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Question: this assignment is about Australian business law. All the requirements are written. I need the solution as per requirements.Please note the following when answering a legal problem question:
a) You should not re-state the question at the beginning of your answer. Go straight to identification of the main issues.
b) You need to provide authority for each legal principle you state in your answer. Wherever possible, you should rely on primary,rather than secondary, sources of law (i.e. cases and legislation rather than textbooks and websites).
c) Your assignment must have footnotes and a bibliography listing the cases, books and or journal articles you used in preparing the answer.
Century Insurance Ltd (Century) is a medium sized general insurance company listed on the ASX. Its main business is conducted in Melbourne and surrounding regions and an important arm of this business is the insurance of houses, farms, cars and other vehicles against property damage. Century has been performing poorly and the directors are hoping to interest other insurance companies in either merging with Century or acquiring its business. For this to happen, Century will need to show improving profit results in the year ending 30 June 2014. A meeting of the board is due to be held on 10 August 2014 to adopt the company's financial report for 2014.
The directors have delegated the responsibility for preparing the company's financial report to Andrew, the Chief Financial Officer (CFO) who is also an executive director.
In preparing the company's financial report, Andrew is aware that he must consider the impact on current year profits of a large bush fire that swept through a large part of Victoria in February, causing extensive damage to many houses, farms and vehicles. In order to do this, Andrew relies on the advice of Linda, a senior property damage assessor and an old school friend of him engaged by Century from Prestige Insurance Assessors Pty Ltd. Linda is also aware of the company's precarious position and unknown to Andrew, chooses to disregard a large number of significant recent claims that fall within the current financial reporting period.
On 1 August 2014, prior to the scheduled board meeting, Andrew meets with the board's audit committee. Joan, Chair of the audit committee, is surprised to hear the relatively low impact of the bush fire damage on the company profits and asks whether Andrew is taking into account the most up to date figures on damage claims. Other audit committee members were relieved to hear that the potential losses do not seem as significant as they had anticipated. In these circumstances, Andrew does not feel it necessary to pursue the provision he has made in his report for future claims associated with the bush fire damage. He signs off on the final financial report.
Andrew's financial report is tabled at the board meeting on 10 August 2014. The figures in the financial report suggest that the company is able to return a small profit in the current year. Joan is still concerned whether the financial report takes into account the most up to date figures on damage claims. However mindful of the company's difficult financial position, Joan endorses the report, relying on Andrew's response to her at the audit committee meeting.
In the light of Joan's endorsement, the board resolves to accept and adopt the financial report. The board is dismayed to learn later that bush fire damage claims have been significantly understated and that Century has in fact incurred a substantial loss in 2014. When the loss figures are revealed in the media, Century's share price plummets and shareholders are threatening a legal action against the company.
What are the full legal responsibilities of Andrewin preparing and approving Century's 2014 Financial Report? Hashe discharged these responsibilities? If not, what are his potential legal liabilities? (You do not need to consider shareholders' remedies in your answer)
What are the full legal responsibilities of Janein approving and endorsing Century's 2014 financial report prepared by Andrew? Have she discharged these responsibilities?
If you are completing this assignment as an individual assignment, answer Question 1. The word limit for your assignment is 1700. If you are completing this assignment as a group assignment, answer both Question 1 and Question 2. The word limit for your assignment is 2100.
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In the present case, a continuous loss of a general insurance company, Century Insurance Ltd (Century), made its directors tensed about its future prospects and thus, they started taking interest towards its merger with other insurance company. In particular, for any kind of business acquisition or merger, the acquiring company looks forward to the growth and the profit margin of the enterprise that can be assimilated.
The reason is linked to the fact that, if such provision is excluded, there will be a tremendous loss to the former company. Furthermore, this calls for the board of directors of Century 2014 to adopt the company’s financial report for 2014. Andrew, being the Chief Financial Officer (CFO) as well as an executive director, was chosen for the responsibility.