Duties and Responsibilities of Directors under Section 181 of the Corporations Act, 2001

Running head: CORPORATIONS LAW
CORPORATIONS LAW
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CORPORATIONS LAW1
Introduction
The regulation of the functional or operational activities of a company or an organization
is governed by a statutory provision of the Corporations Act, 2001 (Cth). It also helps in
providing the responsibilities and certain kinds of duties to the directors in a company or an
organization who work for that specific organization or corporation. It also looks after and
regulates the fundraising of other company or organizational affairs along with the acquisitions
or acquiring of other companies or organizations. It also looks after the operational activities of
the organization or the corporation both at the state level and also at the national level. The civil
responsibilities and the different kinds of duties of the directors and other employees of an
organization or a corporation are enclosed under section 181 of the Corporations Act, 2001. The
good faith of the directors are taken into consideration for the benefit of the corporation under
this specific section. In a company the main responsibilities of the directors in a board are to
perform the duties which they have been hired to perform which would be to consider the
interests of that organization. In this particular section the duties or the responsibilities that are
being performed by the directors must be done in good faith and with a proper reason or purpose
which in turn would benefit the company or the organization and incur profits and interests for
that company or organization (Heenetigala and Lokuwaduge 2013)
The paper discusses the duties and responsibilities of the directors in relation to section
181 of the Corporations Act, 2001 and it tries to analyze the duties in relation to good faith and
proper purpose which has been defined in the above-mentioned section which would try to incur
benefits for that company or organization. This paper also focuses on corporate governance and
an elaborate analysis has been made. It also provide the discussion points which are regulating
good faith and proper purpose under the section 181 of the Act.

CORPORATIONS LAW2
Discussion
It has been defined in Section 181 of the Corporations Act, 2001 that the directors if they
form a part of the Board have certain civil liabilities towards an organization or a company
where they are obligated to perform such duties which would assist the companies or the
organization in acquiring or obtaining profits and gains. Therefore, the directors in a particular
organization or a company are liable to perform the duties which would benefit that organization
or the company. It has also been considered to be defined in the above-mentioned section that
such a duty or responsibility, which has been performed by the director of that particular
company or organization for the interests of that organization, should be done in good faith and
with a proper purpose. According to the provisions of the Act there are certain responsibilities of
the directors both under the general or common law and also under the statutory law (Langford
2015). The directors are considered to maintain loyalty with an organization or a company as
they share certain fiduciary connection with the organization or the company. These duties or
responsibilities of the directors in the company or organization are considered to be both positive
as well as negative. The positive duty of the directors in a company or organization are stated in
the above-mentioned section of the Act. The directors of a corporation or an organization also
has a duty of care towards their organization or the company. This has been mentioned in section
180(1) of the Act.
The foundation of the section 181 under the Corporations Act, 2001 was seen in the case
of Re Smith and Fawcett Ltd [1942] Ch 304 at 306. In this particular case it was observed that
the action of the directors in a company or an organization in order to perform their duties and
responsibilities should be ‘bona fide’ to that of the company or the organization’s interest. After
scrutinizing and assessing several cases it was clear that the responsibilities or the duties, which