LAWS3100 Final: Director Duties 1 (Chap 11)
OVERVIEW
Lecture 6: (Chapter 11)
SUMMARY OF THE DUTIES
The duties can be divided into 2 categories:
1) Loyalty and good faith
2) Care and diligence
Both categories exist under general and statute law.
General law duties are enforced by the company.
Statutory duties are enforced by the ASIC
The general law duty of loyalty and good faith can be divided into 4 specific duties. They are:
-the duty to retain discretions
-The duty to act in good faith in the interests of the company
-The duty to act for a proper purpose
-The duty avoid conflicts of interest
find more resources at oneclass.com
find more resources at oneclass.com
Who owes the duties?
General law duties are owed by:
- Directors
-Senior executive officers who, like directors, can be regarded as fiduciaries.
This means directors and senior executive officers are expected to act in the interests in the company, since
they are in a fiduciary relationship with the company.
Fiduciary: a person who is expected to act in the interest of another person. Fiduciaries cannot use their
knowledge or position to benefit themselves rather than the person on whose behalf the fiduciary is required
to act.
It is common for those executive directors and other senior executive officers to have contracts with their
companies. These contracts will usually impose particular duties on the officers.
Statutory duties:
-apply to directors (including de facto directors and shadow directors)
Several statutory duties apply only to directors and not other officers.
In particular
S2588G, which imposes a duty upon company directors not to have their company trade while it is insolvent,
applies only to directors.
S191: The statutory duty to disclose material personal interests applies only to directors and not other
officers.
———
2 statutory duties that apply not only to directors and other officers, but also to employers of a company.
s182 and 183 of the Corp Act “not to make make improves use of position or information” - also apply to
employees.
To whom are the duties owed?
Duties are owed to the company
Duties may be owed to an individual member. (Brunninghausen v Glavanics)
Who enforces the duties? (More in Chapter 15)
Depends on the type of duty (general law or statutory)
Statutory duties are enforced by ASIC while general law duties are enforced but the company of which the
person is a director or other officer. (or a liquidator if company is being wound up) The liquidator may sue
the director for breach of duty where the liquidator believes the director will bye ordered by the court to pay
compensation to the company as a result of the breach of duty. This means that the liquidator, when winding
up the company, will have additional funds to pay to the company’s creditors and members.
What are the consequences of breaching a duty? (More in Chapter 15 and 16)
Depends on the type of duty (general law or statutory)
The statutory duties imposed upon directors and other officers are civil penalty provisions (under Pt 9.4B
of the Act). These duties are enforced by ASIC
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
The duties can be divided into 2 categories: loyalty and good faith, care and diligence. Both categories exist under general and statute law. General law duties are enforced by the company. The general law duty of loyalty and good faith can be divided into 4 speci c duties. The duty to act in good faith in the interests of the company. The duty to act for a proper purpose. Senior executive of cers who, like directors, can be regarded as duciaries. This means directors and senior executive of cers are expected to act in the interests in the company, since they are in a duciary relationship with the company. Fiduciary: a person who is expected to act in the interest of another person. Fiduciaries cannot use their knowledge or position to bene t themselves rather than the person on whose behalf the duciary is required to act.
