Topic 7 - Director's Duties Flashcards
What is the purpose of Duties?
Protect shareholders, company, creditors and employees as well as preventing misuse of power
What comes under Common Law for duties?
Negligence, Contractual Obligations
What comes under Equity for duties?
Fiduciary, Good Faith, Proper Purpose, No secret profits
What are the 2 Fiduciary Duties in Equity?
- Good Faith and Best Interests
- Proper Purpose
Should Director’s consider Creditor’s interests ?
YES
May there be fiduciary duties to INDIVIDUAL Shareholders?
NO –> Unless close ties such as Family
What if an Action is done in good faith but has an improper purpose?
- It is still considered to be INVALID and breach of duty
What if Action is motivated by EXTERNAL Sources and is strategic and defensive?
- Still invalid as its not for ‘proper purpose’
What if a Director had an HONEST BELIEF that the improper purpose was proper?
- NOT VALID
What is a Duty to Retain Discretion?
- Director’s actively exercise power WITHOUT unauthorised delegation
- Director’s must NOT blindly follow others
What are some Remedies for Breach?
- Injunction
- Account of profits
- Rescission
- Constructive trust
Return of misapplied property
What are some Statutory Remedies for Breach?
- Civil penalties (e.g. s 1317H compensation)
- Criminal prosecution (s 184 — if breach is reckless/dishonest)
- Director disqualification
- Derivative action (s 236 CA)
Are officers liable for Insolvent Trading?
No
