Company Law - corporate governance - Essay Example

The consequences when the policy of the company makes a director a victim or a loop hole in a law makes the company pay compensation for the victim on behalf of the employee can be examined. The points and the necessities found in the above study can form a back ground for the future changes in the law if any. 1 The duties and responsibilities which directors assume are important as they have powers to take majority business decisions. The duties (fiduciary) will be in such a manner that the interests of the company and the stake holders are protected. . This is enshrined in the common law rules and equitable principles.

Hence, directors need to take great care to avoid the breaching of any duty under case law. From the case of Foss v Harbottle, it is derived that directors owe a duty to the company due to the fact that the proper claimant to the breach is the 'company itself'. In the case of Savoy Hotel Ltd, company's interests are expressed as 'interests identified with current and future shareholders'. Hence, the inclusion of future shareholders into corporate interests allows management to justify decisions which are made outside the interests of the current shareholders. . Hence, the inclusion of future shareholders into corporate interests allows management to justify decisions which are made outside the interests of the current shareholders.

However in special circumstances, especially during takeover situations, directors are found to carry with them a 'duty of disclosure' towards current shareholders which encompasses the duty to be honest and not to mislead. Similar obligations arise when directors are in control of small private domestic companies (when shares in particular are owned by hands of 'few family members') as they would be indirectly be in place of a 'direct fiduciary capacity'. Thus, directors in these situations would be treated as agents of the shareholders and not the company.

2Under Section 309(1) directors owes a duty (in regards to their performance) to the interests of the company's employees as well although it is lined with problems of enforceability. It is difficult to determine whether the director has discharged their duty in regards to their performance as they are not bound to prioritise interests of the employees over those of the shareholders. CLRSG even concluded that this provision should be repealed, unless employees interests would serve as an 'incident if promotion shareholders interests'.

In regards to insolvent companies, directors are found to owe a duty to creditors (a general body of creditors and not to individual creditor) as their interests are indirectly represented by liquidator. This can be seen in the case of Kinsella v Russell Kinsela Pty and approved in the case of West Mercia Safetywear Ltd Dodd, in which shareholders do not have the power to absolve the breach made by directors to prevent the