e. while it is unable to pay its debts as and when they fall due); and
  • if the company is nearing or in the process of external administration, actively cooperate and assist the administrator/liquidator in relation to the affairs of the company.

For any questions around how you can ensure you are properly discharging your duties as a director, or for any questions relating to corporate law, please contact Simon Lenton.

  • Share this article: