ACCT256 WK7LEC1

• What is the primary learning outcome of the ACCT256 course on Directors' Duties?

  Gain a deeper understanding of the director's role in corporate structures.
• What specific duties of directors are explored in the ACCT256 course?

  Fiduciary responsibilities, solvency obligations, competency requirements, and managing conflicts of interest.
• What is the focus of today's lecture in the ACCT256 course?

  Understanding the meaning of fiduciary duties of directors.
• Who is the lecturer for the ACCT256 course on Directors' Duties?

  Dr. Simone Schwoerer.
• To whom can a director be personally liable?

  To the company and the shareholders.
• According to common law, to whom do directors owe fiduciary duties?

  Primarily to the company.
• What is a Catch-22 situation regarding directors and breach of duty?

  Directors can choose not to act against themselves for breach of duty.
• How does the Companies Act 1993 address the Catch-22 situation for directors?

  It empowers shareholders to take action against directors for specific breaches.
• What are the four groups of common law duties for directors?

  To act in good faith, not exercise powers for improper purposes, exercise care and skill, and avoid conflicts of interest.
• What was established in the case of Re City Equitable Fire Insurance Co (1925) regarding directors' liability?

  Directors only need to show the skill that could reasonably be expected of a person with their knowledge.
• What is a problem with the approach established in Re City Equitable Fire Insurance Co regarding directors' duties?

  It values honesty over competency and lacks a minimum standard of performance.
• What does the long title of the Companies Act 1993 include regarding directors' management of companies?

  It encourages efficient and responsible management while providing protection for shareholders and creditors.
• What sections of the Companies Act 1993 relate to fiduciary duties of directors?

  Sections 131 to 134.
• How do the duties under the Companies Act 1993 compare to common law duties?

  They resemble common law principles but impose a higher standard of care.
• What is the nature of the fiduciary duty of directors as per section 131 of the Companies Act 1993?

  Directors must act in good faith and in the best interests of the company.
• What criteria do courts use to evaluate the fiduciary duty of directors?

  They use both subjective criteria and an objective standard.
• According to section 132(1) of the Companies Act 1993, to whom is the fiduciary duty fundamentally owed?

  Fundamentally to the company.
• What did Mason J state in Walker v Wimborne (1976) regarding directors' duties?

  Directors must take into account the interests of shareholders and creditors.
• How does the duty of directors change based on the company's solvency?

  When solvent, directors prioritize shareholders' interests; when insolvent, they prioritize creditors' interests.
• What did the Court of Appeal state in Sojourner v Robb regarding directors' duties in insolvency?

  Directors must consider creditors' interests when the company is insolvent or nearing insolvency.
• What is a key feature of the Companies Act 1993 regarding solvency?

  Maintenance of solvency is a key feature.
• What was the scenario in Singh v K & MK Singh Farms Ltd regarding directors' duties?

  Directors resolved to evict Mrs. Singh from the family home after her separation from Mr. Singh.
• In Nicholson v Permakraft (NZ) Ltd (1985), what was the issue regarding the payment of dividends?

  Directors authorized a large dividend payment while the company was nearing insolvency.
• What did Cooke J justify regarding the duty to creditors in Nicholson v Permakraft?

  Limited liability cannot be used to prejudice creditors, and a balance must be made.
• What does section 301 of the Companies Act 1993 allow creditors to do during liquidation?

  It allows creditors to apply to the court to review a director’s conduct.
• What is the nature of the duty under section 133 regarding directors' powers?

  Directors must exercise their powers for a proper purpose.
• What is the significance of the case Howard Smith Ltd v Ampol Petroleum Ltd (1974) regarding directors' powers?

  It established that issuing shares for the primary purpose of diluting a shareholder's shareholding is an improper purpose.
• What does section 134 of the Companies Act 1993 require of directors?

  Directors must not act in a manner that contravenes the Act or the company's constitution.
• What are the potential consequences of failing to comply with section 134?

  It can lead to statutory remedies, including injunctions or shareholder actions.
• What are the key fiduciary duties of directors under the Companies Act 1993?

  • Duty to act in good faith (s131)
  • Duty to exercise powers for a proper purpose (s133)
  • Duty to comply with the Act and constitution (s134)
  • Duties relating to company solvency (s135, 136)
  • Competency duties (s137, 138)
  • Duty to avoid self-interest (s140, 145, 148, 149)
• What are the implications of a company being insolvent for directors' duties?

  • Directors must prioritize creditors' interests over shareholders'.
  • Directors may face personal liability for failing to consider creditors' interests.
  • Decisions must reflect the company's financial status.
• What is the relationship between common law and the Companies Act 1993 regarding directors' duties?

  • The Act resembles common law principles.
  • It imposes a higher standard of care.
  • Courts may rely on common law or equity to fill gaps in statutory provisions.
• What is the significance of the amalgam of subjective and objective standards in evaluating directors' fiduciary duties?

  • Subjective: Directors' honest beliefs about what is right.
  • Objective: How a reasonable director would act in similar circumstances.
  • Courts consider both to assess compliance with fiduciary duties.
• What are the statutory remedies available for breaches of directors' duties under the Companies Act 1993?

  • Injunctions for actions not yet completed.
  • Shareholder actions under section 170 for prejudiced shareholders.
  • Possible proceedings under section 174 for breaches of duty.