Duties of Directors in Corporation Law

Corporation Law
Name of the Student
Name of the University
Author’s Note

Issues
Whether the directors of the company Alex and Bill has breached the duties of the director of
the company.
Whether the Solartec has the right to take action against the breach of duties for the directors
of the company.
Whether company can claim compensation or impose penalty upon the directors for
breaching their duties.
Rules
The director of the company usually holds several legal obligations. After appointing as the
director in the company the duties and legal obligations must be known to the director. The
duties are the part of the company law, constitution of the company and shareholder’s
agreement of the company. Duties of director in Australia are governed by –
1. The common law or case law
2. Statutory of the Corporation Act 2001
3. The governing rules and the constitution of the company, shareholders of the
company
4. If the Company has any agreement
The main duties of the directors are that the directors should not misuse power and make
improper purposes. The directors must not vote for their personal advantage rather they
should vote for the company interest in order to help the company. The director action is
expected to have with loyalty for the company supreme interest1. The Corporation Act should
comply by the directors for the company and they need to implement their authoritative
power and duties. The directors must be aware of the company solvency and financial matters
related to the company2. Directors must renounce their duties with great care and
attentiveness. The company directors and the other executives in the company should culture
on their powers and should release their duties for valid purpose including good faith and best
interest of the corporation [s 181]3. Any action has been strictly prohibited for the directors
1 G Rauterberg and E Talley, "Contracting Out Of The Fiduciary Duty Of Loyalty: An Empirical Analysis Of
Corporate Opportunity Waivers", Repository.Law.Umich.Edu (Webpage, 2017)
<https://repository.law.umich.edu/cgi/viewcontent.cgi?article=2931&context=articles>.
2 Lipton, P., and Herzberg, A., Welsh, M, Understanding Company Law, 19 edition Thomson Reuters 2018.
3 "Duties Of Directors", Companydirectors.Com.Au (Webpage, 2019)
<https://www.companydirectors.com.au/dutiesofdirectors

taken against the company which can lead to the detriments of the corporation and misuse
their power for extracting the advantages for themselves or for someone else’s [s 182]. The
Corporation Act strictly forbid to use of those information the person gains from holding the
post in the corporation and restricts on any kind of detriment towards the corporation [s183].
Civil obligations are the consequences of all the provisions and the provisions are considered
as the civil penalty provision. If the court realize about the detriment cause by a person which
has been breached, the person may face an order to reimburse the Commonwealth which
takes a penalty of $200,000 up to. The person may compensate for the company loss [Part
9.4B]4. The alleged person can be disqualified by the court where the court considers a period
to be appropriate for managing the corporation [s 20C].
Corporation Act 2001 also considers an intentional offence or dishonesty made by the
director or other executive of the company as a criminal offence in which their power and
exercise would breach against the interest of the corporation. They have to discharge their
duties with loyalty and with an accurate purpose for the company. The criminal offence also
implies upon the person who misuses their power and position in the company deliberate and
dishonestly through the information collected from the corporation within their post [s 184].
The directors plays a duty within their knowledge to make full and frank disclosure for the
shareholders for holding proper judgments on any affairs. According to the Corporation Act
(s588G), the directors should not trade if the company is bankrupt as the directors remain
well updated about the fiscal condition of the company. The directors must keep the faith on
the employees and the other staffs in the company at the time of decision-making and the
directors have to make reasonable reliability according to the assessment of s189 Corporation
Act5. The directors must collect the financial report of the company and keep the information
about the company finance within all the transactions and finance associated issues. The
directors performs a duty according to the Corporation Act where the government bodies like
ASIC keeps the certain information for lodging6. The directors are bound with the duty to
exercise discretion. Which indicates their independent judgment for operating the
corporation. The matters of the discretion can be assigned by the directors where the
4 "General Duties Of Directors - Corporations Act 2001 (Cth)", Lawhandbook.Sa.Gov.Au (Webpage, 2019)
<https://lawhandbook.sa.gov.au/ch05s04s02.php>.
5 Baker Mckenzie, "Duties And Liabilities Of Directors Of Australian
Companies", Bakermckenzie.Com (Webpage, 2019)
<https://www.bakermckenzie.com/-/media/files/locations/australia/bk_australia_dutiesliabilitiesofdirectors_dec
17.pdf?la=en>.
6 "Duties Of Directors", Companydirectors.Com.Au (Webpage, 2019)
<https://www.companydirectors.com.au/dutiesofdirectors>.