Duty of law Essay Example | Topics and Well Written Essays - 2500 words

Duty of law - Essay Example Emphasising on this understanding, the essay will aim at addressing the principles mentioned under the Corporations Act 2001 (Cth) concerning the fiduciary duties of directors in a company. The essay will also aim at analysing the purposes and effectiveness of these statutory principles to restrict the directors from performing unethical conducts or wrongdoings, taking the opportunity of the power enjoyed by them. 2.0. Background Companies act as an artificial legal entity which can be managed with the enforcement of its human legislatures. The board of director’s form an important part of any organization as the decision making and the managerial powers remain mainly with its directors (Austin & Ramsay (2013). For instance, as stated in section 198A (1) of Corporations Act 2001(Cth), the directors are eligible to manage the company’s affairs under their jurisdiction. ... Previous instances have often illustrated unethical conducts performed by the directors, misusing their power or authority to satisfy the organisational interests above their personal objectives (Austin & Ramsay, 2013). 3.0. Duty of good faith 3.1. Code of conduct As stated under the section 181 of Corporation Act 2001(Cth), duty with regards to good faith bestowed upon directors in compliance with the interest of the management is to avoid conflicts which might arise from personal benefits (Milne, 2006). Under this provision, if the directors of a company decipher reckless attitude and/or depict behaviour of intentional dishonesty, which in turn hampers the interests of the corporation at large. In this context a director of any corporation must enforce or exercise the bestowed responsibilities and powers with regards to good faith and for a ‘proper purpose’. If the director violate this duty or responsibility they are liable for punishment under civil penalty provision under section 1317E of Corporation Act 2001(Cth) (The Legal Exchange, 2012). 3.2. Case Examples According to the case of Charterbridge Corporation Ltd v Lloyds Bank Ltd (1970) a test was conducted to find whether the decision made by the director in relation to that situation was valid. As per the case convictions, it was held that directors in a particular company owe a certain degree of responsibility towards the company’s creditors at the time of its insolvency (Sourdin, 2009). It is worth mentioning in this context that even though the provision unambiguously dialects the implications of good faith, it fails to render a precise notion of ‘proper purpose’ and thus can be deemed as subjected to the judge’s rationality when assessing