The Duty of Directors to Act Bona Fide in the Interests of the Company: A Positive Fiduciary Duty? - Australia and the UK Compared

Abstract

The fiduciary classification of the fundamental duty of directors to act bona fide in the interests of the company is in doubt in Australia due to apparent recent narrowing of the fiduciary principle by the High Court and many commentators. By contrast, the fiduciary characterization and positive operation of the duty in the UK are clearer. This article outlines the differences between the operation of the duty in each jurisdiction and the reasons for these differences. It explores the significance of fiduciary classification (particularly in terms of loyalty and the imposition of liability based on the rule in Barnes v Addy) and the distinctive use of this duty to require directors to consider the interests of creditors. The duty to act bona fide in the interests of the company should continue to be classed as a fiduciary duty. In this respect the position in the UK is to be preferred.

Keywords: fiduciary, duty of directors, bona fide, company, High Court, United Kingdom, Barnes, Addy, creditors, Australia

JEL Classification: K00, K10, K22