Understanding the Duties and Responsibilities of a Director in Business Law

Running head: BUSINESS LAW
Business Law
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Author Note

1
BUSINESS LAW
The director is in a fiduciary relation with the company and owes a duty of care to its
employees. The Corporations Act 2001 mandates that the director shall act in good faith and
shall also act in the best interests of the company1. The functions of the director are meant to
achieve a particular purpose and therefore the activities of the director should be directed at
achieving the best purpose for the company. The director is not only responsible to comply with
the general and specific laws of the company but is also responsible for keeping in mind the best
interests of the shareholders. The director has to exercise due diligence in exercising his rights
and discharging his duties. In cases when the director breaches his duties, both civil and criminal
penalties can be attracted in light with the provisions of the Corporations Act. Civil remedies are
imposed by way of imposing penalties in the form of fines or compensating the aggrieved party
by way of paying damages.
The duties of the directors are governed by common law, in accordance with the statutory
principles of the Corporations Act. In cases when the company has an agreement between them,
the director are bound that and they have to act in accordance with the terms of the agreement.
The director also has to act on behalf of the shareholders and even though limited liability shields
the director to some extent, the director still has to uphold the common law principles and also
preserve the sanctity of the company constitution2.
According to the Corporations Act, a director is one who has been appointed as a director
and gives instruction to all the people employed in the company and are meant to follow the
instructions. The director need to promote good governance by keeping their interests ahead of
the company’s and also need to work towards the collective benefit if the company and the
1 Directors' Duties | Free Legal Information | Legalvision (2018) LegalVision <https://legalvision.com.au/directors-
duties/>
2 Eggers, Peter MacDonald, and Simon Picken. Good faith and insurance contracts. Taylor & Francis, 2017.