Directors’ Duties

The overriding duties of a company director are to function on behalf of shareholders and to uphold the interests of the business. However, alongside these responsibilities come several key obligations which ensure directors will always act in the best interests of the business, rather than themselves.

These are as follows:

  • Acting with care and diligence
  • Acting in good faith
  • No improper use of position
  • No improper use of information

The consequences of a breach of such duties are examined in the recent decision of Australasian Annuities Pty Ltd (in liq) v Rowley Super Fund Pty Ltd [2013].

Rowley was the director of Australasian Annuities Pty Ltd and was also director of a second company ‘Rowley Super Fund Pty Ltd’. This was, in turn, the trustee for his super fund. In his role as director of Australasian Annuities Pty Ltd, Rowley ensured the company took out loans which were paid into his super fund and made employee contributions to the super fund for his own benefit. It was alleged that this breached Rowley’s actions as director.

The court held, in this instance, that Rowley had neglected his duties as he had not separated his personal interests from those of the company in transferring money to the separate fund. Additionally, he was found to have exercised his position improperly by obtaining benefits from superannuation payments. This violates several of the directors duties outlined above.

To prevent such breaches in future, directors must remain focussed on the requirements of the company as a whole and refrain from acting in their own personal interest. It is also important to declare any material interests in any potential dealings promptly to other directors.