Four basic duties of Directors
What are the Four Basic Directors’ Duties?
The Corporations Act 2001 refers to four main duties for directors:
- Care and diligence - to act with the degree of care and diligence that a reasonable person might be expected to show in the role (s 180). The same duty is imposed on directors at common law. The business judgment rule (discussed below) provides a "safe harbour" for a director in relation to a claim at common law or under s 180;
- Utmost Good faith - to act in good faith in the best interests of the company and for a proper purpose (s 181), including to avoid conflicts of interest. They should reveal and manage conflicts if they arise. There is both a duty of fidelity and trust, known as a ‘fiduciary duty’ imposed by general law and a duty required in legislation;
- Improper use of position - to not improperly use their position to gain an advantage for themselves or someone else or to the detriment to the company (s 182);
- Improper use of information - to not improperly use the information they gain in the course of their director duties to gain an advantage for themselves or someone else or to the detriment to the company (s 183).
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