Tom Joseph and Nancy Case Study - Annual General Meeting - Separate Legal Entity - Law Assignment Help

Assignment Task:

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Beauty for Ashes is an Australian based entity. At their 2015 Annual General Meeting, Tom, Joseph and Nancy were appointed as Directors. Soon after the annual general meeting, Joseph got married to Sofia, who lives in Greece. Sofia is not interested in relocating to Australia and as a result, Joseph spends most of his time in Greece and is unable to manage the daily affairs of the company. Tom who is a 16-year-old computer geniusis an ACU student and oversees the technical aspect of the business. Nancy runs the daily affairs of the company and is dating Fred Pucker.

In 2015, Beauty for Ashes successfully took out a loan with Diamond Bank of Australia to expand its business. The transaction was carried out exclusively by Nancy (who provided all the necessary paperwork to cover the guarantee for the loan) as she was responsible for the daily affairs of the company. Six months later, Nancy approached Diamond Bank of Australia for additional funds for Beauty for Ashes, based on the same collateral as previously provided. Nancy signed the paperwork as a Director of Beauty for Ashes, forged Joseph’s signature and represented to Diamond Bank of Australia that Fred was the Company Secretary of Beauty for Ashes.

Upon approval of the loan by Diamond Bank of Australia, Nancy and Fred absconded. The loan later fell due and Diamond Bank of Australia sought to take possession of Beauty for Ashes’ property used as guarantee for the loan.

The following has been alleged:
(a) The doctrine of separate legal entity applies, and the directors should not be responsible.
(b) That all the directors are in breach of their duties as directors
(c) That both loans were not obtained by the Company,
(d) That Nancy and Fred forged Joseph’s signature and fraudulently obtained the second loan from Diamond Bank of Australia, and
(e) That the last appointment of directors was irregular.

Questions
1. Does the doctrine of separate legal entity apply to these facts? Explain using relevant case law.

2. Please advise the company on the issues raised in (be) above.

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