Corporate Director's Duties.

Director's duties derive from three potential sources. First, there are duties imposed by statute, primarily the Corporations Law. Secondly, director's duties have been developed by the Courts, particularly those duties arising from a director's fiduciary position. Thirdly, director's duties may be expanded upon or shaped by the particular circumstances and perhaps by other contracts such as Shareholders Agreements.

The primary directors' duties are found in sections 180, 181,182 and 183 of the Corporation Law.

These duties include:

• The duty to use care and diligence;
• The duty to act in good faith;
• The duty not to make improper use of position; and
• The duty not to make improper use of information.

Care and Diligence

Section 180(1) contains the director's duty of care and diligence. It provides:

"A director or other office of a corporation must exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if they:

1. were a director or officer of a corporation in the corporation's circumstances; and
   
2. occupied the office held by, and had the same responsibilities within the corporation as, the director or officer."

Duty in Good Faith

Section 181(1) contains directors' fiduciary duty and provides:

"A director or other officer of a corporation must exercise their powers and discharge their duties;

1. in good faith in the best interest of the corporation;
   
2. for a proper purpose."

Use of Position

Section 182(1) provides:

"A director, secretary, or other officer or employee of a corporation must not improperly use their position to:

1. gain an advantage for themselves or someone else; or
   
2. cause a detriment to the corporation."

Use of Information

Section 183 of the Corporations Law provides:

"A person who obtains information because they are, or have been a director or other officer or employee of a corporation must not improperly use the information to:

1. gain an advantage for themselves or someone else; or
   
2. cause detriment to the corporation."

As with section 182(1), this section extends to a person who was involved in the contravention.

Source: Michael Poynter - Poynters Corporate services