BLAW20001 Lecture Notes - Lecture 8: Aberdeen Railway, Public Company, Civil Penalty
19 Jun 2018
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CORPORATE LAW WEEK 8
Duty to avoid conflicts of interest
Duty to Avoid conflicts of interest: Director must avoid an actual or substantial possibility of conflict between a
personal interest and the director’s duty to act in the best interests of the company. Unless the permission of the
company is obtained or the constitution allows the director to have personal interest in the transaction, in which case
there will be no breach of duty. The director has both general law and statutory duties.
Difference between general law and statutory duty: Statute has extra provisions regarding conflict
s 191: Directors only.
s 195:
statutory duties apply more widely than general law, which mainly considers directors being in a position where there
is reliance and trust taken in them.
s 182:
s 183:
General law conflict rule: a very strict duty designed to protect shareholders. This can arise where the director
contracts with the company. A directors interest in the transaction may be direct or indirect Aberdeen Railway.
Matters considering taking a corporate opportunity or property include: Furs Ltd; Cook v Deeks and Peso Silver
Mines. A Director will be in breach even if the company cannot itself take up the opportunity, unless the company
agrees Regal (Hastings). Matters considering whether a director can resign to take up an opportunity are considered in
Canadian Aero Service.
Conflict of Duties: A director must avoid an actual or substantial possibility of a conflict between the director’s duty
to the company and the directors duty to someone else e.g. another company. South Australia v Marcus Clark.
In order to avoid a conflict arising: a company consents that full disclosure made to members in general meeting and
members pass an ordinary resolution approving it; or constitution permits ‘conflict’ with full disclosure to board, and
full disclosure is made; or the constitution modifies the duty e.g. expressly allows personal gains.
Disclosure of interest:
s 191: director must disclose material personal interest to the board unless exempt. Failure to disclose is a breach of
duty and is seen as a criminal breach.
s 192: Directors can give standing notice of personal interest.
s 193: disclosure is in addition to general law disclosure duties and any other requirements of constitution.
s 194 [RR]: Pty Ltd company directors can have interest and vote. However doesn’t permit them to breach their duties
to the company.
Voting restrictions- Public company directors:
s 195: director with a material personal interest in a matter being considered by the board must not be present or vote
at the meeting, unless other directors(deciding in best interest of company) (or ASIC in limited circumstances) allow
it. If breached it is a criminal breach.
Improper use of position or information: ASIC v Vizard
Directors are not allowed to use their position (s 182) or information obtained in that position (s 183) to gain
advantage for themselves or someone else, or to cause detriment to the company.
Breach of conflict of interest or disclosure duties: Statutory provisions:
s 191: Fine $2,100 and/or 3 months
s 195: Fine $1,050
s 182 and s 183: Civil penalty provisions.
s 184(2) and s 184(3): Criminal offence provisions
Related party transactions: Ch 2E 5 requirements
s 208: public companies, or company(pty or pty ltd) controlled by a public company
s 229(1): Very broad. Giving financial benefits. Can include interposed entities (i.e. indirectly providing the benefit)
s 229(3): including buying, selling or leasing assets or services, providing finance or issuing shares.
s 228: To related parties s 228(1):entities that control the public company s 228(2)(a): directors of the public company
s 228(2)(b): directors of controlling entity s 228(2)(d): spouses of directors of above s 228(3): parents or children of
the above and s 228(4): entities controlled by any of the above.
Okay if member approval is given (special rules apply) or the benefit is exempt.
find more resources at oneclass.com
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Document Summary
Duty to avoid conflicts of interest: director must avoid an actual or substantial possibility of conflict between a personal interest and the director"s duty to act in the best interests of the company. Unless the permission of the company is obtained or the constitution allows the director to have personal interest in the transaction, in which case there will be no breach of duty. The director has both general law and statutory duties. General law conflict rule: a very strict duty designed to protect shareholders. This can arise where the director contracts with the company. A directors interest in the transaction may be direct or indirect aberdeen railway. Matters considering taking a corporate opportunity or property include: furs ltd; cook v deeks and peso silver. A director will be in breach even if the company cannot itself take up the opportunity, unless the company agrees regal (hastings).
