The Directors, officers and other employees of a company have a Common Law duty to:

Act bona fide in the interests of the company in which they are working: Directors and officers should act in good faith in the company’s interests as a whole.

Act for proper purposes only: Directors and officers should not misuse their powers for improper purposes such as gaining personal advantage or defeating voting powers of the existing shareholders by forming a new majority.

Exercise due care and diligence: Directors are required to guide, monitor and use diligent care and make well informed and independent decision while managing the affairs of the company.

Avoid conflicts of interest and retain discretion: Directors should not place themselves in such situations or become a part of transactions where they are not able to make a decision which is in the best interest of the company. Since the Directors owe a relationship of faith and trust to the company, they are presumed to put the company’s interest ahead of their own interest.

Refrain from disclosing confidential information and abusing corporate opportunities: On account of their fiduciary relationship, Directors are under an obligation not to disclose confidential information or abuse corporate opportunities. They should not disclose such information which might be detrimental to the company’s interest and/or likely to be. The employment lawyers at Owen Hodge Lawyers can provide more information if you have any questions.

Breach of Fiduciary Duty

The Directors and other officers of a company are considered to have breached their fiduciary duties when they:

fail to make a business judgment in good faith for a proper purpose; or

have placed a material personal interest in the subject matter of the business judgment ahead of the company’s interest; or

have reasonable grounds to believe that the business judgment is not in the best interests of their company; or

engage in such conducts which are detrimental to the interest of the company with the intention and purpose of obtaining a benefit for and/or from anyone; or

deceitfully and intentionally fail to exercise their powers and discharge their duties in good faith either in the best interest of the company or for a proper purpose; or

dishonestly and intentionally commit an offence by using their position so as to gain an advantage for themselves or someone else, either directly or indirectly, thereby causing harm to the company; or

obtain information with intentional dishonesty and use the information to the detriment of the company to gain an advantage, directly or indirectly, either for themselves or for someone else; or

fail to prevent the company from trading in a dishonest manner while being insolvent.

Civil Remedies for Breach

In order to claim remedies for breach of fiduciary duty, a complainant needs to establish the following:

There was an existence of a duty between the complainant and the fiduciary;

The fiduciary owed a duty of trust and faith to the complainant;

There has been a breach of duty by the fiduciary; and

The complainant has suffered loss and damage owing to such breach of duty.

In case the breach is proved, the Courts may Order the following:

Pecuniary penalty up to $200,000 if a declaration of contravention has been made by any person when the contravention is serious and materially prejudices the company and its ability to pay to its creditors or members;

Compensation for damage for contravening a civil penalty provision under Section 1317 E of the Corporation Act 2001 in relation to a company or a scheme; and

Disqualification from managing corporations.

Power of Australian Securities and Investment Commission (ASIC)

An application for declaration of contravention of a civil penalty provision can be made by the ASIC to the appropriate Court. Upon the declaration been made, ASIC can seek a pecuniary penalty Order or a disqualification Order to disqualify Director(s) from managing the affairs of the company owing to breach of general, statutory or constitutional duties.

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What to Consider When Hiring a Contractor
Workplace Rights and Adverse Action
Wrongful Dismissal Vs Unfair Dismissal
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Disciplinary Matters – Deceptive And Misleading Conduct
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Unfair Dismissal – Not Covered By An Award
When Competitors Steal Staff There Are Legal Consequences
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