Company Directors owe duties and responsibilities to the company and its shareholders under the Corporations Act 2001, the common law and any Shareholders Agreement or Executive Employment Contract. These Directors Duties include the:
- duty to exercise due care and diligence,
- duty to act in good faith in the best interests of the company and for a proper purpose,
- duty to avoid conflicts of interest,
- duty not to improperly use their position to gain an advantage for themselves (or someone else) or to cause detriment to the company,
- duty not to misuse information, and
- duty to prevent insolvent trading.
These duties are owed by Directors and Company Secretaries and in some circumstances executives and other people who control the way a company operates (also known as shadow directors or de facto directors) . Significantly, a person involved in a contravention of duty arising under the Corporations Act may by liable for loss or damage flowing from the breach along with the Director.
An action for breach of a Directors’ Duty may be brought by the company (including a liquidator), by a shareholder (with leave of the Court) or by ASIC.
A Director may also be liable to a Company in Liquidation where the Director has been a party to an insolvent transaction, especially an unreasonable director-related transaction.