Hypothetical Case: Breach Of Fiduciary Relations

In order to prove the breach of section 184, the following rules and duties must have been violated. A director commits an offence if they are reckless or intentionally dishonest, and fail to exercise their powers and discharge their duties in good faith in the best interests of the corporation or for a proper purpose .As mentioned earlier Mr Palmer was reckless in decision making by waving loans and using the company assets for private benefits and the company suffered had to go in voluntary administration. The second offence that needs to the violation of section 184 is that when a director commits an offence if they use their position with intentional dishonesty or recklessly in order to directly or indirectly gain an advantage for themselves, or someone else, or cause detriment to the corporation. Mr Palmer acted as a shadow director and his nephew agreed with all the decisions the corporation made such as political donations and transferring funds to another firms owned by Mr Palmer that caused detriment to Queensland Nickel. The third offence is a person who obtains information because they are, or have been, a director of a corporation commits an offence if they use the information with intentional dishonesty or recklessly. As

There are three internal and one external governance mechanisms used for owners to govern managers to ensure they comply with their responsibility to satisfy stakeholders and shareholder’s needs. First, ownership concentration is stated as the number of large-block shareholders and the total percentage of the shares they own (Hitt, Ireland, Hoskisson, 2017, p. 317). Second, the board of directors which are elected by the shareholders. Their primary duty is to act in the owner’s best interest and to monitor and control the businesses top-level managers (Hitt, Ireland, Hoskisson, 2017, p. 319). Third, is the

Issue: Have the directors of the company breached their duties mainly related to the company’s insolvent trading.

of Teamsters v. Willis Corroon Corp., 369 Md. 724, 727 n.1 (2002); Kann v. Kann, 344 Md. 689, 693 (1997) (“[A]llegations of breach of fiduciary duty, in and of themselves, do not give rise to an omnibus or generic cause of action at law that is assertable against all fiduciaries.”). Fiduciary obligations may surely arise by means of contract, the imposition of a duty in tort, or some other sort of relationship, and when they do, “[c]ounsel are required to identify the particular fiduciary relationship involved, identify how it was breached, consider the remedies available, and select those remedies appropriate to the client's problem.” Kann, 344 Md. at

In many misfeasance cases against directors, those breaches maybe relatively uncontroversial. This draws into focus the question of whether the director has any common law or statutory defence, including the Duomatic principle and ratification by shareholders (CA 2006 S.239), available to a claim against him for restitution to the company. S.239(6)(a) preserves the Duomatic rule that if an informal unanimous consent is reached among voting shareholders, it is unnecessary to pass such ratification resolution through general meeting or written resolution. The first part will examine the scope and requirements of this rule to illustrate the validity of such assent. S.239(7) leaves the door open for rules of law, which refers to common law principles, to continue guiding ratification. It will be assessed how these rules impose limitations on the general ratification power conferred by s.239.

According to UK Law, the directors should act in good faith in the interest of the company, and exercise care and skill in carrying out their duties. The Company Law Reform Bill (2005) defines, in section 154-161, the directors’ duties as follows:

Finally, and perhaps most importantly, consider what the prospective directors ' affiliation might be with executives. Members of the board are often obliged to make arduous decisions concerning finances, personnel and salaries. Ensure that potential members do not have a conflict of interest concerning management and other key personnel. Professionals emphasize board members must

The duty of loyalty requires the fiduciaries to act in good faith and in what they believe to be the best interest of Chevron in lieu of their personal interest. Even if the committee finds enough evidence to support the complaint filed by Bezirdjian, the Board must bring the lawsuit against the alleged directors. If the committee does not pursue the investigation with impartiality and independence, the committee might be open to attacks regarding its objectivity in dealing with the directors under investigation and then they may not be protected under the business judgment rule. If this is the case, the court can reject the committee’s findings because the committee from the beginning was not truly independent and disinterested.

In large corporations the success or failure of the company is the responsibility of the board of directors. According to Richard DeGeorge, “The members of the board are responsible to the shareholders for the selection of honest, effective managers, and especially for the selection for the CEO and of the president of the corporation.” (p. 202). The board members have a moral responsibility to ensure the corporation is run honestly, in respect to its major policies, and to ensure the interests of the shareholders are satisfied. The next responsibility within a corporation is the responsibility management has to its board of directors. DeGeorge writes, “It must inform the board of its actions, the decisions it makes or the decisions to be made, the financial condition of the firm, its successes and failures, and the like.” (p. 202). The management of the corporation is morally obligated to

Equitable principles for directors were developed from fiduciary duties applied to trustees through common law. A director has a fiduciary duty to ensure that no conflict of interest exists between him and the company. This common law principle “the no conflict rule” was established in Keech v Sandford.7 Upholding this, Lord Cranworth LC held in Aberdeen Railway Co v Blaikie Bros,8 “And it is a rule….no one....shall be allowed to enter into engagements in which he has, or can have, a personal interest conflicting, or which possibly may conflict, with the interests of those whom he is bound to protect.” This principle was encompassed in the Companies Act 2006:

There is a conflict of interest involved between the two parties. As mentioned in the Business Corporation Act of Ontario which claims that every director and officer of a corporation within his powers act honestly and in good faith and must vote in best interest of the corporation. Also, the director should exercise the care, diligence and skill that a reasonable person would exercise in this situation.

In relation to James Hardie case, directors breached their statutory obligations, referred in the Corporations Act 2001 (Cth) s180, in terms of acting with care and diligence, good faith and the proper use of information and position.

During the course of this essay, one aims to open the paradox, that is non-executive directors (hereinafter NEDs) and lay down the issues that they face and the remedies that have been proposed. Hence, in order to understand the role of a NEDs, one must be able to look at their role holistically. NEDs, are known as part time directors who are appointed by the full time directors of a company, and their role in essence is to do the exact opposite of the full time director, making them an independent party.

Further to the general negligence position on public bodies, in instances of omissions the general principle is that there is no duty to act unless a special relationship exists. However, there is an exception, a duty is owed if proximity is established as demonstrated in Home Office v Dorset Yacht Co Ltd [1970] UKHL 2.

The principals (the shareholders) have to find ways of ensuring that their agents (the managers) act in their interests.