B. DUTY TO ACT IN GOOD FAITH IN BEST INTERESTS OF THE COMPANY Directors have a duty to act honestly having regard to the best interests of the company (s 181(1)(a). The objective test is whether a reasonable person, in the director or officer’s position, acting in good faith would believe the act to be in the best interests of the company (ASIC v Adler). The company’s interests include those of: a. Shareholders i. Shareholders as a whole (Parke v Daily News Ltd) ii. Directors must act fairly as between the different classes or groups of shareholders (Mills v Mills), including: 1. variation of class rights 2. selective capital reduction 3. selective buy-back 4. issue of shares b. Employees and the community i. This was ruled out in Parke v Daily News. ii. However, in the Canadian case of Teck v Millar, a ‘decent respect for interests’ beyond shareholders won’t lead to a breach of duty. c. Creditors i. Interests of the creditors can only be considered where the company is insolvent – (Walker v Wimborne, Kinsela) ii. Consider creditors where company is insolvent or where a transaction may cause insolvency (Nicholson v Permakraft)
The most concise and updated Business Associations, Corporations Law and Business Organisations Study Notes for Australian Law Students.
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Approximately 24829 words over 51 pages. Prepared in 2022.