Directorial Duties and Violations: Case Study Analysis

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Title Page
Name of the student
Student ID

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Contents
Solution............................................................................................................................................3
Issues............................................................................................................................................3
Relevant Law...............................................................................................................................3
Application of law........................................................................................................................4
Conclusion...................................................................................................................................5
Reference List..................................................................................................................................6

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Solution
Issues
i. Whether Rocky, Drago and Clubber have violated any directorial duties?
ii. Are there any defenses that can be raised by the directors?
iii. Whether the same standard will apply to Drago as the as the company's chief financial
officer?
Relevant Law
As per Salomon v A Salomon & Co Ltd [1896] a company has a separate legal existence in law
and the acts are governed by the officers in the name of the company. A company director is
authorized to carry out functions in order to achieve the objectives of the company. Section 9 of
the Act submits that any person who is appointed at the position of a director must comply with
its duties and responsibilities. As per ASIC v Vines [2003] the Chief Executive and Chief
Financial Directors are also considered to be the directors of the company. (Baxt 2015)
Every company director has the responsibilities to comply with statutory duties which include:
i. Duty of good faith - It is the prime duty of the directors that his acts must be
conducted with good faith and honesty and the acts should comply with the company
best interest and proper purpose. The directors conduct is evaluated as what a normal
prudent man thinks in the given situation to justify whether the duty is comply with or
not. The duty is rightly constructed in section
ii. Care and diligence – The director’s act must be carried out with all care and diligence
and is analyzed by comparing what a reasonable person would have acted if he is in
same position and circumstance. The duty is rightly constructed in section 180 (1) of
the Corporation Act 2001 and is evaluated in Australian Metropolitan Life Assurance
Company Ltd v Ure - [1923].
The executive directors are at much higher position and thus they have a higher
standard of care and is analyzed in ASIC v Hellicar & Ors [2012] and Shafron v
ASIC [2012].
iii. Avoidance of conflicting interest situation – whenever a situation arises wherein the
director is in the position where his own interest con-coincide with the companies
interest, then, it is the duty of the director that the interest of the company must
prevail in each and every scenario. The duty is rightly constructed in section 191-195