Thursday, December 16, 2010

A Directors responsibility under the Corporations Act 2001 (Cth) (the Act)

The Australian College of Midwives is an incorporation therefore falls under the rules and regulations of the Corporations Act (Cth) and the statue of limitation is 6 years, therefore a responsible position.
By law a Board Director is responsible for: The following information comes from Directors Duties under the Corporations Act 2001

Duty to act with care and diligence - s180(1)
A director or other officer must exercise their duties with a degree of care and diligence that a reasonable person would exercise in their position. The standard of care and diligence required as determined by a court would take into consideration the company's circumstances and the director or officers position within the company. The skill required by an executive director is measured objectively in regard to that directors' special calling. So, in considering whether a director is so negligent as to be in breach of the statutory duty, the conduct is measured in two ways: against the (objective) standard of care; and against the standard of skill held by the particular director or officer.

Duty to exercise powers in good faith – s181(1) (Conflict of duties)
A director or other officer of a corporation must exercise their powers and discharge their duties: in good faith in the best interests of the corporation; and for a proper purpose.

Duty not to improperly use position - s182 (Duty not to profit from position)
A director, secretary, other officer or employee of a corporation must not improperly use their position to: gain an advantage for themselves or someone else; or cause detriment to the corporation.

Duty not to fetter discretion's Directors have certain discretion's conferred on them by law and the company's constitution. When exercising such discretion's the directors are subject to two duties, namely: a duty to retain discretion; and duty to give adequate consideration.

Directors must exercise active discretion, they cannot ignore issues or blindly rely on another person. They must give adequate consideration when purporting to exercise a particular discretion.

Material personal interest - director's duty to disclose - Section 191
s191 requires a director who has material personal interest in a matter that relates to the affairs of the company to give the other directors notice of this interest. s191(2) outlines the exceptions to this requirement to provide notice.

The notice must give details of the nature and extent of the interest and the relation of the interest to the affairs of the company and be provided at a directors' meeting as soon as practicable after the director becomes aware of their interest. The details must be recorded in the minutes of the meeting.

Failure to disclose a material personal interest according to s191(4) does not invalidate a resolution by the directors at first instance. It has been held that the threshold for determining whether an interest is material is quite low however this contrasts with Magellan v Mount King Mining NL where the Western Australian Supreme Court stated that the nature of the interest ``should have the capacity to influence the vote of the particular director upon the decision to be made, bearing in mind that the conflict of interest must be of a real or substantial kind''.

Therefore it is considered appropriate to declare even minor conflicts of interest where there is a potential for conflict so as to err on the side of caution.

s192 of the Act provides that a director may give other directors standing notice about an interest. The notice may be given at any time and whether or not the matter relates to the affairs of the Company at the time the notice is given.

This is worth reading and taking note if you are a Board Director........

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