Australia:
A comparison of directors' duties in PNG and Australia
21 December 2016
Holding Redlich
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This article is a comparison of Papua New Guinean and Australian
directors' duties to assist the navigation of the
differences.
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Australia |
Directors' Duties |
The general duties of directors exist under both the general
law and the Corporations Act 2001 (Cth)
(Corporations Act). |
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1. To act with care and diligence
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Based on how a reasonable person in the circumstances would
act
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Civil contravention. A pecuniary penalty of up to $200,000.
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2. To act in good faith and in the best interests of the
company
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Acting in the best interests of the company and only in pursuit
of a proper purpose.
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Civil contravention and a criminal offence if intentionally
dishonest or reckless (2,000 penalty units or imprisonment for 5
years, or both).
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3. To not use your position as director improperly
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Cannot use your directorship to your own, or another's
advantage nor can you use your position in a way that has
detrimental effects for the company.
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Civil contravention and a criminal offence if intentionally
dishonest or reckless (2,000 penalty units or imprisonment for 5
years, or both).
|
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4. Proper use of information
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Cannot use information that you have obtained in your role to
your advantage and to the detriment of the company. This duty
carries on after you cease to be a director.
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Civil contravention and a criminal offence if intentionally
dishonest or reckless (2,000 penalty units or imprisonment for 5
years, or both).
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5. Not to trade while insolvent
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Cannot take on a debt that will, or you reasonably suspect, will
make you insolvent, or when you are insolvent.
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Civil contravention (2,000 penalty units), but if debt
dishonestly taken on may be a criminal offence.
The director (or former director) may be liable for the loss
suffered by a person in relation to a debt owed by the company.
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6. Disclosure
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You must notify the directors if you are a director and have a
"material personal interest" in something that affects
the company.
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A criminal offence (10 penalty units or imprisonment for 3
months, or both).
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7. Covered in duty 6 above and general law duties.
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8. Covered in duty 4 above and general law duties.
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9. Covered in duty 1 above and general law duties.
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10. Covered in duty 1 above and general law duties.
*a penalty unit is currently $180.
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General Law / Underlying Law |
High-level conflict of Interest Duties |
Directors are in a fiduciary relationship – that is, in a
position of highest trust. Directors:
- must act in good faith and in the best interests of the
company;
- must put (or risk putting) their own interests ahead of their
company's;
- must not act contrary to another duty the director has or
compete with the company; and
- must not profit from the Director's role in an improper
manner or derive secret profits.
Although breaching these general law duties taken alone does not
result in a criminal offence, the court can still penalise a
director such as by allocating profits made, for example, to the
company or shareholders. Note that where a statutory duty also
applies the position is different.
|
Other duties |
Directors are also potentially subject to further general law
duties applicable in certain circumstances.
|
|
Papua New Guinea |
Directors' Duties |
Largely equivalent general duties of directors exist under both
the underlying law and the Companies Act 1997
(Companies Act). |
|
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1. To exercise powers or perform duties with care, and
diligence, and skill.
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Based on how a reasonable person in the circumstances would
act.
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A fine not exceeding K50,000 or imprisonment for a term not
exceeding two years, or both.
|
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2. To act in good faith and in the best interests of the
company.
|
Acting in the best interests of the company and only in pursuit
of a proper purpose.
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A fine not exceeding K200,000 or imprisonment for a term not
exceeding five years, or both.
|
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3. Equivalent duty in underlying law.
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4. Not to disclose any information or make use of or act on any
information if such information would not be available to you if
you were not a director of the company.
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A director who has information that would not otherwise be
available to him/her, generally, you must not disclose the same to
any person, or make use of or act on the information.
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A fine not exceeding K200,000 or imprisonment for a term not
exceeding five years, or both.
|
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5. To prevent insolvent trading
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Cannot take on a debt that will, or you reasonably suspect, will
make you insolvent, or when you are insolvent.
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A fine not exceeding K10,000.
The director (or former director) may be liable for the loss
suffered by a person in relation to a debt owed by the company.
|
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6. Disclosure
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A director interested in a transaction or proposed transaction
with the company must cause this to be entered in the interests
register and notify the other directors.
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May be liable to a fine not exceeding K10,000.00.
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7. To disclose any acquisition or disposition of a relevant
interest in shares issued by the company
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A director who acquires or disposes of a relevant interest in
shares issued by the company shall notify the board in the way
provided for in this section.
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A fine not exceeding K10,000.00.
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8. Not to engage in insider dealing
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A director in possession of information material to the value of
securities of the company or a related company cannot acquire or
dispose of the same unless the consideration is the fair value.
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A fine not exceeding K200,000.00 or imprisonment for a term not
exceeding five years, or both.
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9. To supervise the share register
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-
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A fine not exceeding K10,000.00.
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10. To comply with the Companies Act 1997 and the company's
constitution
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A director shall not act, or agree to the company acting, in a
manner that contravenes the Act or its constitution.
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A fine not exceeding K10,000.00.
|
|
General Law / Underlying Law |
High-level conflict of Interest Duties |
As in Australia, directors are in a fiduciary relationship.
Directors are in a fiduciary relationship – that is, in a
position of highest trust. Directors:
- must act in good faith and in the best interests of the
company;
- must put (or risk putting) their own interests ahead of their
company's;
- must not act contrary to another duty the director has or
compete with the company; and
- must not profit from the Director's role in an improper
manner or derive secret profits.
Although breaching these underlying law duties taken alone does
not result in a criminal offence, the court can still penalise a
director such as by allocating profits made. Note that where a
statutory duty also applies the position is different.
|
Other duties |
Directors are also potentially subject to further underlying law
duties applicable in certain circumstances.
|
This note has been prepared for general information purposes
only, and is not a comprehensive list of all duties. There are also
additional results of breach (such as equitable remedies) in some
cases as well as additional duties that can arise. Generally, these
duties can apply to de facto, nominee and shadow directors. If you
require legal advice, please contact Peter Taimre,
Special Counsel, to discuss.
This publication does not deal with every important topic or
change in law and is not intended to be relied upon as a substitute
for legal or other advice that may be relevant to the reader's
specific circumstances. If you have found this publication of
interest and would like to know more or wish to obtain legal advice
relevant to your circumstances please contact one of the named
individuals listed.
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