Understanding the Duties and Responsibilities of Directors in Company Law

Running head: COMPANY LAW
Company Law
Name of the Student
Name of the University
Author note

1COMPANY LAW
Issue
The issue of this scenario is whether Geoffrey Vines will be liable for contravening
his duty of care in relation to the profits made by the company.
Rule
As per the Corporations Act, 2001 directors of a company has a few specific duties
which they have to carry out while working in the organization. Section 180 of the above
mentioned act discusses the duty of care and diligence of the directors of a corporation. An
officer or director should exercise or carry out their powers and discharge their duties
according to certain circumstances of the corporation (Murray 2017). If the company is
occupied even then the directors will have the same responsibilities within the corporation. A
director must meet the requirements of his responsibilities and duties as it have been
mentioned under the act. Their duties are generally equal to the duties as mentioned under
common law. Thereafter, Section 181 of the Corporations Act, 2001 deals with the civil
obligations including good faith. This refers to a situation where the director or any other
officer of a corporation should carry out or exercise their powers and discharge their duties in
good faith in the best interests of the corporation by having a proper purpose. Followed by
the above mentioned sections, Section 183 of the Corporations Act, 2001 the officers or
directors of a corporation should gather the information but is not permitted to make
improper use of it. The directors should not make any kind of direct advantage for others or
for themselves. Thereafter, the officers associated or engaged with the organization must not
cause any sort of detriment to the company. If any director or any officer contravenes these
sections then he will be liable and answerable to the Court. Section 184 of the above
mentioned act states that if the directors or officers of the corporation will be committing
criminal offences if they fail to use their position and information honestly. Thus, if the

2COMPANY LAW
officer or the director of a corporation are dishonest on purpose, reckless and fails to carry
out their powers ad discharge their duties then they will be held for committing a criminal
offence. Hence, the officers and the directors should act in good faith and in the best interests
of the company. If the director or the employee of the company commits an offence by using
their position not in an honest manner and with the intention of directly gaining, an advantage
then he will not be allowed to be a part of that particular corporation as it will be treated as a
criminal offence. Such circumstances and situations have been observed in the case of ASIC
v Vines as it is considered to be as one of the leading cases on the duties and responsibilities
of an officer of a company. Thus, in case of a criminal case, the higher degree of negligence
must be proved.
On the other hand, if it is related to civil issues then a civil penalty will be imposed on
the officers or directors engaged with that particular corporation. Along with the sections that
have already been mentioned, comes Section 1318 that plays a major role in the corporations.
This section further states that the associates of the company must act in the interests of the
company and its shareholders. Thereafter, they must also carry out the statutory standard of
due diligence and care. Duties are suppose to be shaped purposely based on the legal duties
of the directors or officers. However, legal duties encompasses the basic fundamental duty
for acting in good faith for the interests of the company based on its traditional formulation of
the shareholders.
Application
The case of ASIC v Vines is considered to be as one the famous and major cases on
the responsibilities and duties of an officer of a company. As mentioned in the relevant rule,
it can be stated that the care and diligence duty has been defined under section 232(4) of the
Corporations Act, 2001. It can be said that Mr. Vines had contended the degree of