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Directors Duties: Introduction

Duty to Act in Good Faith in the Co's Best Interests. The duty to the company: Percival v Wright [1902] 2 Ch 421The duty to an individual shareholder in special circumstances: Brunninghausen v Glavanics (1999) 17 ACLC 1247Nominee directors: Scottish Co-operative Society v Meyer [1959] AC 324Gr

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Directors Duties: Introduction

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    1. Directors’ Duties: Introduction Director’s fiduciary relationship with the company To act in good faith in the co’s best interests To retain discretion To exercise powers for proper purpose To avoid conflicts of interest Further duties under the CA To act in good faith and in the co’s best interests: s 181(1)(a) To exercise their powers for their proper purpose: s 181(1)(b) To avoid conflicts of interests: s 191 To act with care and diligence: s 180 To prevent the co engaging in insolvent trading: s 588G

    2. Duty to Act in Good Faith in the Co’s Best Interests The duty to the company: Percival v Wright [1902] 2 Ch 421 The duty to an individual shareholder in special circumstances: Brunninghausen v Glavanics (1999) 17 ACLC 1247 Nominee directors: Scottish Co-operative Society v Meyer [1959] AC 324 Group companies and the exception in s 187 Creditors: Kinsela v Russell Kinsela Pty Ltd (1986) 2 ACLC 215

    3. The Company: Percival v Wright [1902] 2 Ch 421

    4. Individual Shareholder: Brunninghausen v Glavanics (1999) 17 ACLC 1247

    5. Nominee directors: Scottish Co-operative Society v Meyer [1959] AC 324

    6. Creditors: Kinsela v Russell Kinsela Pty Ltd (1986) 2 ACLC 215

    7. Duty to Act in Good Faith in the Co’s Best Interests under the CA Directors must exercise powers in good faith in the best interest of the company: s 181(1)(a) Directors fail to exercise powers in good faith in the best interest of the company commits an offence: s 184(1)(c) Consequences of breach Civil penalty: s 1317E(1) & s 1317G (1) Disqualification: s 206C; ASIC v Adler (2002) 20 ACLC 1146 Compensation to the co: s 1317H & s 1317J Criminal offence: eg, ASIC v Adler Relationship with other duties: s 185

    8. Duty to Exercise Powers for Proper Purpose (1) Directors breach their fiduciary and statutory duties if they issue shares to: Maintain their control of the company; Defeat a takeover bid; or Create or destroy the voting power of majority shareholders: Howard Smith Ltd v Ampol Petroleum Ltd [1974] AC 821 Directors must exercise their power of refusal to register transfer of shares under ss 1072F(3) & s 1072G for a proper purpose: Australian Metropolitan Life Assurance Company Ltd v Ure (1923) 33 CLR 199

    9. Duty to Exercise Powers for Proper Purpose (2) Consequences of breach General: voidable at co’s option Share issue: the share issue disallowed When registration of share transfer improperly refused, the transferee is entitled to apply to the court for an order: s 1071F Statutory duty Directors must exercise powers for a proper purpose: s 181(1)(b) Directors fail to exercise powers for a proper purpose commits an offence: s 184(1)(c)

    10. Howard Smith Ltd v Ampol Petroleum Ltd [1974] AC 821

    11. Australian Metropolitan Life Assurance Company Ltd v Ure (1923) 33 CLR 199

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