Duties of Directors in Corporations Law
Added on 2022-12-18
10 Pages3050 Words1 Views
Leadership ManagementPolitical ScienceLaw
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Running head: CORPORATIONS LAW
CORPORATIONS LAW
Name of the Student:
Name of the University:
Author Note:
CORPORATIONS LAW
Name of the Student:
Name of the University:
Author Note:
1
CORPORATIONS LAW
INTRODUCTION:
The Corporations Act 2001 (Cth) refers to the Act of the Commonwealth of Australia that
provides the laws governing the business entities in the nation at both the interstate and federal
level. It controls mainly the operation of the companies but of some other business entities too
like the partnerships as well as investment schemes. The Act provides the foundation of the
corporations law of Australia. It provides the main legislation that regulates the Australian
companies. It deals with matters like the creation and working of companies, duties and rights of
the officers involved, takeovers, winding up, fundraising and other aspects of a company. The
directors of a company are its fiduciary agents and they the duties towards the company. in this
assignment the duties of the directors are discussed with special reference to section 181 of the
Act (Fallon and Cooper 2015). It states that the directors, officers and other secretaries of the
company have a civil duty to act in good faith while using their powers and performing their
duties in order to incur the best interest of the company and for a ‘proper purpose’ (Du Plessis
and Rühmkorf 2015). The assignment mainly deals with the critical analysis of the duty of
directors in reference to the meaning and functions of the terms ‘good faith’ and ‘for a proper
purpose’ as statutory mechanisms to improvise the corporate governance. In this regard it will
also be discussed whether this particular section has any relevancy in the present days.
Discussion:
The said Corporations Act provides several extra fiduciary duties for the directors of all
the entities that are incorporated under it (Barker et al. 2016). They are entrusted with strict
duties of law. This is due to the fact that the directors are empowered to control the company
management can result into two types of issues. Firstly, the directors can incur a tendency to
CORPORATIONS LAW
INTRODUCTION:
The Corporations Act 2001 (Cth) refers to the Act of the Commonwealth of Australia that
provides the laws governing the business entities in the nation at both the interstate and federal
level. It controls mainly the operation of the companies but of some other business entities too
like the partnerships as well as investment schemes. The Act provides the foundation of the
corporations law of Australia. It provides the main legislation that regulates the Australian
companies. It deals with matters like the creation and working of companies, duties and rights of
the officers involved, takeovers, winding up, fundraising and other aspects of a company. The
directors of a company are its fiduciary agents and they the duties towards the company. in this
assignment the duties of the directors are discussed with special reference to section 181 of the
Act (Fallon and Cooper 2015). It states that the directors, officers and other secretaries of the
company have a civil duty to act in good faith while using their powers and performing their
duties in order to incur the best interest of the company and for a ‘proper purpose’ (Du Plessis
and Rühmkorf 2015). The assignment mainly deals with the critical analysis of the duty of
directors in reference to the meaning and functions of the terms ‘good faith’ and ‘for a proper
purpose’ as statutory mechanisms to improvise the corporate governance. In this regard it will
also be discussed whether this particular section has any relevancy in the present days.
Discussion:
The said Corporations Act provides several extra fiduciary duties for the directors of all
the entities that are incorporated under it (Barker et al. 2016). They are entrusted with strict
duties of law. This is due to the fact that the directors are empowered to control the company
management can result into two types of issues. Firstly, the directors can incur a tendency to
2
CORPORATIONS LAW
misuse their power and position resulting into their own advantage and benefit. Secondly, the
interest of the shareholders particularly those who are mere passing investors not following the
management of the company on a regular basis. In order to combat these issues, the law has
enumerated certain provisions in this legislation.
It is noteworthy that the directors have duties under both general law and also under
statute. This classification of the duties of the directors is significant as the remedies that are
available against the breach of such duties depend on the genesis of the concerned duty. Under
principle of equity, the company and its directors have fiduciary relation with each other based
on high level of loyalty (Barker et al. 2016). The loyalty of the directors is mostly seen in the
positive duties of the directors towards the company as well as in some cases, in the negative
duties. The positive duties are enshrined in the under section 181 of the Act which provides the
duties of acting good faith for a proper purpose to incur the best possible output for the company
(Fallon and Cooper 2015). The negative duties are embodied under sections 182 and 183 of the
Act. The common law also provides the directors’ duty to take care of the company which again
contained under section 180 (1) of the Act.
As a company’s director, the director has numerous duties the major purpose behind
those duties is to incur the best output for the company. Out of several duties, one of the duties
embodied under section 181 of the Act is the duty of acting in ‘good faith’ in the interest of the
company and also subjected to a ‘proper purpose’ (Du Plessis and Rühmkorf 2015). But what is
actually meant by the terms ‘good faith’ and ‘for a proper purpose’ will be discussed in this part
of the writing. The directors can be considered as the company’s fiduciaries which mean that the
directors owe the company. The duties of the directors include the duty of avoiding the conflicts
CORPORATIONS LAW
misuse their power and position resulting into their own advantage and benefit. Secondly, the
interest of the shareholders particularly those who are mere passing investors not following the
management of the company on a regular basis. In order to combat these issues, the law has
enumerated certain provisions in this legislation.
It is noteworthy that the directors have duties under both general law and also under
statute. This classification of the duties of the directors is significant as the remedies that are
available against the breach of such duties depend on the genesis of the concerned duty. Under
principle of equity, the company and its directors have fiduciary relation with each other based
on high level of loyalty (Barker et al. 2016). The loyalty of the directors is mostly seen in the
positive duties of the directors towards the company as well as in some cases, in the negative
duties. The positive duties are enshrined in the under section 181 of the Act which provides the
duties of acting good faith for a proper purpose to incur the best possible output for the company
(Fallon and Cooper 2015). The negative duties are embodied under sections 182 and 183 of the
Act. The common law also provides the directors’ duty to take care of the company which again
contained under section 180 (1) of the Act.
As a company’s director, the director has numerous duties the major purpose behind
those duties is to incur the best output for the company. Out of several duties, one of the duties
embodied under section 181 of the Act is the duty of acting in ‘good faith’ in the interest of the
company and also subjected to a ‘proper purpose’ (Du Plessis and Rühmkorf 2015). But what is
actually meant by the terms ‘good faith’ and ‘for a proper purpose’ will be discussed in this part
of the writing. The directors can be considered as the company’s fiduciaries which mean that the
directors owe the company. The duties of the directors include the duty of avoiding the conflicts
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