Complete ACL Final Exam Notes
LECTURE 5 – DIRECTOR’S DUTIES
Overview of duties
All directors and officers of a corporation are bound by a number of general law and statutory duties. All directors owe the company equitable duties of loyalty and good faith
Act in good faith in the interests of the company
Act for a proper purpose
Avoid conflicts of interest
Retain discretion.
s185 – provides that the duties imposed by the Corporations Act are additional to the duties imposed at the common law and in equity, rather than exclusive of them. Thus a director could be sued for all three types of actions rather than just the Corporations Act.
s180(1) – the duty of care by imposing the same objective standard; is determined by what a reasonable person would do or would have believed. s181 – duties to act in good faith and for a proper purpose ss 182 and 183 – the duty to avoid conflicts of interest by prohibiting directors from making improper use of their office and information.
Problem: the enforcement of these duties and the remedies that flow from the different sources of law.
Addressed by Part 2F.1.A – allowing shareholders to litigate on the company’s behalf in certain circumstances via a statutory derivative action.
ASIC generally enforce the statutory duties arising under the Corporations Act.
Part 2D.1 – duties of company officers reflecting general law principles.
To whom are directors duties owed?
The duty is owed to the company as a whole (company is a separate legal entity) – meaning not the company as an entity outside and apart from its shareholders, but rather the general body of shareholders. Who can sue?
Greenhalgh v Ardene Cinemas Ltd [1951] Ch 286
The principle that only the company could enforce a breach of directors duties leads to the obvious practical problem that the company only acts on the initiative of the directors.
The decision that prevented individual shareholders from taking actions against
Overview of duties
All directors and officers of a corporation are bound by a number of general law and statutory duties. All directors owe the company equitable duties of loyalty and good faith
Act in good faith in the interests of the company
Act for a proper purpose
Avoid conflicts of interest
Retain discretion.
s185 – provides that the duties imposed by the Corporations Act are additional to the duties imposed at the common law and in equity, rather than exclusive of them. Thus a director could be sued for all three types of actions rather than just the Corporations Act.
s180(1) – the duty of care by imposing the same objective standard; is determined by what a reasonable person would do or would have believed. s181 – duties to act in good faith and for a proper purpose ss 182 and 183 – the duty to avoid conflicts of interest by prohibiting directors from making improper use of their office and information.
Problem: the enforcement of these duties and the remedies that flow from the different sources of law.
Addressed by Part 2F.1.A – allowing shareholders to litigate on the company’s behalf in certain circumstances via a statutory derivative action.
ASIC generally enforce the statutory duties arising under the Corporations Act.
Part 2D.1 – duties of company officers reflecting general law principles.
To whom are directors duties owed?
The duty is owed to the company as a whole (company is a separate legal entity) – meaning not the company as an entity outside and apart from its shareholders, but rather the general body of shareholders. Who can sue?
Greenhalgh v Ardene Cinemas Ltd [1951] Ch 286
The principle that only the company could enforce a breach of directors duties leads to the obvious practical problem that the company only acts on the initiative of the directors.
The decision that prevented individual shareholders from taking actions against