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Generally, directors’ duties are owed to the company and not to individual shareholders or classes of shareholders. There are very limited exceptions to this rule. Directors do not owe duties to creditors, though there may be certain circumstances in which directors must consider the interests of creditors in exercising their powers. However, directors are under a statutory duty to prevent insolvent trading the common law, equity and statute imposes a duty of care and diligence on directors. Equity and common law imposes a number of fiduciary duties that are owed by directors. There may be harsh, severe penalties for breach of these duties.  Our team of highly skilled Commercial and Corporate Law Solicitors may be able to assist you in protecting your rights and advising you appropriately so that you may properly discharge your fiduciary obligations as an executive or manager.

The fiduciary character of the office of director affects all aspects of a director's function and his or her duties. These include the duty of good faith; the duty to avoid situations where there is a conflict between the interest of the director and the interest of the company and the duty to exercise powers conferred on a director as a result of his or her office for proper purposes. Subject to certain limits, shareholders may ratify a breach of directors' duties by ordinary resolution in general meeting, whether in anticipation of the breach or after the breach has occurred. Professional legal advice from a Commercial and Corporate Lawyer may be required to ensure that you are fulfilling your duties in a manner which is compliant with all your obligations under the law.

The imposition of legal duties upon directors and senior management are supported in policy by the need to prevent self-dealing by management and to ensure that management conducts itself with an appropriate level of diligence, thereby constraining management power and strengthening shareholder control. The policy underpinnings of directors' duties as being that power to control a company's management is generally vested by the company's constitution in its board of directors; this power creates opportunities for fraud and mismanagement to which shareholders are especially vulnerable; and the law responds to that vulnerability by holding directors to strict fiduciary and general law duties. Consultation with an experienced Commercial and Corporate Lawyer may provide great assistance in these matters.

It is clear that directors are in a fiduciary relationship to a company and that, as a consequence of their status as fiduciaries, directors owe a duty to act in good faith for the benefit of the company. It has been stated that "directors of a company are fiduciary agents, and a power conferred upon them cannot be exercised in order to obtain some private advantage or for any purpose foreign to the power". There are various tests devise to determine whether a breach of fiduciary duties has occurred and they can be surmised as whether the actions benefit the company as a whole or benefit certain individuals at the expense of others. Generally speaking fiduciary duties exist to ensure that directors act bona fide to the best interests of the company. It is important that proper legal advice be obtained to ensure compliance with fiduciary duties from a skilled Commercial and Corporate Lawyer to avoid fines, penalties and other retribution.

If you need further legal advice on your matter, you may book an appointment with us by telephone on (02) 9233 4048 or by email to info@navado.com.au. 

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