Skip links and keyboard navigation

    7.3 Corporations Act 2001 (Cth) (the Corporations Act)

    The Corporations Act imposes a number of additional fiduciary duties on directors of entities incorporated under that legislation. The Queensland Government has established a number of special purpose companies (incorporated under the Corporations Act) which operate under the auspices of a number of departments. Details of these companies can be found in the relevant department's annual reports.

    Individuals appointed as directors of companies must comply with the Corporations Act in carrying out their duties. Although persons who are appointed to Government Boards which are not companies are not specifically bound by the Corporations Act, the duties discussed below parallel the common law duties to which Government Board members must adhere.

    Under the Corporations Act, directors are required to:

    • act in good faith and for a proper purpose
    • act with care and diligence
    • avoid improper use of information
    • avoid improper use of position
    • disclose certain interests.

    Duty to act in good faith in the best interests of the corporation and for a proper purpose

    Section 181 of the Corporations Act imposes a civil obligation on directors, secretaries and other officers of a corporation to exercise their powers and discharge their duties in good faith, in the best interests of the corporation and for a proper purpose. e.g., use by the directors of their powers to benefit self interest, the interests of a third party or sectional interests, rather than the interests of the corporation as a whole, may be considered to be a breach of this duty.

    Under Section 184(1) of the Corporations Act a breach of this duty will be a criminal offence if the breach arises because the director or other officer of the corporation was reckless or intentionally dishonest.

    Duty to act with care and diligence

    Section 180 of the Corporations Act provides a civil obligation that a director or other officer must at all times exercise a reasonable degree of care and diligence in the exercise of powers and the discharge of duties. ‘Reasonable’ in this sense means the degree of care and diligence that a reasonable person in a like position in a corporation would exercise in the same circumstances.

    The requirement for a director or officer to exercise a reasonable degree of care and diligence will be satisfied in relation to a particular business judgement where they:

    • make the judgement in good faith and for a proper purpose
    • do not have a material personal interest in the subject matter of the judgement
    • inform themselves about the subject matter of the judgement to the extent they reasonably believe is appropriate
    • rationally believe that the judgement is in the best interests of the corporation.

    Directors do not satisfy the required levels of care, skill and diligence by delegating to colleagues or subordinates in the company and paying no further attention. At a minimum, they must take an active interest in the company's affairs and obtain a general understanding of the company's business. They must pursue anything untoward that comes to their attention.

    Duty to avoid improper use of information

    Section 183 of the Corporations Act provides a civil obligation that 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 that information to gain an advantage for themselves or someone else or cause detriment to the corporation. This duty is of particular significance where the director has interests in the industry to which the Government Board relates.

    Under Section 184(3) of the Corporations Act directors, other officers and employees of corporations may also commit a criminal offence where information is used dishonestly.

    Duty to avoid improper use of position

    Section 182 of the Corporations Act provides a civil obligation that prohibits a director, secretary, other officer or employee of a corporation from making improper use of their position to gain an advantage for themselves or someone else, or to cause detriment to the company. Section 184(2) of the Corporations Act specifies that directors, other officers or employees of a corporation commit an offence if they use their position dishonestly.

    Duty to disclose certain interests

    Section 191 of the Corporations Act requires a director of a company who has a material personal interest in a matter that relates to the affairs of the company to give the other directors notice of the interest, unless one of the specified exceptions apply. The notice must include details of the nature and extent of the interest and be given at a directors' meeting as soon as practicable after the director becomes aware of their interest in the matter. A common example of a material personal interest is a director who has a personal interest in a contract that the corporation is to enter into.

    Penalties

    Breach of statutory duties draws penalties under the Corporations Act which range up to $200,000. Under both the common law and the Corporations Act, officers may also be required to pay compensation or to account for profits. In some cases directors may also be disqualified from office.

    ^ to top

    Last updated:
    18 May, 2016
    Last reviewed:
    29 July, 2010