Part B

Question 1
1. Did Mr. Daly breach any directors’ duties? If so, which ones and how?
Yes, Mr. Daly breached the duty as an executive director of the Linchpin Company.
1) Act against the interest of the investors.
The fund that came into the company was the amount the investors invested so as to get 8%
return from their investment in diversified portfolio as disclosed in the PDS of the company.
However, the majority of the funds were not invested in the areas as stated in the PDS. Thus, the
investors were misled. As an executive director Mr. Daly must have made sure that the company
worked in the best interest of the investors.
2) Self interested transactions with the company
Mr. Daly took loan from the company for his personal use. The collateral against the loans were
the shares of the company that he owned which were not registered. It's simply siphoning the
fund off the company into illegitimate direction.
3) Misappropriation of the fund
The funds were allocated to the directors, parties related to the directors, associates of the
directors and expansion of private business and loans. As a director of the company Mr Daly
should have controlled such misappropriation of the fund and directed the funds into the
legitimate purpose.
4) Improper use of information
The PDS of the company stated that, the investors funds be used in the diversified portfolio such
as direct property, lease financing, construction and development. However, most of the funds
were used for the private expansion of the business. Hence Mr. Daly breached the duty to
disseminate proper information to the stakeholders.
5) Disclosure
The Company operated an unregistered fund which was not explicitly disclosed to the investors.
Thus Mr. Daly breached the duty to disclose significant information to the investors.

Question 2
Did any of the other directors breach their duties? If so, who, which duty and how?
Yes, Mr. Raftery also breached the director's duty. Mr. Raftery took the personal loan from the
company for settlement of his divorce fee. This lead him to breach the duties because he
misappropriated the fund of the company, acted against the best interest of the company and
conducted the self interested transactions with the company. The collateral used for the loan was
the shares of the company owned by Mr. Raftery. It was found that the collateral were
unregistered and thus unsecured. Thus, Mr. Raftery used the funds of the investors for
unlegitimate purpose.
Similarly he can be accused of using the information improperly to mislead the investors and to
allow insufficient disclosure of the information.