Claw6001 week 9 &10 conflict of interest and insolvent trading.docx

Claw6001 week 9 &10 conflict of interest and insolvent trading.docx

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Week 9 Week 10 Conflicts of Interest Duty to Prevent Insolvent Trading Directors’ Duties – conflicts of interest A company and its directors are in a fiduciary relationship whereby the directors (fiduciaries) owe a fiduciary duty to the company (beneficiary) to: act in good faith in the best interests of the company act for proper purposes avoid having a personal interest or inconsistent engagement without the fully informed consent of the company avoid misusing their positions as directors for their own advantage or for that of another without the fully informed consent of the company not make secret profits or misappropriate the company’s property for their own advantage or for that of another Directors who enter into self-interested transactions with the company to whom they owe fiduciary duties or otherwise have a conflict of interest amounting to a breach of fiduciary duty, such as: making a personal profit arising from their position diverting a corporate opportunity from the company, or misusing company information must fully disclose the details of their personal interest to the company (members), and obtain the fully informed consent (approval) of the company (members) if they are to avoid liability for the breach General Law fiduciary duty (of trust and confidence): directors must avoid conflicts of interest – Aberdeen Railway Co v Blaikie Bros (company can avoid a contract with fair terms where a director is involved with the other party) Statute Law duty: s 182 – directors, officers + employees must not improperly use position s 183 – directors, officers + employees must not improperly use information obtained from position s 191 – disclosure of material personal interest to board s 208 – disclosure of related party transaction to members General Law and Statute Law have different obligations General Law fiduciary obligations: Fiduciary must not place themselves in position where duty and interest conflict: Phipps v Boardman Liability can be avoided if: full disclosure to members, and member approval of the conflict Can be modified by constitution to require full disclosure and board approval (as distinct from member approval): Woolworths v Kelly – now s 191 + [rr] s 194 or s 195 Examples : contracting with company – direct and indirect: undisclosed personal profits: Regal (Hastings) Ltd v Gulliver
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Week 9 Week 10 Conflicts of Interest Duty to Prevent Insolvent Trading bribes / secret commissions: Furs Ltd v Tomkies misuse of confidential information: Riteway Express Pty Ltd v Clayton (names and requirements of clients, prices charged) ; ASIC v Vizard (company’s investment strategies) misuse of company funds: Paul A Davies (Aust) Pty Ltd v Davies diverting a corporate opportunity from the company: Cook v Deeks; Peso Silver Mines v Cropper competing with the company: Bell v Lever Bros Ltd Directors’ Duties – misuse of position & information Statute Law duty:
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