Reference no: EM133799250

Question

Michael is the managing director of Forever Beautiful Ltd (FBL), a company specialising in selling beauty products. Shalini works as the marketing manager of another company selling beauty products too. Michael and Shalini were classmates while doing a double degree in Commerce and Law. Michael met Shalini last year for the first time since their graduation from the university in 2021. While discussing their respective careers, Shalini asks Michael if he would be interested in helping her to market a new product 'Be Blonde', a product supposed to stop hair from going grey. Michael says he does not think the company he works for would be interested as FBL has almost a similar product. However, Michael tells Shalini that he personally would be interested in marketing 'Be Blonde' and suggests he and Shalini set up a company together called Bright Spark Pty Ltd (BSPL). BSPL becomes an overnight success. Michael and Shalini are the only shareholders and directors. Seven months later, BSPL is finding it difficult to market its product and there have been some serious customer complaints. Michael gets desperate to find ways of selling more BSPL products. He suggests to the Board of FBL that they should diversify and market BSPL products. The other directors agree. They also agree that Michael should receive a commission on each sale of a BSPL product by FBL stores. Michael did not disclose his connection with Bright Spark Pty Ltd but thought that most of the Board of FBL would know of this connection as he and Shalini had been featured in the media.

Assume that Mary, one of the shareholders of FBL finds out about the Board of FBL paying Michael these commissions. She is angry as she was one of those customers who had complained to BSPL about "Be Blonde" and was ignored. Mary knows Michael is involved in BSL. She reports the matter of the commissions to the corporate regulator, ASIC.

1. To whom does Michael owe duties as the managing director of FBL?

2. Identify and explain the duties Michael owes in his capacity as a director of FBL.

3. Has Michael breached any of his statutory duties under the Corporations Act, 2001? If yes, what are the possible consequences of these breaches?