claw2201 hd notes

1、Directors Duties:1. Sources of Directors Duties:1) General Law1. Fiduciary Duties: s185 Interaction of sections 180 to 184 with other laws etc.(a) have effect in addition to, and not in derogation of, any rule of law relating to the duty or liability of a person because of their office or employment

2、 in relation to a corporation; and(b) do not prevent the commencement of civil proceedings for a breach of a duty or in respect of a liability referred to in paragraph (a).2. Principle and rules (derived from case law) of s9:General law means the principles and rules of the common law and equity.Sta

3、tute:Restatement /modification of the general lawDuties and obligations in addition to the general law (s185)2) WHO OWES DIRECTORS DUTIES?General law duties: DirectorsStatutory duties:Ss 180+181: Directors/ officersSs 182+183 Directors/ officers/ employeesS 588G: Directors S9 extended definitions:&#

4、183; Alternate director (A director of a company may, with the other directors' approval, appoint an individual to act as an alternate to exercise some or all of the director's powers for a specified period.)· De facto director/ officer (有的人在公司的職位不是經(jīng)理，但是他行使的權(quán)利是屬于經(jīng)理的權(quán)利范圍的話，這種人就叫做de facto

5、 director，在追究民事或刑事責(zé)任的時(shí)候，de facto director雖然職位上不是經(jīng)理，但也要按照經(jīng)理的職位來(lái)進(jìn)行處罰。)· Shadow director/ officer (有的人在公司的職位不是經(jīng)理，但是他的言行有一定的影響力，而當(dāng)這種影響力影響到公司的經(jīng)理行使他們的權(quán)利的時(shí)候，這種人就叫做shadow director；在追究民事或刑事責(zé)任的時(shí)候，shadow director雖然職位上不是公司的經(jīng)理，但也要按照經(jīng)理的職位來(lái)進(jìn)行處罰。)2. Categories of duties:A. Duties of loyalty and good faith:

6、3; General Law fiduciary duty:Directors must act bona fide in best interests of company: GREENHALGH v ARDERNE CINEMAS1. Good faith=bona fide (good trust)=loyal adherence to duty with honorable intentions: BRISTOL& WEST BUILDING SOCIETY v MOTHEW2. Best interest of the company-the company=company

7、as wholeCompany as whole =best interests of shareholders as collective group: GREENHALGH v ARDERNE CINEMAS3. Interests of employees? No. PARKE v DAILY NEWS4. Interests of creditors? Yes when company is in an insolvency context. WALKER v WIMBORNE, RING v SUTTON, KINSELA v RUSSELL KINSELA PTY LTD5. No

8、minee Directors: SCOTTISH CO-OPERATIVE WHOSALE v MEYERBreach their duty to the subsidiary company when they have a conflict of duty between the interest of the holding company (which appointed them to the subsidiary company) and the subsidiary company wherein they prefer the interest s of the holdin

9、g company and sacrifice the interests of the subsidiary company.6. Corporate Groups/ Associated Entities: WALKER v WIMBORNE Directors breach their duty if they:· Make loans from one company to another with no prospect of repayments· Cause one company to pay the expenses of another company7

10、. Directors of wholly-owned subsidiaries: S187 Director of subsidiary NOT in breach of duty if:· Constitution authorizes action in best interests of the holding company· Director acts in good faith in best interests of the holding company, and · Subsidiary not insolvent or made insolv

11、ent by action8. Example of breaches:· Overpayment for goods/services: ASIC v ADLER · Loan unlikely to be repaid: WALKER v WIMBORNE · Loan at less than market rates: RING v SUTTON· Guarantee of debt unrelated to business activities: ANZ v QINTEX· Sale of company at undervalue

12、: COLEMAN v MYERS· Gratuitous payments to employee: PARKE v DAILY NEWS9. The duty to act in good faith in the companys best interest is subjective. It will be complied with if the directors honestly believe they acted in the companys best interests: RE LEDIR ENTERPRISES PTY LTDDirectors must su

13、bjectively consider that the transactions are in the best interest of the company.A failure to comply with that duty can tend to arise, relevantly, when circumstances induce directors to believe that the companys interests correspond with their own interests and, making that unreflective assumption,

14、 they then act in the companys affairs without considering its interests as a separate entity with its own shareholders and creditors. B. Duty to act for a purpose purpose:General law fiduciary duty:Directors must exercise powers for a proper purpose: PERMANENT BUILDING SOCIETY (IN LIQ) v WHEELER應(yīng)當(dāng)披

15、露涉及交易事項(xiàng)的有關(guān)事實(shí)，既包括交易標(biāo)的的有關(guān)事實(shí)，還包括交易雙方的資信情況等.被告Wheeler是PBS公司的董事會(huì)主席，同時(shí)，他還是Capital Hall Ltd公司的董事會(huì)主席和控股股東。PBS公司的董事表決同意向CHL公司提供1500百萬(wàn)澳元貸款。Wheele：披露了自己的利益，并且沒(méi)有參加投票，但是Wheele：清楚CHL根本沒(méi)有財(cái)力償還貸款。法院認(rèn)為，僅僅向公司披露利益是不夠的，還應(yīng)當(dāng)對(duì)CHL在貸款當(dāng)時(shí)無(wú)財(cái)務(wù)能力的情況予以披露。Statutory Duty:S181(1)(b):Directors +officers must exercise powers/discharge

16、duties for a proper purpose.Both forms of duty essentially have the same requirements.1. Directors power may be exercised only for the purpose for which they were conferred upon directors cannot be exercised in order to obtain some private advantage or for any purpose foreign to the power: MILLS v M

17、ILLSPERMANENT BUILDING SOCIETY (IN LIQ) v WHEELER2. Whether a director acts for an improper purpose is determined objectively involving an assessment by the court of what is reasonable in circumstances: ASIC v ADLER3. Mixed purposes-more than one purpose· But for test: WHITEHOUSE v CARLTON HOTE

18、L· Which of the purposes was causative of the exercise of power?4. Matters to consider:· Objective element: purposes for which power granted, and · Subjective element: purpose actually motivating exercise of power5. Examples of breach:· Issuing shares to (a) Maintain majority con

19、trol: NGURLI v McCANN(b) Alter voting power of majority shareholders: HOWARD SMITH v AMPOL PETROLEUM· Use of company funds to promote re-election: ADVANCE BANKE v FAI INSURANCES· Refusal to register share transfers: AUSTRALIAN METROPOLITAN LIFE v URE· Gain personal advantage: ASIC v A

20、DLERB. Duty to avoid conflicts of interestGeneral law fiduciary duty:1. Directors must avoid conflict of interest-ABERDEEN RAILWAY v BLAIKIE2. Fiduciary must not place themselves in position where duty +interest conflict: PHIPPS v BOARDMAN3. Liability can be avoided if (a) full disclosure, and (b) m

21、ember approval4. can be modified by constitution to require full disclosure and board approval: WOOLWORTHS v KELLY- s191 (rr) s194 s1955. Examples:· Contracting with company direct and indirect: TRANSVAAL v NEW BELGIUM · Personal profits: REGAL HASTINGS v GULLIVER· Bribes: FURS v TOMK

22、IES · Misuse of confidential information: RITEWAY EXPRESS PTY LTD v CLAYTON· Misuse of company funds: PAUL A DAVIES (AUST) PTY LTD v DAVIES · Taking up corporate opportunity: COOK v DEEKS; PESO SILVER MINES v CROPPER· Competing with the company: BELL v LEVER BROSStatute law duty:

23、S182: Directors, officers, employees must NOT improperly use position.S183: Directors, officers, employees must NOT improperly use information obtained from position in either case:(a) to gain advantage for themselves/ someone else, or (b) to cause detriment to the company.ASIC v VIZARDGeneral law a

24、nd statute law have different obligations.Additional statutory obligations:Disclosure of material personal interestsS191(1) Director with material personal interest in matter relating to affairs of the company must notify board.· Material personal interest-has capacity to influence vote: McGELL

25、IN v MT KING MINING· Affairs of the company -s53 business, trading, transactions, dealings, property, liability, profits, losses etc.· Disclosure of material personal interestsS191(2) no notice required for interests· As member of the company and in common with other members· Rem

26、uneration as director· Contract subject to approval of members· Guarantees/security given by director for company debts· Contract with related body corporate (RBC) arising just because of directorship of RBC( s50 holding company, subsidiary)· Pty co and other directors are aware

27、of the interestS192 standing notice possibleEffect:1. Pty co-(rr) s194· Interested member may vote on matter· Interested member may retain benefits· Company cannot avoid transaction2. Public company-s195· Interested member must NOT:· Be present when matter considered by boar

28、d· Vote on matter· Exceptions:· Other (disinterested) directors resolve to allow presence and voting · Asic approval (lack of quorum+ urgent matter) -s196Related party transactions (Public companies ONLY)1. Prohibition on giving financial benefit to related party. S2082. S229: fi

29、nancial benefit-includes provision of finance/ property, buying/leasing asset, supplying/receiving services (eg: interest-free unsecured loan: ASIC v ADLER)3. S228-related parties include:· Parent company· Directors and their spouses, parents, children· Related party in last six month

30、s or likely to be related party in future· Entity controlled by related party4. Exceptions (member approval not required) ss210-216· Arms length terms or terms less favourable to RP-s210· Reasonable remuneration, reimbursement-s211· Less or equal $5000benefit per financial year-s

31、213· Court order-s216Otherwise, member approval is required. -S208C. Duty of care and diligence:General law duty:Tort of negligence and equitable duty of care-director in breach if:· Director owes duty to exercise reasonable care· Duty is breached· Breach causes loss of damage to

32、 company, and · Loss of damage not too remote for recoveryStatute law duty:S180(1) Director/officer must use care+ diligence that a reasonable person would use if (a) director/ officer-in corporations circumstances, and (b) occupied same office +same responsibilitiesBoth forms of duty have the

33、same substance: ASIC v VINESs588 G: directors duty to prevent insolvent trading by company. Elements of the duty:1. Subjective element: consider companys circumstances, persons office and responsibilities. 主觀的2. Objective element: what would a reasonable person have done? 客觀的 Companys circumstances-

34、COMMONWEALTH BANK v FRIEDRICH· Type of company· Size and nature of enterprise· Composition of board· Distribution of responsibilities between board +othersPosition and responsibilitiesChair: ASIC v RICHCEO/MD: DANIELS v ANDERSONExecutive Director/Non-executive director: DANIELS v

35、 ANDERSONDirectors appointed because of skills/ experience:· Must give company benefit of skills/experience: GOLD RIBBON v SHEERS· Must pay attention to other aspects of business: DANIELS v ANDERSONMinimum standard-all directors must DANIELS v ANDERSON· Become familiar with companys b

36、usiness· Keep informed about business operations· Be familiar with financial positionASIC v ADLER· Have opinion of companys solvency· Attend board meetings( unless exceptional circumstances)Business judgment rule-s180(2)Elements to be satisfied:1. make judgment in good faith for

37、proper purpose2. no material personal interest3. informed about subject matter to extent believe reasonably appropriate, and 4. rationally believe judgment in companys best interestsDefence only to alleged breach of s180(1)+equivalent general law duties.Reliance on information/adviceS189: A director

38、 canRely on information/expert advice from · reliable, competent employee· professional adviser/expert on matter within expertise· another director/ officer on matter within their authority· committee of directors on matter with in its authority provided that the reliance was:in

39、good faith, and after making independent assessment (considering directors knowledge +complexity of matter)Consequences of breaches of duty and members right+ remedies1. Ratification available at General LawCompany can ratify breach of duty:· By ordinary resolution· With full disclosure of

40、 all relevant informationRatification only available · If company is solvent: KINSELA v KINSELA· For General Law duties (not statutory duties): ANGAS v CARABELAS Ratification by company does not prevent:· ASIC bringing action· Statutory derivative action s239(1) TO WHOM are dutie

41、s owed?General principle· Directors owe duties to the company: GREENHALGH v ARDERNE CINEMAS· Company is proper plaintiff原告 for wrongs done to the company: FOSS v HARBOTTLEBreach of general law duties:Only company may bring action.Remedies available to company: Damages: DANIELS v ANDERSON A

42、ccount of profits: PAUL A DAVIES (AUST) PTY LTD v DAVIES Rescission 取消 廢除: TRANSVAAL LANDS v NEW BELGIUM Constructive trust: COOK v DEEKS Injunction: PARKE v DAILY NEWS If company is in liquidation, then liquidator can bring action on companys behalf (see s9 officer (f) officer includes liquidator)B

43、reach of statutory duties:1. Any of the following may bring action:· Company· ASIC· DPP (if criminal)· Third parties (limited-insolvent trading)2. Remedies available:Compensation order under s1317H may be brought by · ASIC or · CompanyInjunction under s1324 (for breach

44、of act only) may be brought by · ASIC, or · Person whose interests are affectedIf company is in liquidation, then liquidator can bring action on companys behalf (see s9 officer (f) officer includes liquidator)2. Action available to ASIC:· Breach of civil penalty provisions (ss1317DA +

45、1317E)· SS180, 181, 182, 183, 209(2), 588G(2)· Management banning order: s206C· Pecuniary penalty order ($200,000)· Statutory compensation order: s1317H· ASIC v VIZARD· ASIC v ADLER3. Action available to DPP:· Criminal penalties-s184· Breach of ss 181, 182, 18

46、3 AND· Breach is reckless or intentionally dishonest· Penalty: up to $360,000 fine or 5 years jail or both-Schedule 3 Item 304. Additional statutory obligations:material personal interest -S191S191(4) breach does not cause invalidityS191(1) offence: penalty: $1800 or 3 months imprisonment

47、or both (s1311 and schedule 3 item 32)Public company-s195Conflicted director must not:· Be present when matter considered by board· Vote on matterS195(5) breach does not affect validity of resolutionS195(1)offence: Penalty $900(s1311 and schedule 3 item 3)Financial benefit to related party

48、 of public company-s208· S209(1) consequencesContravention does not invalidate contract/transactionNo offence by company· S209(2) person involved in contravention in breach -Civil penalty provision· Person involved in contravention is in breach (no offence by company/validity of contr

49、act not affected: s209 (1)· Civil penalty provision (s1317 item 3)-pecuniary penalty up to $200,000(s1317 G)· S209(3) if dishonest, then person commits offence-Criminal provision· A person commits an offence if they are involved in a contravention of section 208 by a public company or

50、 entity and the involvement is dishonest.· Penalty: $360,000 OR 5 years imprisonment or both(s1311and schedule 3 item 50)Members right1. TO WHOM are duties owed?General principle: Directors owe duties to company: GREENHALGH v ARDERNE CINEMAS-members as a wholeCompany is proper plaintiff for wro

51、ngs done to company: FOSS v HARBOTTLE2. Statutory Derivative Action-s2361) Abolishes common law derivative actions s236(3)The right of a person at general law to bring, or intervene in, proceedings on behalf of a company is abolished.2)Person who can sue on companys behalf-s236(1)(a)· Member

52、83; Former member· Person entitled to be registered as member· Officer· Former officer3). Must obtain leave of the Court under-s236(1)(b)4).Court must grant leave if satisfied that -S237· Company is unlikely to bring proceedings· Applicant is acting in good faith · In b

53、est interests of company to grant application· Serious question to be tried· Notice given to the company (at least 14 days before making the application)(or otherwise is appropriate)5) Action that can be taken by person-s236(1)· Bring proceedings on behalf of the company· Interve

54、ne in existing proceedings6) Proceedings must be in companys name-s236(2)7) Relevant considerations: SWANSSON v PRATT· Acting in good faith-not abuse of process· In best interest of company( note s237 (3)Consider nature /character of companyEffect on companys businessRedress available by a

55、lternative meansAbility of other party to meet any judgment· Serious question to be triedNot a consideration of meritsMust show arguable case8) Rubuttable presumption-s237(3)granting leave NOT in company's best interest if· Proceedings concern third party· Company made decision no

56、t to bring proceedings AND· All of Directors who participated in that decision1) Act in good faith for proper purpose2) No material personal interest3) Informed about subject matter to extent appropriate4) Rationally believed decision in company's best interests9) If leave is granted, Court

57、 makes costs order it considers appropriate: s242The Court may at any time make any orders it considers appropriate about the costs of the following persons in relation to proceedings brought or intervened in with leave under section 237 or an application for leave under that section:(a) the person

58、who applied for or was granted leave;(b) the company;(c) any other party to the proceedings or application. 10) Ratification by menbers· Does NOT prevent granting of leave: s239(1)· Ratification can be considered: s239(2)How well informed were members?Were members acting for proper purpose

59、?11) Remedy/compensation recovered is for companyPersonal rights1. Oppression· Absence of commercial fairness: MORGAN v 45 FLERS AVENUE· Determined objectively: WAYDE v NSW RUGBY LEAGUE· Member dissatisfaction with management style not sufficient RE H W THOMAS· Several factors may amount to oppression-course of conduct S