Laws 19032- Company and Association Law

Running head: Laws 19032- Company and Association Law
Business Law
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1Laws 19032- Company and Association Law
Table of Contents
Question 1......................................................................................................................2
Question 2......................................................................................................................6
Question 3......................................................................................................................8
Bibliography.................................................................................................................11

2Laws 19032- Company and Association Law
Question 1
In Australia, a director of a company not only exhibits statutory duties but also certain
duties held by the common law, also known as the fiduciary duties. The Fiduciary Duties of
the director held under the common law comprises of: Duty to act in good faith
The common law comprising of the fiduciary duties of director of a company
states that it is the duty of the director to act in good faith for the best interests of the
company. The director should not act in such a way which becomes contrary to the best
interest of the company. An act contrary to the best interest of the company would
amount to the violation or breach of fiduciary duty. Therefore a directive is supposed to
act bona fide for the best interest of the company for which they work and draw
remuneration1. Duty not to misuse power
It is the fiduciary duty of the directors under common law to act for a propos and
particular purpose, thereby refraining from misusing their power. Misuse of power for
achieving improper purpose is a common phenomenon by the directors of a company
whereby they try to derive personal advantage from the company. There are instances of
the directors' attempt to defeat the voting power of the shareholders by colluding among
them, thereby defeating the right of the shareholder to vote. Duty to avoid conflict of interest
It is the duty of the director to refrain from placing themselves in in situation
where it becomes difficult for them to avoid conflict of interest which would affect the
company. They should not be a part of transactions which are not likely to be the best
1 Bruner, Christopher M. "Is the Corporate Director's Duty of Care a Fiduciary Duty-Does It Matter." (2013)
48 Wake Forest L. Rev.1027.

3Laws 19032- Company and Association Law
decision for the company. Therefore they retain the duty to retain discretion to avoid
conflict of interest along with other probable issues that may affect the best interest of the
company. Duty to take due care and diligence
The fiduciary duties of the director ask them to take due care and act diligently
while managing the company. Therefore it is important to be well-informed, to act
reasonably and with utmost care while making decisions for the company. Duty not to disclose confidential information
The directors are asked to refrain from disclosing confidential information which
is likely to abuse the condition of the company, making it vulnerable to competitors. The
directors must not abuse corporate opportunities by selling out confidential information
about the company he is a working for; it not only violate the fiduciary duties but also
breaches corporate ethics.
Quite similar to the fiduciary duties, the Statutory Duties laid down by the
Corporations Act 2001 specifies four major duties for the directors under section2: Care and Diligence
Section 180 of the Corporations Act states that a director must act with due
care and diligence, just as any reasonable person would do in his position3. It is very
similar to the fiduciary duties of director laid down by common law. This statutory
duty has been widely discussed recently in the case of Australian Securities and
Investments Commission v Healey4. The director is supposed to refrain from putting
the company’s safety in jeopardy by entering into a risky transaction which do not
have a certainty to reap benefit for the company in return. Good faith
2 Bruner, Christopher M. "Is the Corporate Director's Duty of Care a Fiduciary Duty-Does It Matter." (2013)
48 Wake Forest L. Rev.1027.
3 Corporations Act 2001 (Cth), s 180.
4 Australian Securities and Investments Commission v Healey [2011] FCA 717.