Breach of Directors' Duties
Directors of companies, whether, private, publicly listed or public but unlisted, have duties at:
- Common Law;
- Statute Law; and
- Under the company’s constitution.
Directors have a number of duties they must comply with. Broadly speaking, they must ultimately act in the best interest of the company as a whole at all times. They must not act in their own self-interest or the interest of a related party at the expense of the company.
The Corporations Act 2001 (Cth) (Corporations Act) provides for a number of civil and criminal penalties for breaches of directors’ duties as well as failure to comply with certain reporting requirements imposed in the conduct of certain transactions and day-to-day management of the company.
Schedule 3 of the Corporations Act provides the penalties applicable for breaches of particular provisions. These involve lengthy periods of imprisonment and significant fines. In addition to these penalties, a person is automatically disqualified from managing a corporation if convicted of certain criminal provisions. The length of the disqualification depends on the offence they are convicted of and length of imprisonment imposed.
Criminal proceedings are instituted by the Commonwealth Director of Public Prosecutions (CDPP). The CDPP have specialist commercial prosecutors who take carriage of these matters, which are referred to them by ASIC. ASIC have usually conducted a detailed investigation and may have even commenced civil action. Therefore, it is necessary that a defendant has a legal team who are ready, willing and able to take carriage of these matters.
We also understand the need to work in collaboration with crisis management and public relations providers on these matters. This is because there is often media interest and steps need to be taken to mitigate public opinions, while preserving the integrity of the case.
If you find yourself before the courts for criminal charges this can be a very stressful time, as the consequences can have significant impacts on a person’s future livelihood.