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Corporation, Commercial, Merger & Acquisition

Corporation law almost always deals with the functioning, conducting, and governance of a corporation that runs a business. It mostly deals with the functioning of rights, relations, and structures established within the corporation, making it inherently internal in nature. 


On the other hand, commercial law is more external in nature. It is essentially concerned with a corporation's business engagement with other commercial or non-commercial entities. More often than not, commercial law deal with a corporation's transactional undertakings.

Company law, while dealing with governance and regulations of business, mostly confronts issues regarding the following:

  • Business structures such as companies, partnerships, trusts and incorporations

  • Formation, registration and maintenance of registration of such business structures

  • Winding up in insolvency 

  • Meeting and updating licencing requirements

  • Rights and liabilities of partners, shareholders, employees etc

  • Requirements of director meetings, annual general body meetings

  • Documentation upkeep of financial records, tax returns, assets etc

  • Dispute resolution

In addition to frequently interacting with one another, company and commercial law also interact with the following areas of law: 

  • Torts 

  • Labour Law 

  • Contract law

  • Competition law

  • Property Law 

  • Employment Law 

  • Competition Law 

  • Intellectual Property Law 

  • Alternate Dispute Resolution 

Directors Duties in Common Law and under corporations Act in Australia 

Under Section 180 and 183 of Corporations Act 2001 (Cth)

Chapter 2D of the Corporations Act 2001 (Cth) provides the general duties of a company's director and officeholder. Section 180, in particular, sets down a director’s obligation to carry out duties and exercise power with due diligence and care. This duty to exercise power with care and due diligence attracts the application of the business judgment rule. Read together, this section requires a director to:

  • Make decisions within their powers in good faith and for a proper purpose

  • Refrain from having a personal interest in the subject matter of the decision

  • Inform themselves about the subject matter of the decision to the extent that is considered reasonably appropriate 

  • Make the decisions keeping the corporation's best interest in mind.

Further, section 183 adds on to such general duties of the director by prohibiting them from improperly using information obtained, due to their role in the corporation, to gain any advantage for themselves or someone else or cause detriment to the corporation.

Any contradictions of such duties attract a civil penalty as per section 1317E of the Corporations Act 2001 (Cth). 


Director can be criminally liable under Section 184 of Corporations Act 2001 (Cth)

Another important section guiding a director's duties is Section 184 of the Corporations Act 2001 (Cth). As per this section, if a director of a corporation recklessly or intentionally fails to exercise power and discharge duties in good faith or the best interest of the corporation or for a proper purpose, then sich director attracts criminal liability.


Under Section 588G Corporations Act 2001 (Cth)

Section 588G imposes a duty on the director of a corporation to prevent trading while insolvent. This section applies when it if found that:

  • The company was insolvent at the time of trading or became insolvent by incurring debt or several debts, and

  • At the time of incurring debt, there were reasonable grounds for suspecting that the company was insolvent, and

  • The director failed to prevent trading or incurring of debt.

Failure to comply with this section can attract civil and criminal liability.

Summary of the directors duties under corporations Act 2001 (Cth) 

The Directors of a company essentially control how the company operates in all aspects, from the entry to the executive personnel. The role of a director varies slightly with each company as different types of business dealings have a different set of requirements. These requirements would generally be set out in a company’s constitution, outlining specific needs from their directors.

Directors Duties under the Corporations Act 2001(Cth)

The responsibility of being appointed as a Director of a company also has a range of duties and obligations prescribed by the Corporations Act.

Firstly, there are four main duties:

  1. Care and diligence – Require a director to act with a reasonable degree of care and diligence expected in that role (s 180).

  2. Good faith – Require a director to act in good faith and the best interests of the company (s 181).

  3. Not to improperly use information – Prohibits a director from improperly using information gained in the course of their director’s duties, to benefit themselves or someone else, to the detriment of the company (s 182).

  4. Not to improperly use position – Prohibits a director from improperly using their position, to benefit themselves or someone else, to the detriment of the company (s 183)

Secondly, there are other major duties covered by the Act:

  1. Insolvent trading – Require a director to ensure that the company is solvent while trading and can pay it’s debts when due and payable(s 588G).

  2. Financial record keeping and reporting obligations – Require a director to ensure that the company’s financial records and reporting obligations are all met (s 344).

  3. Disclosure of director’s conflicting interests – Require a director to ensure that they disclose any possible conflicting interests they hold (s 191, 208, 205G).

  4. Lodging obligations with ASIC (s 188).

  5. Continuous disclosure – Applies to listed companies regrading market information (s 674).


Consequences of breaching Directors Duties

Result of breaches may result one or more of these consequences, depending on the nature of the breach and its severity.

  • Criminal sanctions (s 184)

  • Civil sanctions

  • Disqualification (Part 2.6D)

  • Commercial consequences

  • Personal liability

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