Powers and Duties of Directors under Corporation Law 1993
The directors of a corporation are referred to as the executives who are responsible for managing the affairs and administration of the company. They need to ensure upholding of the interests of potential stakeholders and employees and other connected personnel of the corporation. Directors primarily are obliged under any corporation law with the duty of managing the basic administration of the corporation(Khan Lockhurt & Bathurst, 2018).In the case of failure to honour the requisite needs which are considered significant the purposes of upholding organisational objectives and goals shall be deemed to loose the trust vote, and therefore afford the opportunity of loosing their so held position and capacity by the virtue of voting on the part of stakeholders in accordance with the corporate laws of the specific jurisdiction.
The discussion shall link the parameters as discussed herein and the relation between the same promoting the duties of the directors and the fiduciary inclusions therefore. The element of Fiduciary relation and trust shall be the base and premise for catering to the duties of the directors as has been discussed in these paragraphs.
There are several duties and responsibilities that the directors of corporation need to adhere to and comply with in order to ensure ethical as well as legal compliance of the statutes governing the operations of the corporation. This part of the paper shall discuss the powers and duties of the directors with special reference to their fiduciary duties, solvent statuses of the directors of the corporation, competency of the directors as under the provisions of the corporate law as prescribed due for them to be eligible to be appointed as the directors of the corporation, true and fair disclosure of the self-interests of the directors so appointed for the purposes of ensuring no prejudice to the organisational aims and objectives. The legislation and jurisdiction that shall be discussed herein shall be the Company Law 1993, operating within the jurisdiction and prescribing for the duties and obligations of the directors of the entity (Raido & Crezee, 2020).
The specific parts and relevant sections that shall be discussed herein, is Part VIII of the legislation named as Corporation Act 1993 and Sections 126-Section 162 enlisted and discussed under the concerned part of the legislation. Directors shall necessarily and mandatorily adhere to the duties they are obliged to follow and in the case of any violations and aggressions the same shall be punished and condemned for the same which may include fines as well as prosecutions in the cases of material defaults and failures indicating lack of due diligence and good faith actions. The duties and obligations of the directors are stated with specific reference to their sections under the code and the parameters as has been given herein. Sections 131- Section 149 of the code specifically deals with the mandatory duties of the directors and the disclosures which the directors are bound to adhere to relating to involvement of self-interests in the actions which include the interests of the organization (Harris & Hargovan, 2021).
Mandatory Duties of Directors under Sections 131-149
The directors of the company and corporations whether subsidiary or parent company are deemed and assumed to be well-versed and well-equipped with the constitution of the company and the documents dealing with the base and foundation aims and objectives of the company.
Section 131 of the code under discussion deals with the same and expressly provides for that the directors shall act in good faith while dealing with the activities which shall be carried upon in the best interests of the corporation without prejudicing and exploiting the same. The directors shall act in Good faith for the purposes of deciding the management and administration of the corporation and avoid any kind of mala fide and ignorant activities having the potential to damaging the interests of the corporation(Gurrea-Martínez, 2021).
The directors and connected executives of the corporation shall carry only those acts which form the aim, purpose and objective of the organisation and are expressly provided by the memorandum and articles of the company. The wisdom of the directors and the discretion for furthering the operations and activities of the organization shall not be absolute and shall be subject to the provisions of the legislation as well as the constitutional framework of the company, irrespective of the nature and kind of corporation under discussion (Steele, 2021).
It is also the duty of the directors of the corporation to make efficient and effective rules, regulations and provisions for the employees of the corporation in order to ensure protection of the interests of the employees, as it forms the basis and motto of any ethical organization. The directors shall digress from entering into any deals and activities having the potential to prejudice the interests of the employees, may it be social, cultural, economic or financial interest(Watson, 2014). These activities and aggressions shall be strictly condemned and the directors and other connected executives shall be considered to be personally liable for such actions and the actions shall be taken and imposed accordingly without relinquishing the interests and goals of the corporation.
Considering the factors and parameters forming the basis of bifurcating the duties of the directors of the corporation they can be discussed herein pertaining to their use and application herein. By virtue of Section 133 of the code under discussion it has been expressly provided that the directors shall only use their powers for exercising a proper purpose which aims to facilitates and supplement the interests of the organization and no action derogatory to the aims of the corporation shall be taken upon which shall back sanctions and liabilities for the directors and other connected executives of the corporation.
As far as the relationship of Directors with the corporation is concerned, it is a Fiduciary relationship which simply means that the executives of the corporation share a relationship of trust with the corporation and other potential stakeholders and no activities in derogation to the same shall form the aim of the executives so employed in the organization and forming an essential composition of the structure of personnel structure of the organization to which they agree to provide their services and share professional experiences and exposure therefore (Langford, 2019).
Fiduciary Relationship of Directors with the Corporation
There are some sections which have been expressly discussed in the above referred paragraphs and directly relate to the fiduciary duties of the corporation and some relevant provisions are stated and explained in the following paragraphs and discussions put forthwith. Section 135 of the Corporation Code of 1993 shall be considered to be the most important provisions as far as the fiduciary obligations and duties of the directors and other executives of the corporation is considered and concerned. The specific section so stated herein deals with the express derogation of the interests of the creditors as well as the potential stakeholders of the corporation.
The section tends to impose a duty and obligation upon the directors and executives of the corporation that the stated personnel shall avoid any kind of Negligent and Reckless trading which tends to prejudice the financially entitled and eligible interests of the creditors of the corporation irrespective of them being financial or operational creditors. Reckless trading simply means to avoid entering into any activities and dealings which prejudices and creates a substantial risk of serious loss to the company’s creditors and related parties. The provision also includes and involves the terms that the directors of the corporation shall avoid any kind of abetment and encouragement to any person which aims to cause a serious risk of loss to the creditors of the corporation and ultimately prejudices the business and organizational interests as well as goals and objectives of the corporation irrespective of the fact of it being subsidiary or holding or parent corporation (Bainbridge, 2014).
Section 137 of the code as has been discussed herein deals with the Directors duty of Care thereby forming the express fiduciary adherences and compliances which if ignored shall derogate the underlying interests and goals of the corporation so discussed herein. The duty of care simply means that a director shall act reasonably and prudently while performing operations directly affecting the corporation and any negligence shall be avoided having the potential to violate and breach the interests of the corporation so discussed herein. No limitation shall lie and apply as far as the nature of the company, nature of the decision and position and capacity of the director is considered and concerned.
As far as the self-interest disclosure obligations of the directors of the corporation is considered, Section 139 defines the same and also discusses the meaning of interested party and the actions that shall be avoided for the purposes of achieving aims and objectives of the corporation without exploiting and derogating the same(Cassidy, 2014). By virtue of Section 140 of the Corporation Act, 1993 it is the duty of the directors to disclose the involvement of self- interests in good faith and in the case of breach of the same shall be dealt with under the sanctioning provisions of the code so referred to and discussed herein with.
As far as the solvent capacity and competence of the individuals to be appointed as directors is concerned and considered, the relevant sections of the code which discusses the same are stated and briefed herein. By virtue of Section 151 of the Corporation Act, 1993 there are certain fundamental principles and essentials which shall be considered to be mandatory for the purposes of appointment of the directors of the corporation. Any derogation and violation to the same shall be considered to be negligent and voluntary mis conduct of the relevant personnel of the corporation and the appointment therefore shall be deemed to be invalid and void and later ratification of the same shall not be considered to be relevant as far as the appointment of the directors of the corporation is considered.
The essential eligible conditions which shall be adhered to and complied with for the purposes of deciding the appointment of the individuals as directors are listed in brief herein:
- Individual shall be more than 18 years of age at the time of being appointed as the director of the corporation.
- Person shall be solvent and not undischarged insolvent.
- Natural Person can only be entitled to be the director of the corporation.
- The person shall not be priorly interested in the management and affairs of the corporation.
These are the major essentials which shall be considered for the purposes of deciding the appointment of the directors.
Reporting Requirements refer to the mandatory obligation and duties of the corporation to ensure timely reporting of the annual reports and other relevant documents to the potential stakeholders and shareholders who are referred to as the owners of the corporation in order to keep them updated if the operations of the corporation and the progress in the scale of operation of the companies. Reporting requirements, compliances and mandates also helps the corporation to ensure that any adverse actions of the executives of the companies by the directors which shall be considered necessary for the shareholders to be aware of the same so to deter and condemn such actions(Blackburn et al., 2018). The major aim and purpose of mandating reporting requirements is to make the shareholders aware and updated of the financial performances of the corporation and the areas that needs to be improved upon for the purposes of ensuring timely attainment of goals and objectives of the corporation.
As far as the Code of 1993 is concerned and considered, Part XI and Part XII of the same deals with the financial reporting and reporting obligations to shareholders of the corporation respectively. This answer shall be dealing specifically with the Part XII of the legislation and the relevant sections therefore which directly deal with the obligations of the corporation to report to the shareholders and stakeholders timely financial reports and annual reports (Montecalvo Farneti & DeVilliers, 2018).
The specific sections of the part XII which deal with the obligation of the corporation range from Section 208- Section 214A. The shareholders are lawfully entitled to the timely annual reports and statements of the corporation and any derogation to the same shall be considered to be the material breach and violations of the compliance provisions and terms of the code as has been referred to herein(Zaman et al, 2021). Section 208 supported with other relevant sections as has been talked about in this provision majorly deals with the duties and obligations of the corporation to disclose to the shareholders the actual financial standings and performance report of the corporation, by virtue of timely publication of Board reports and annual meeting reports for the purposes of effective assessment and evaluation of the areas which perform well and those areas which needs to be dealt with effectively for improving, expanding and increasing the performances of the corporation and also providing an opportunity to the potential stakeholders and shareholders to provide for suggestions and opinions therefore.
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Blackburn, N., Hooper, V., Abratt, R., & Brown, J. (2018). Stakeholder engagement in corporate reporting: towards building a strong reputation. Marketing Intelligence & Planning.
Cassidy, J. A. (2014). Wake up New Zealand: Directors' duties reform responses to the Global Financial Crisis. New Zealand Business Law Quarterly, 20(3), 181-199.
Gurrea-Martínez, A. (2021). Towards an optimal model of directors’ duties in the zone of insolvency: an economic and comparative approach. Journal of Corporate Law Studies, 1-31.
Harris, J., & Hargovan, A. (2021). Potential liability for directors during corporate restructuring: comparative perspectives. In Research Handbook on Corporate Restructuring. Edward Elgar Publishing.
Khan, M., Lockhart, J. C., & Bathurst, R. J. (2018). Institutional impacts on corporate social responsibility: a comparative analysis of New Zealand and Pakistan. International Journal of Corporate Social Responsibility, 3(1), 1-13.
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