Directors' Duties and Responsibilities towards Stakeholders in Australia

COMPANIES AND SECURITIES LAW 1
Introduction
A company is an artificial person created by law, the operations and the management of
which, is undertaken by either the members of the company, or the directors. The members of
the company are vested with the powers of the election of the board of directors, who in turn
are entrusted with the responsibility of the management of the affairs of the entity as per the
section 198A (1), of the Corporations Act, 2001 (Cth)1. Generally, some of the main
functions of the directors of the company are overseeing the daily processes of business
management, implementation, and formulation of the business policies, strategies, and goals,
meeting the various compliance requirements on behalf of the company; and reporting the
results of the activities of the company to the members and the other stakeholders. The chief
duties of the directors are however prescribed in the sections 180 to 184 of the Corporations
Act, 2001, as established in ASIC –v– Cassimatis2. These are referred to as the general duties
of the directors, as referred to in the case law of Elliott v ASIC3.
General duties towards the Corporation
As per the section 180 of the Corporations Act, directors are required to exercise care and
diligence while they discharge the managerial functions of the entity4. Thus, the directors
must take care of the assets and the property of the company and make sure that the business
functions are taking place smoothly, within the framework of the industrial and other laws.
The same was established in the case law of ASIC v Wizard5.
1 Corporations Act, 2001 (Cth).
2 (No 8) [2016] FCA 1023
3 10 VR 369; 205 ALR 594.
4 Corporations Act, 2001, s180.
5 (2005) 145 FCR 57; 219 ALR 714.

COMPANIES AND SECURITIES LAW 2
Section 181 of the said act requires the directors to act in the good faith6, which means that a
director must take the decisions that are in nature of the best interests of the company. As the
directors are in a fiduciary relationship with the company, they must not let the conflict of
interest over rule the trust and faith placed by the corporation over his or her position. The
duty was accorded in the case law of AWA Ltd v Daniels t/as Deloitte Haskins and Sells7.
The third general duty is prescribed in the section 182, which states that a director must not
make an improper use of the position in the company8. The duty was established in ASIC v
Fortescue Metals Group Ltd9. The improper use can take place when a director enters into the
arrangements, which would result in the personal enrichment for him, any of his relative or
any of his acquaintances. Lastly, the general duty as laid down in the section 183, states that a
director of a corporation must not make the improper use of the information that has been
obtained by him during discharge of his managerial functions10. The duty was also
pronounced in the judgement of Commonwealth Bank of Australia v Friedrich11.
Thus, it can be said from the above listed duties that a director must act in accordance with
the general duties only, which have been prescribed taking into the interests of the
corporation. The specific duties of the director does not say anything about the answerability
of the directors towards the other stakeholders connected to the company, namely the
employees, community suppliers, regulators, and the society and environment as a whole. As
a result, a wrong inference may be drawn by the persons as to the directors duties are limited
only to the performance of the above listed general duties.
6 Corporations Act, 2001, s181.
7 (1992) 7 ACSR 759.
8 Corporations Act, 2001, s182.
9 (2011) FCAFC 19.
10 Corporations Act, 2001, s183.
11 (1991) 5 ACSR 115; 9 ACLC 946.