Corporation Act: Duties and Liabilities of Company Officers

Running Head: Corporation Act 1
Corporation Act

Corporation Act 2
Answer 1
Part A
Section 180 of the Corporation Act 2001, defines the duty and liability of the officers of the
company. Clause 1 of this section states that director of the company must act honestly and use
reasonable attentiveness for the purpose of performing their duties. Clause 2 of this section
defines that any officer or agent of the company must not make any improper use of their
position as an officer or agent of the company (corporation Act 2001).
Section 182 and 183 of the Corporation Act 2001 states that, if directors or officers of the
company receives any information in lieu of their position, then director is under obligation not
to use any such information for gaining advantage for them or for any other person.
Director of the company owns duty towards the company to act in good faith and in the best
interest of the company, which means directors ensure complete loyalty towards the company
when it comes to decision-making of the company. In other words, directors and officers of the
company own fiduciary duty towards the organization that they must act in the good faith and in
the best interest of the company. It must be noted that, management of the company is generally
consist in the board of directors of the company, and board also have other particular powers
such as power to issue shares. Section 181 also imposes obligations on directors to exercise
these powers for proper purpose (Corporation Act 2001). Even though directors of the company
acted in good faith and they are under impression that they act in the best interest of the
company, then they exercise their particular powers in improper manner. This can be
understood through case law ASIC v Adler (2002). In this case, Court stated that company’s
directors must fulfill their duties in good faith and in the best interest of the company. In this
Court further stated that Adler breaches the section 80(1) because loan was not permitted by
reasonable person.
Part B
Section 191 of the companies Act defines the provisions related to the disclosure of interest in
context of transactions, properties, offices, etc. as per this section director is under obligation to
make disclosure in the meeting of directors if such director is interested to enter in transaction
or proposed transaction with the organization. Clause 2 of this section stated that disclosure on

Corporation Act 3
parts of directors is not needed if interest of the director consists of being a member or creditor
of the company, and in case interest of the director may properly be considered as not being a
material interest. This section further states that, exceptions, as to when a director of the
company will be found to be interested.
While disclosing nature and extent of his material interest with the organization, director also
disclose the nature, character, and extent of any issues related to his duties that might be arise
because of his holding office or possessing any property. It must be noted that if director fails
to disclose above stated facts that it can lead to a fine not exceeding $5000 or to imprisonment
of a term not exceeding 12 months (Corporation Act 2001).
This can be understood through case law Forty Two International Pty Limited v Barnes [2014]
FCA 85 (18 February 2014, Griffiths J)[CA ss 182, 191]. In this case, court stated that
directors were under obligation to disclose their material interest to the company in the meeting
of the directors.
It must be noted that, companies Act make disclosures of particular conflicts of interest
mandatory, and these interest are stated below:
 The nature, character, and extent of the interest of a director (whether direct or indirect)
in any contract or proposed contract with the company. It also includes the interest of
family member of the director.
 The nature, character, and extent of any issue that might be arise in context of director
holding any office.
 The nature, character, and extent related to any issue that might be arise in context of
property owned by director.
It must be noted that, in lieu of fiduciary duties of directors towards the company, these
disclosures must be made to shareholders of the company also (Ross W. parsons 1967).