Put your organisation’s logo here Conflicted by interests Prof Michael A Adams.
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Transcript of Put your organisation’s logo here Conflicted by interests Prof Michael A Adams.
![Page 1: Put your organisation’s logo here Conflicted by interests Prof Michael A Adams.](https://reader036.fdocuments.net/reader036/viewer/2022062421/56649d355503460f94a0c092/html5/thumbnails/1.jpg)
Put your organisation’slogo here
Conflicted by interests
Prof Michael A Adams
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Introduction – conflicts of interest
• Overview of officers’ duties• Importance of conflicts laws• Practical examples and cases
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Context of governance
• Important to understand corporate governance
• Various definitions• Board Charter
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• There is a clear distinction between the concepts:
• Corporate governance• Due diligence• Compliance program
Adams’ Concepts
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Officers and Directors
• Section 9 is the “Dictionary”• Officer = director or secretary of the corporation• De facto• Shadow
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Corporations Act 2001
Reasonable care
Act honestly Misuse information
Misuse position
Insider tradingInsolvent trading
Criminal offences
Liable for all
“Adams officers’ overlap diagram”
Harris, Hargovan & Adams, Australian Corporate Law LexisNexis 2010
SBSA v Clark (1996)
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General Defences
• There are not many defences• 1993 BJR defence s 180(2)• USA has “safe harbour rule”• Common law
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Focus on conflicts
• Fiduciary duty creates legal duties, which at its heart state:
– “no conflict rule”– “no profit rule”
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Conflicts law
• All officers and directors are fiduciaries• Impact of Grand Enterprises v Aurium
Resources (2009)
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Conflicts law
Duty to avoid conflicts of interest– Aberdeen Railway Co v Blaikie Bros (1854)
• Tests for establishing conflicts–Phipps v Boardman (1967)– Bell Group Ltd (in liq) v Westpac (2008)
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Rule against conflicts
Diversion of business opportunities & misappropriation of company property
• Green v Bestobell Industries Pty Ltd (1982)
Some potential protections:–Peso Silver Mines v Cropper (1966)–Streeter v Western Areas Exploration Ltd (2011)
• Regal Hastings Ltd v Gulliver (1967)
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Secret profit concept
• The general rule is against any “secret profits”– Regal Hastings Ltd v Gulliver (1967 HL)
– Groeneveld Australia PL v Wouter Nolten (2010)
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Statutory overlap
• The equitable fiduciary duty overlaps with statutory provisions in sections 182 &183– ASIC v Vizard (2005)
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Disclosure
• “The best disinfectant is day-light”– full and frank disclosure is critical to avoid conflicts
• Both equity and section 191 provide protection
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Conflict defences
• Full and frank disclosure • Apply for court relief under section 1317S• Members consent or Ratification
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Conclusion
• All company officers owe legal duties• Good corporate governance helps• Conflicts of interest get resolved by disclosure