Directors' Duties Flashcards
Who do directors owe a duty to?
The company rather than to members/shareholders
What type of duty do directors have as agents of the company?
Fiduciary duty
What is the statutory duty under S171?
Duty to act within powers:
a. in accordance with company’s constitution
b. only exercising powers for the purposes for which they are conferred
What is the focus of the duty under S172?
Promote the success of the company for the benefit of the members as a whole
What considerations must directors take into account under S172?
- Long-term plan
- Employees’ interests
- Impact on community
- Reputation
- Need to act fairly
What does S173 require from directors?
Duty to exercise independent judgement (individual duty)
What does S174 state about directors’ duty?
Duty to exercise reasonable care, skill, and diligence
What standard must a director meet according to S174?
a. The skill that may reasonably be expected of someone in that role (objective)
b. The general knowledge, skill and experience of that director
What is the focus of the duty under S175?
Avoid conflicts of interest - applies to the exploitation of property, information or opportunity
What happens if a director resigns to exploit a corporate opportunity?
They cannot merely resign to exploit a corporate opportunity
Can a conflict of interest be authorised?
Private company - yes, if independent director authorises it
Public company - yes, if the constitution permits
What does ‘competing directorships’ refer to?
The equitable position preventing a fiduciary from entering into a position that gives rise to conflicting fiduciary duties without the informed consent of both parties. This duty is not infringed if the situation cannot reasonably be regarded as likely to give rise to a conflict of interest
Under MA14, what restriction is placed on directors if there is a conflict of interest?
They may not vote or count in the quorum in relation to transactions in which they have an interest
What duty is s176?
Duty not to accept benefits from third parties. The duty is not breached if the acceptance of the benefit cannot reasonably be regarded as likely to give rise to a conflict of interest.
Can other directors authorize an arrangement under S176?
No, other directors cannot authorize an arrangement.
What is S177?
The duty to declare an interest in proposed transactions - this applies to proposed transactions and existing transactions, as well as indirect interests (e.g through a spouse)
How can a declaration be made under S177?
A declaration can be made at a board meeting or in advance of the board meeting.
When is a declaration not required under S177?
A declaration is not required when:
- The director is not aware of the interest or transaction
- If the interest cannot reasonably be regarded as likely to give rise to a conflict of interest
- If the conflict arises because it concerns their service contract.
What does MA14 state about directors interested in a transaction?
A director who is interested in a transaction cannot vote on or count in the quorum for board resolutions in respect of that transaction.
Can the restriction in MA14 be disapplied?
Yes, it can be disapplied by ordinary resolution.
Can MA14 be removed?
Yes, MA14 can be removed.
