Law coursework Essay Example | Topics and Well Written Essays - 2000 words

Law coursework - Essay Example Resulting from this unique position of power, directors are legally considered to stand in a fiduciary relationship with their company, and are subject to specific duties stemming from that relationship (Regal (Hastings) Ltd v Guliver (1967). Where an employee or director of a company (1) takes advantage of business opportunities made known to them during the course of their relationship and diverted such opportunities to themselves, (1) receives bribes from suppliers, and/or (3) engages in unlawful competitive activity, the employee or director will not be permitted to retain that benefit, as the law treats money or corporate opportunities as belonging to the principal company. In addition to this, if the person owing the fiduciary duty earns further profits from a breach of fiduciary duties, those profits also belong to the principal. Principals are in some circumstances entitled to trace the property received through to third parties. Moreover, even if the person has spent the mon ey or disposed of the assets in question, a fiduciary remains personally liable for the monetary equivalent of the benefit received (Gillhams). Over the time, the courts have construed company directors' fiduciary duties as being duties to: act in good faith and for proper purpose; a) avoid conflicts of interest; b) retain directors' discretion; and c) act with due care and skill; Directors also owe a duty of care to their company under the common law of negligence. In addition to these general law duties, directors owe statutory duties under the Corporations Act 2001 (Cth), (Stephens) such as duty to act in good faith in the best interest of the company and duty to prevent insolvent trading by company (Ibid). The Companies Act of 2006 provides seven general duties in the new statutory statement as follows: a)?A duty to act in accordance with the company’s constitution, and to use powers only for the purposes for which they were conferred. This replaces existing, similar duti es. b) a duty to promote the success of the company for the benefit of its members. This replaces the common law duty to act in good faith in the company’s interests. c) A duty to exercise independent judgment. There is no exactly equivalent duty at common law. However, directors are currently under an obligation not to fetter their discretion to act or to take decisions – this aspect of the general duty replaces this obligation. d). A duty to exercise reasonable care, skill and diligence. This replaces the existing duty of care and skill. e). A duty to avoid conflicts of interest (except where they arise out of a proposed transaction or arrangement with the company – see below). At present, if a director allows his personal interests, or his duties to another person, to conflict with his duty to the company then, unless shareholders consent to the conflict: (i) the company can avoid any relevant contract and (ii) he must account to the company for any ‘se cret profit’ he has made out of the arrangement. The new duty replaces this old rule. f)?A duty not to accept benefits from third parties. There is no express duty to this effect at common law. It appears to derive from the current duties (Freshfields 4). A director must not exploit his office for personal gain at the expense of the corporation and its stockholders, to whom he owes the utmost good faith (Babb and Martin 321).