The application of a directors obligations beyond

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The application of a Director’s obligations beyond disclosure and abstinence from voting will vary from case to case {Fitzsimmons v R per Owen J} This heavier duty is required where the following three factors are present {Marcus Clark} o (1) The director’s role involves him in the day-to-day running of the company o (2) The degree to which the director is involved in the transaction (is he driving it or just sitting on the board) o (3) Whether the director knows or should reasonably know that the outcome of the transaction would be “ clearly adverse in terms of ultimate loss” for the Company This heavier duty may entail that you resign because you cannot resolve the conflict of duties {Fitzsimmons v R} Therefore if you are a senior officer in a company with a material conflict of interest you MUST take positive steps to protect the company {Marcus Clark} C.2 Curing a Conflict under Statute If the director is found to have a material personal interest that is not exempt under s 191(2), then under the Act he must provide notice of this interests to the other directors (1) Notice The disclosure must include details of the nature and extent of the interest and the relationship of the director’s interests to the Company’s affairs {s 191(3)(a)(i) and (ii) Corporations Act} It should be given to the other directors at a director’s meeting as soon as practicable after the director becomes aware of their interest in the matter {s 191(2)(b) Corporations Act} o The details must be recorded in minutes of that meeting Standing notice can also be given for interests that are yet to become material personal interests {s 192(1) Corporations Act} The level of disclosure was considered by {Santow J in Camelot Resources Ltd v MacDonald} : o Held that disclosure must be in sufficient detail for the board as a whole to understand the scope of the benefit and potential profit to the director (2) Abstaining from Voting Under {s 194 Corporations Act } a director of a proprietary company who has a material personal interest in a matter that relates to the affairs of the company (and under 191 has disclosed the matter or under s 191 is not required to disclose matter) o The director may vote on the matters that relate to the interest {s 194(c) Corporations Act} o The director may retain the benefits under the transaction even though the director has the interest {s 194(e) Corporations Act} Under {s 195(1) Corporations Act} a director of a public company who has a material personal interest in a matter that is being considered at a director’s meeting must not : o (a) be present while the matter is being considered at the meeting; or o (b) vote on the matter o unless: a majority of the other directors (who themselves do not have a material personal interest in the matter) permits the director to be present and vote – pass a resolution that: Identifies director, the nature and extent of the interest and its relation to affairs of company {s 195(2)(a) Corporations Act} 7
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