Director Duties – ASIC takes action against Dixon Advisory Director

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Director Duties – Part 1

Approximately 2,500,000 Australians are a company director.

That’s 10% of the total population.

Which begs the question, how many of these Australians fully understand their duties as directors?

Directors’ Duties are always topical

One nice feature of directors’ duties is that there’s always something in the news to illustrate key lessons.

For example, earlier this month the Australian Securities and Investments Commission (ASIC) commenced civil proceedings against Paul Ryan, a director of Dixon Advisory, a financial services firm. You may recall that ASIC has previously obtained judgments against Dixon Advisory for failure to act in its clients’ bests interests.

In the current proceedings, ASIC alleges that Mr Ryan breached various directors’ duties when he:

  • Amended Dixon Advisory’s constitution to permit its directors to act in the interests of its parent company; and
  • Entered into a deed that imposed conditions which adversely affected Dixon’s ability to recover money that its parent company owed to it.

Importantly, these claims arose in the context of Dixon’s then approaching insolvency. The company was put into voluntary administration shortly after the above actions.

Every Conceivable Duty for Every Conceivable Need

ASIC claims Mr Ryan breached various duties under the Corporations Act, including that:

  • He did not act in good faith in the best interests of the company;
  • He did not discharge his duties with the requisite degree of care and diligence; and
  • He used his position to gain an advantage for himself or for others.

In short, by putting the interests of the parent company ahead of the interests of stakeholders (including creditors) in Dixon Advisory, Mr Ryan allegedly breached multiple duties as a director. Noticeably, as shown in this instance, individual actions can support multiple breaches.

Company directors are in a position of trust

Shareholders effectively place their wealth in the hands of directors, trusting that their money will be administered wisely. Consequently, directors have duties obliging them to act in the interests of the company’s stakeholders.

Stakeholders are more than just the shareholders. For instance, directors must take into account the interest of creditors, especially if the company is approaching insolvency. This means that all directors should be mindful of their legal obligations, even when they happen to be the sole shareholders.

In the coming weeks, we will take a closer look at some of these duties as part of a refresher course for directors.

In the meantime, Aintree Group Legal will be happy to discuss your commercial law needs. Contact us today.