Corporations Act - Care and Diligence of Company Directors?

[T1m]

Hi,
Just a quick question about the above issue regarding commercial law. What orders can be made against company directors following the contravention of a civil penalty provision in the Corporations Act?


Thanks.

 

[Worldly1]

Hi T1m,
Are you able to give some more context to your question so that we can understand a bit better?

 

[T1m]

ah sorry about that. its in the context that the corporations act doesn't adequately protect the interests of directors who have acted honestly.

 

[John R]

Hi @T1m,
Are you referring to section 180 of the Corporations Act 2001 (Cth)?
Section 1317E sets out the process when someone (that is, a director or officer of a company) is found to have contravened their care and diligence obligation. The primary defence to any finding of contravention under section 180 is the "business judgment rule".

Hope this helps. Please keep us updated with your progress.

 

[Worldly1]

If you're concerned about your liability as a director, then it would be worthwhile to invest in directors and officers insurance (D&O insurance). See this Allianz "Introduction to D&O Insurance" fact sheet that has some more information.

 

[DennisD]

Hi T1m

I agree with JohnR's comments, and will expand a bit on the "business judgment rule" defence, the rationale of which is not to penalise directors for legitimate mistakes in unsuccessful ventures

The business judgment rule (set out in section 180(2)) may provide a defence for directors whose conduct contravenes the statutory duty of care and diligence (set out in section 180(1)). Whether the defence is available would depend on your case's unique circumstances, so it's difficult to provide much guidance. As the obligations in section 180 are civil obligations, if the defence is not available, look to section 1317E as JohnR recommends

Finally, let us know if you'd like comment on how section 1317E operates