Directors' Responsibilities towards Shareholders and Other Stakeholders in Light of Corporations Act, 2001 (Cth)

27 July 2018

REPORT 1
Executive Summary
The report is prepared for the Australian Institute of Company Directors. It includes a critical
analysis of directors’ responsibilities with regards to the shareholder interests and the
interests of the other stakeholder groups, in light of the Corporations Act, 2001 (Cth). The
report begins with the definition of the director, the law in relation to the appointment and the
general duties of the directors as specified in the sections 180 to section 184 of the act. This is
followed by the indirect inferences drawn from various sources to evaluate the role of the
directors in the modern corporate scenario of Australia. Various case laws have been
mentioned so as to highlight the critical role of the directors in the company. The report ends
with the recommendations to the directors and the conclusion that practically the interests of
the stakeholders are required to be considered as well by the directors of the company, in
light of the transparent business practices, financial reporting requirements and healthy
corporate governance approach.

REPORT 2
Table of contents
Introduction................................................................................................................................3
Directors and their General Duties.............................................................................................3
Case Laws..................................................................................................................................4
Various indirect inferences in relation to responsibility towards stakeholders..........................5
Recommendations......................................................................................................................7
Conclusion..................................................................................................................................8
References................................................................................................................................10

REPORT 3
Introduction
On incorporation, a company becomes a legal artificial person, i.e. it has an identity of its
own. However a company is not a natural person, i.e. it does not possesses the mind and body
of its own to think take decisions and accordingly manage the affairs (Department of
Industry, Innovation and Science, 2017). Consequently, a company cannot act by itself and it
has to depend on some human agency to act in its name. A company acts mainly through the
two groups of people namely, the directors of the company and the members of the company.
In other words, the decision making power of a company vests in two organs, i.e. the board of
the directors and the shareholder members. The board is the managerial body, to whom is
entrusted the whole of the management of the company (Tricker and Tricker, 2015). The
members constitute the board of the directors. It is the responsibility of the directors to act as
a body as a whole, without improperly excluding any of the directors. The board of the
directors are in a fiduciary relationship with the company and are responsible for the overall
management of the business of the company on behalf of the shareholders. Moreover, the
directors are also in charge of the compliance of the regulatory requirements in addition to
making the strategic and operational decisions for the company (Australian Securities &
Investments Commission, 2018).The report is an analysis of the role of the directors in the
company, with regards to the responsibilities towards the shareholders and the other
stakeholders of the company.
Directors and their General Duties
The Corporations Act, 2001 (Cth) defines the term directors in the Section 9 which reads as
follows. Director refers to a person who has been appointed as a director, or is appointed and
acting as an alternate director in the capacity of the same (Federal Register of Legislation,
2018). The definition also includes the de facto directors and the shadow directors. In simple