Directors Duty
Directors’ duties in Australia are designed to promote good governance and ensure that directors act in the interests of the company – including putting the company’s interests ahead of their own (A Guide to Directors’ Duties and Responsibilities, 2008). In the case of OHS Solutions Pty. Ltd. in order to give advice it must first be known what are the duties and responsibilities of a director and officer. There are three sources of law in which directors’ duties are enforced: the common-law (judge made), the Corporations Act 2001 (Commonwealth) (the “Corporations Act”) and a company’s constitution (A Guide to Directors’ Duties and Responsibilities, 2008). There are both general law and statutory law duties that are owed by the director to different persons General law duties are owed by the directors and senior executive officers, which are also regarded to as fiduciaries. Statutory duties apply to directors, but there are some statutory duties that apply to company officers as well (Hanrahan, Ramsay & Stapledon 2011).
The obligations and responsibilities that directors must follow include: duty to act bona fide (in good faith) in the interests of the company as a whole, duty not to act for an improper purpose, duties of care and diligence, duty to avoid conflicts of interest, duty not to make improper use of position, duty not to make improper use of information, duty not to trade while insolvent (A Guide to Directors’ Duties and Responsibilities, 2008). As extensive as these duties and responsibilities are for the purpose of this paper the duty of focus is, duty not to trade while insolvent. Referring to section s588G of the Corporations Act 2001 (Commonwealth), directors have the duty to prevent their company incurring debts when the company is insolvent or would become insolvent (Corporations Act 2001 (Cth) s 588).
Firstly, it needs to be sought as to when s588G applies. It must be analysed whether the company was insolvent at the time or became
The obligations and responsibilities that directors must follow include: duty to act bona fide (in good faith) in the interests of the company as a whole, duty not to act for an improper purpose, duties of care and diligence, duty to avoid conflicts of interest, duty not to make improper use of position, duty not to make improper use of information, duty not to trade while insolvent (A Guide to Directors’ Duties and Responsibilities, 2008). As extensive as these duties and responsibilities are for the purpose of this paper the duty of focus is, duty not to trade while insolvent. Referring to section s588G of the Corporations Act 2001 (Commonwealth), directors have the duty to prevent their company incurring debts when the company is insolvent or would become insolvent (Corporations Act 2001 (Cth) s 588).
Firstly, it needs to be sought as to when s588G applies. It must be analysed whether the company was insolvent at the time or became
References: A Guide to Directors’ Duties and Responsibilities for Non-listed Public Companies or Proprietary Companies in Australia 2008, Pricewater Coopers Australia, accessed on 8 February 2012, http://www.pwc.com.au/legal/assets/GuideDirectors_Apr08.pdf Corporation Act 2001 (Cth) Gilford Motor Co Ltd v Horne [1933] Ch 935 Hanrahan, P., Ramsay, I. & Stapledon, G. 2011, Commerical Applications of Company Law, 12th ed, CCH Australia Limited, North Ryde, NSW. James, T. & Topp, A. 2000, ‘What is Debt and When is it Incurred?’, Find Law Australia, accessed of 15 February 2012, http://www.findlaw.com.au/articles/2018/what-is-a-debt-and-when-is-one-incurred.aspx James, T. & Topp, A. 2012, ‘What is Insolvency?’, Find Law Australia, accessed of 15 February 2012, http://www.findlaw.com.au/articles/1993/what-is-insolvency.aspx Salomon v Salomon & Co Ltd [1897] AC 22 Quick v Stoland Pty Ltd [1998] FCA 1200