Directors Duties in the On Line Environment July

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Directors’ Duties in the On. Line Environment July 2001 Carolyn Reynolds 1 397965

Directors’ Duties in the On. Line Environment July 2001 Carolyn Reynolds 1 397965

IS THERE A DIFFERENCE? • Early thinking argued yes • Now accepted that the

IS THERE A DIFFERENCE? • Early thinking argued yes • Now accepted that the same standard applies 2 160469

WHO IS A DIRECTOR? • Not only appointed directors • Includes those who direct

WHO IS A DIRECTOR? • Not only appointed directors • Includes those who direct decision making or control the board 3 160469

WHAT ARE THE DUTIES OF A DIRECTOR? • Function of directors’ duties: to ensure

WHAT ARE THE DUTIES OF A DIRECTOR? • Function of directors’ duties: to ensure the director’s loyalty to the company • Duties include: • to act in good faith and honestly • to act with due care, skill and diligence • to act for the benefit of the corporation as a whole and exercise powers for their proper purpose • What are the interests of the corporation as a whole: • can include interests of the holding company • does not include interests of directors or employees 4 160469

CONFLICTS • Duty to avoid conflicts: that is, a conflict between duty to the

CONFLICTS • Duty to avoid conflicts: that is, a conflict between duty to the company and other interests • Must be a ‘real sensible possibility’ of conflict • Circumstances where a conflict exists • What are the Corporations Act 2001 requirements regarding conflicts? • Directors should not divert corporate opportunities, use corporate property or divulge confidential information • Directors should not make improper use of position 5 160469

INSOLVENT TRADING • Personal liability for directors • Where company is insolvent or likely

INSOLVENT TRADING • Personal liability for directors • Where company is insolvent or likely to become insolvent • Cannot allow company to incur further debts 6 160469

THE BUSINESS JUDGEMENT RULE • New defence - introduced by CLERP • Not a

THE BUSINESS JUDGEMENT RULE • New defence - introduced by CLERP • Not a general defence, but only available for alleged breaches of the duty of care and diligence • Only applies to business judgements • Preconditions • good faith judgement for proper purpose • no material personal interest • inform oneself • rationally believe that in best interests of the company • What difference will it make? 7 160469

DELEGATION BY THE BOARD • Directors are responsible for acts of delegates except in

DELEGATION BY THE BOARD • Directors are responsible for acts of delegates except in limited circumstances eg reasonable belief that delegate would conform • Delegates must be reliable and competent • Similarly, directors can rely on information or advice in limited circumstances eg reasonable belief that expert was competent • However, directors should not accept information or advice at face value 8 160469

ONLINE ISSUES • Business fundamentals are the same • Disclosure obligations are the same

ONLINE ISSUES • Business fundamentals are the same • Disclosure obligations are the same • Security and privacy consequences • Board composition and management team • Corporate opportunity and conflicts 9 160469

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Markta Tomanov Content Duties Benefits course Duties OLSMarkta Tomanov Content Duties Benefits course Duties OLS
YearEnd Duties YearEnd Duties Cancellation of Warrants OldYearEnd Duties YearEnd Duties Cancellation of Warrants Old