Directors ' Duties And Company Law

In order to prove the breach of section 184, the following rules and duties must have been violated. A director commits an offence if they are reckless or intentionally dishonest, and fail to exercise their powers and discharge their duties in good faith in the best interests of the corporation or for a proper purpose .As mentioned earlier Mr Palmer was reckless in decision making by waving loans and using the company assets for private benefits and the company suffered had to go in voluntary administration. The second offence that needs to the violation of section 184 is that when a director commits an offence if they use their position with intentional dishonesty or recklessly in order to directly or indirectly gain an advantage for themselves, or someone else, or cause detriment to the corporation. Mr Palmer acted as a shadow director and his nephew agreed with all the decisions the corporation made such as political donations and transferring funds to another firms owned by Mr Palmer that caused detriment to Queensland Nickel. The third offence is a person who obtains information because they are, or have been, a director of a corporation commits an offence if they use the information with intentional dishonesty or recklessly. As

They are liable of facing the civil penalties as mentioned in part 9B of corporation act 2001. The Australian Securities and Investment Commission (ASIC) is the national body responsible for company registration and securities regulation in Australia. Under section 1317J(1) of the Corporations Act, ASIC can apply to the court for disqualifying the directors from managing corporations. Under section 206C of corporate act 2001, court possess a power to disqualify a person from managing affirm for a contravention of a civil penalty provision.

In many misfeasance cases against directors, those breaches maybe relatively uncontroversial. This draws into focus the question of whether the director has any common law or statutory defence, including the Duomatic principle and ratification by shareholders (CA 2006 S.239), available to a claim against him for restitution to the company. S.239(6)(a) preserves the Duomatic rule that if an informal unanimous consent is reached among voting shareholders, it is unnecessary to pass such ratification resolution through general meeting or written resolution. The first part will examine the scope and requirements of this rule to illustrate the validity of such assent. S.239(7) leaves the door open for rules of law, which refers to common law principles, to continue guiding ratification. It will be assessed how these rules impose limitations on the general ratification power conferred by s.239.

According to the pro and contra Section 203D and 203E of the Corporations Act as above, most judges and scholars agree that the procedure of removal directors as stipulated in the Corporations Act provides fairness treatment for the directors who may be removed. However, they still strongly argue whether the Section 203D is mandatory or not. Moreover, they questioned the existence of Section 203E since it eliminates flexibility for companies to make decision particularly in the emergency situation as explained above. Therefore, in order to provide broader perspectives about the relevancy of Section 203D and Section 203E, it is necessary to compare the procedure of removal directors in the Australian legislation with the

According to UK Law, the directors should act in good faith in the interest of the company, and exercise care and skill in carrying out their duties. The Company Law Reform Bill (2005) defines, in section 154-161, the directors’ duties as follows:

In large corporations the success or failure of the company is the responsibility of the board of directors. According to Richard DeGeorge, “The members of the board are responsible to the shareholders for the selection of honest, effective managers, and especially for the selection for the CEO and of the president of the corporation.” (p. 202). The board members have a moral responsibility to ensure the corporation is run honestly, in respect to its major policies, and to ensure the interests of the shareholders are satisfied. The next responsibility within a corporation is the responsibility management has to its board of directors. DeGeorge writes, “It must inform the board of its actions, the decisions it makes or the decisions to be made, the financial condition of the firm, its successes and failures, and the like.” (p. 202). The management of the corporation is morally obligated to

Equitable principles for directors were developed from fiduciary duties applied to trustees through common law. A director has a fiduciary duty to ensure that no conflict of interest exists between him and the company. This common law principle “the no conflict rule” was established in Keech v Sandford.7 Upholding this, Lord Cranworth LC held in Aberdeen Railway Co v Blaikie Bros,8 “And it is a rule….no one....shall be allowed to enter into engagements in which he has, or can have, a personal interest conflicting, or which possibly may conflict, with the interests of those whom he is bound to protect.” This principle was encompassed in the Companies Act 2006:

There is a conflict of interest involved between the two parties. As mentioned in the Business Corporation Act of Ontario which claims that every director and officer of a corporation within his powers act honestly and in good faith and must vote in best interest of the corporation. Also, the director should exercise the care, diligence and skill that a reasonable person would exercise in this situation.

The removal of a director by the board in the FDC case creates legal and ethical issues, which ultimately led to the onset of commercial issues. Despite the legal, ethical and commercial issues, this case is strongly indicated that there are some problems in the mechanism of removal directors stipulated in the Corporations Act 2001 (Cth) (“Corporations Act”) S 203D and S 203E. This indication is underpinned by some cases in the Australian court in which directors are removed also by the board. Therefore, this paper will analyse the legal, ethical and commercial issues regarding with the removal of FDC’s director, discuss the problem in the procedure of removal directors stipulated in the legislation, and compare other regulations in the common law and civil law countries. Finally, drafts of new mechanism of dismissal directors will be provided in this research to reform Section 203D

As directors of Australian companies, there are certain rights and obligations that are attached to the role. Directors are required to act in good faith, not use their position improperly or exploit information gained from their position to their advantage, which may cause detriment to the company. Any breach of these duties, can result in civil or criminal punishment. Director’s duties exist under common law and legislation. The Corporations Act 2001 imposes a number of duties on directors including the duty of good faith (s 181), the duty to not to improperly use their position (s 183) and the duty not to improperly use information obtained (183). Breach of any of above civil obligations may lead to the a fine of up to $200,000 on the director or even disqualification from

According to S129, a company be legally bound by a contract depending on the authority granted to an agent or officer under the common law of statutory provisions. A contract can be directly executed under the common law provision s127(1) which states that a contract is executed when signed by two directors or a director and a company secretary. Ickea can rely on the statutory assumptions under s129(3), which proposes that James was duly appointed and had appropriate form of customarily authority, s129(5) where the contract was appropriately signed per stated in s127(1) and s129(7) where the officer/agent was given the authority to license the documents.

The major contributing factor to these failures of good governance is poor attention to the ethical and expected compliance function as stipulated by the corporation. Frequent disconnections in the board of governance and more especially in the ethics of officers have resulted in poor performance of the ethical inquiry, which is an essential component of sound corporate governance (Rabin, 2002).

a whole. This was based on an precedent from a 1970 case law in which it was held that a director of a group of company is not in breach of his fiduciary duty if the decision was based on what a reasonable person could consider to be an act that was in the best interest of all companies in the group.

Provision B.1.1 states “The Board should state its reasons if it determines that a director is independent notwithstanding the existence of relationships or circumstances which may appear relevant to its determination, including if the director: has received or receives additional remuneration from the company apart from

Corporation origin from the Latin word Corpus which means body. It is formed by a group of people and has separate rights and liability from those individual. In any means, corporation exists independently from its owner and this principle is called the doctrine of separate personality. Doctrine of separate personality is the basic and fundamental principle in a Company Law. This principle outline the legal relationship between company and its members. Company’s assets belong to the company not the shareholders as assets are the equity for creditors. Company must use up all its assets to pay off the creditors if it became insolvent. The same applies to the corporation’s debts. For limited liabilities company, the shareholder liability is limited which means that the shareholder is restricted to the number of shares they paid and not personally liable for the corporation’s debts. If the company does not have enough equity to pay off debts, the creditors cannot come after the shareholders. However, limited liability company can be very powerful when in hands who do fraud and on defeating creditors’ claims. Courts then can ignore the doctrine for exception cases and lifting the corporate veil. Lifting the corporate veil is a situation where courts put aside limited liability and hold a corporation’s shareholders or directors personally liable for the corporation’s debts.