Responsibilities of Directors and Officers under Corporations Law and Corporate Governance Principles

Corporation Law
Running Head: Corporations Law 0
9 / 3 0 / 2 0 1 8
Student’s Name

Corporations Law 1
Contents
Findings...........................................................................................................................................2
Responsibility under Corporations Act 2001 (Cth).........................................................................2
Responsibility under Corporate Governance principles..................................................................3
Recommendation.............................................................................................................................6
Conclusion.......................................................................................................................................7
Bibliography....................................................................................................................................8
Legislations 9
Cases 9
Books/journals 9
Other Resources 9

Corporations Law 2
Introduction
A company is a business structure that works with the minds of its directors and officers.
Directors and officers of a company do act on behalf of the company and therefore considered as
agents of the same. This is the reason that these people have a fiduciary relationship with the
company1. They are required to act in the best interest of the company. In every nation, a
separate legislation is there to regulate the affairs of the company. Corporations Act 20012s is the
federal level legislation of Australia. This act imposes liabilities on officers and directors of an
Australian company under various sections.
However, in the recent times, many of the cases have been reported the cause of which the scope
of this act has been questioned. Many of the section such as 180, 181, 182, 183, 674, 1043 and so
on are there in which a director/officers of corporations are required to perform their duties. Most
of these sections are there to protect the interest of shareholders only. This is a major issue in the
field of corporate governance. According to the principles of corporate governance, a company
must act in a manner keeping the interest of all stakeholders in view but not only the
shareholders. The report presented hereby consist a snap of current scenery, the expectations of
stakeholder from the act and conclusion thereof.
Findings
Responsibility under Corporations Act 2001 (Cth)
This act provides a set of duties and obligations for the directors and officers of the company.
The reason behind the imposition of duties is that these people are liable to manage the affairs of
the company. A company is an artificial person, which depends on its directors. Although in
addition to being an artificial person, a company is also a separate legal personality. The same
can enter into a contract with a third party. Further, the same can also run the business in it is
own name. Law gives birth to a company. A person who deals with a company actually deals
with the directors of the same. A company can sue and can be sued by a person. As directors
have huge powers to take decisions on behalf of a company, the same is liable to perform their
duties in a manner that brings the best positive results to the same.
Some general duties of a director and officer of a company are defined under the Division 1 of
Part 2D of the act3. Section 180 (1) of the act says that a director and officer of a company that
they must discharge their obligation and duties with due care and diligence. The section
1 James Sheedy and Stephen Baker, Litigating Trust Disputes in Jersey: Law, Procedure & Remedies ( Bloomsbury
Publishing, 2017)
2 Corporations Act 2001 (Cth)
3 Legal.Thomsonreuters.com, Chapter 2d – Officers And Employees (2015) <
https://legal.thomsonreuters.com.au/browse/law-annuals/pdf/corps_leg_extract.pdf>.

Corporations Law 3
ultimately demands such people to act like a reasonable person. Section 181 of the act is also an
important one in the area of director duties. This section says that it is expected from every
director and officer of a company to do the acts in the good faith of the company and for an
appropriate purpose. On the other side, section 182 of the act states that no director, secretary,
employee, or an officer of a company must ever misuse their position in the company to earn
personal benefits4.
Where section 182 prohibits the improper use of position, similarly section 183 of the act
prohibits the improper use of available information and provides that an officer, an employee, a
director, or the secretary of the company must not use the business information for their personal
benefits5.
The duties mentioned under section 180 to 183 are the general duties. There are many other
sections, which describes the duties of directors and officers. These sections included 191, 195,
209, 588G and many others. Directors and officers of every Australian company are required to
follow the provisions of discussed section, elsewhere they will be held liable for the breach of
duty6.
Responsibility under Corporate Governance principles
Duties of directors are not limited upto the scope of Corporations Act 2001, but they are also
required to keep the principles of corporate governance in minds. Corporate governance is a
subject that is closely connected to ethics. This subject focuses on the factor that being a director
of the company, a person should work for the betterment of all the stakeholders. No there is a
need to understand the term stakeholder.
Stakeholder: - This is a wider term then the shareholder. Every person who has some interest in
the affairs of a company will be treated as a stakeholder of the company, For instance,
4 Austlii, Corporations Act 2001 - Sect 182 (2018) <
http://www5.austlii.edu.au/au/legis/cth/num_act/ca2001172/s182.html>.
5 Australia, Australian Corporations & Securities Legislation 2011: Corporations Act 2001, ASIC Act 2001, related
regulations. (CCH Australia Limited, 2011), 222.
6 AICD, The role of a company director is to govern a company on behalf of the shareholders or members of that
company. (31 October 2017) < https://aicd.companydirectors.com.au/resources/director-tools/practical-tools-for-
directors/duties-of-directors/general-duties-of-directors>.