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CORPORATIONS (Directors Duties (:warning::s181 + CL: Duty to act in good…
CORPORATIONS
Directors Duties
:warning::s181 + CL: Duty to act in good faith and for a proper purpose s181 + CL
-Good faith: act honestly in the best interests of the corporation as a whole
-Porper purpose: for the benefit of the corporation as whole and not for any extraneous purpose -e.g. use the company's assets or their power as directors for their own personal profit
:warning:s183 + CL: Duty not to use inside information improperly
-have a duty not to misuse inside/corporate information for personal gain, or gain to third parties causing detriment to the corporation
:warning::s184: Duty to act in good faith, use of position, use of information
-Criminal offences
-the central element of each offence is dishonesty
-This may be established by showing the director intended to act dishonestly or was reckless
-Recklessly or intentionally dishonest:
-s184(1) fail to exercise powers in good faith
-s184(2) misuse position
-s184(3): Misuse information
:warning: s182 + CL Duty not to misuse directors position
-cannot use their position imporperly for personal gain, gain by a third party or cause detriment to the company
:warning:s180(1) Duty of care skill and diligence
-Directors are allowed to delegate the task of preparing financial reports, but there is a core, irreducible, requirement of all directors to be involved in the management of the company, and to take all reasonable steps to guide and monitor the company
Overview
Has a Full legal personality distinct from its owners (shareholders) and managers s124 CA (Corporations Act 2001):
-can sue or be sued in its own name;
-can commit a crime or tort or other wrongful conduct - is a 'person'
Limited liability
-The owner (shareholder) is not personally responsible for business debts and obligations of the company
s124(1) CA: Is a Full legal personality, distinct from its owners (shareholders) and mangers
Corporation- a company as a seperate legal entity and with limited liability for its owners
Management and Control
Directors
-Carry out day-to-day management of a company
-Section 198A CA provides that the business of a company is managed "by or under the direction of the directors"
If more than one director, referred to as '*a board of directors'. The board will usually appoint a managing director or CEO
Directors Duties
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:warning:s191 Disclosure of interests by director
-has a duty to notify other rirectors of material personal interest when conflict arises! (unless subsection (2) says otherwise )
:warning: 588G Duty to prevent insolvent taking
-a director contravenes the section if, when the company incurs debt (e.g. buys something, borrows money) there is reasonable grounds for suspecting that the company is, or would become, insolvent (unable to pay its debts when they fall due)
s588H Defences to insolvent trading
At the time debt was incurred director must establish:
-s588H(1): reasonable grounds to expect (and the
director did expect) that the company was solvent and
would remain solvent even with the new debt(s);
-588H(2): reasonable grounds to rely on info provided by
a competent and reliable person that the company was
solvent;
-588H(3): s/he did not take part in management owing to
illness or other good reason (NB: mere ignorance of the
co’s operations is not a defence); or
-588H(4): s/he took all reasonable steps to prevent the
co. from incurring the debt
Remedies for insolvent trading
-588J: Civil penalty: directors can be made personally liable for company debts if they were incurred at a time the company was trading insolvent
-588G(3) Criminal offence: Director can be charged if dishonesty was involved
-588M Recovery by liquidator: liquidator can recover from the director personally
-588M recovery by creditor: creditor can recover from director personally
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