In modern society, company directors become more important character in corporations as they decide most actions and operations of the corporations. However, strict corporate governance is major factor of successful business. "Corporate governance broadly refers to the mechanisms, processes and relations by which corporations are controlled and directed." (Shailer, 2004) In order to build developed governance, there are duties and obligations imposed on company directors for the legal regulation of corporate governance. In addition, the Australian Securities & Investments Commission has been established to monitor and manage the corporate market. This essay will demonstrates how directors imposed by the general law duties as common law and statutory duties for company directors , duty of care and diligence contains general law and statutory duties with details and cases to prove that significant role of them in corporate governance.
Firstly, company directors have to notice that legal obligations and liabilities of being the significant role is increasing. In most situation, general law duties have to be considered first as them applied to all jobs in corporate organisation no matter directors, officers or employees. The general law duties contains two aspect like common law and fiduciary. With common law duty, directors have to exercise reasonable care and skill. (Fairfax, 2004) Moreover, S185 does interaction of S181-S184 with other laws etc, (a)it has effect in addition to, and not in derogation of, any rule of law relating to the duty or liability of a person because of their office or employment in relation to a corporation; and (b)do not prevent the commencement of civil proceedings for a breach of a duty or in respect of a liability referred to (a).(Austlii.edu.au, 2014) Breach of general law duty could lead to some remedies like injunction, equitable compensation, common law damage, account of profits and constructive trust that are all important for the purpose of corporate governance in twenty first century. Two of them is quite typical and frequently applied by ASIC will be examined in full. Equitable compensation is that "it provide other grounds for recovery from the fraudulent employee. More importantly they also provide a basis for recovery from third parties, such as the banks involved in the misappropriation example."(Alrc.gov.au, 2014) Account of profits is one type of equitable remedy. It is explained as " A defaulting fiduciary has a personal obligation to account for gains from use of the beneficiary's property as well as the misappropriated property itself. Any party that has made a profit by breaching the property rights of another party may be called to account to that party for that profit.[cdlxxxvii] In effect the party owing the duty must account to the owner of the property for any accretion to the property it was entrusted with resulting from that party's breach of duty.[cdlxxxviii] The basis of such a remedy is that such a wrongdoer should be stripped of all profits which it would be unconscionable that it retain.[cdlxxxix] " (Alrc.gov.au, 2014) These two remedies has been illustrated in a famous case ASIC v Rich(2009) shows an account of profits directs the defendant to give to the plaintiff money what he has improperly gained which related to proper purpose, at the same time equitable compensation directs the defendant to recover the money that losses which he did to the plaintiff. It is obvious that both remedies, in contradistinction to the constructive trust, are absolutely personal remedies. The factor that plaintiff choose to have an account of profits or to have equitable compensation will depend on which of these two remedies will, on the facts of the case, will provide more remedy as money which is reasonable. However, the plaintiff does have the rights to select between these two remedies when defendant did breach the duties that made a profit from it and plaintiff has suffered
