In a company, the directors, shareholders and the company are separate legal entities. The directors control the company and the shareholders own the company.
Given different parties involved, some with their own interests, this often leads to disputes amongst directors, between a director and shareholders, or a third party against a company director.
A dispute involving a director might arise in the following circumstances:
- Where the directors are in dispute over the company’s management, business strategy, ownership or control;
- Where a director has breached one of their director’s duties;
- Where there is a disparity between the remuneration of directors;
- When there is a conflict of interest;
- When a director has commit fraud.
What are a director’s duties?
Directors of a company owe statutory duties under the Corporations Act 2001 (Cth) to the company. These include a duty to:
- Exercise care and diligence in discharging their duties and in making business judgements (section 180);
- Act in good faith, in the best interests of the company and for a proper purpose (section 181);
- Not to improperly use their position to gain advantage for themselves or someone else or to cause detriment to the company (section 182);
- Not to improperly use information obtained as a result of their position as a director (section 183);
- To disclose a material personal interest (section 191).
Directors also have a fiduciary duty to the company to act in the best interests of the company and to place the interests of the company above their own. It is a director’s fiduciary obligation to the company to exhibit undivided loyalty to the company.
When one of these duties is breached, often shareholders or directors will engage in disputes over their rights and responsibilities.
For more information, or if you are having a dispute and would like to have a confidential discussion with one of our lawyers, call Rockliffs today.