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Corporate Groups and the Duty of Directors to Act in Their Company's Best Interests

Journal of Applied Research in Accounting and Finance (JARAF), Vol. 8, No. 2, 2013

19 Pages Posted: 9 Jan 2014  

Barbara Mescher

University of Sydney Business School

Brett Bondfield

University of Sydney Business School

Date Written: 2013

Abstract

The nature of the group structure creates conflicts of interest for directors who have to reconcile both commercial and personal conflicts with this legal duty. This article examines the fiduciary duty of directors to act in the best interests of their company and highlights the complexities of this duty as it relates to corporate groups. The common law is ambiguous as demonstrated by English and Australian decisions, with cases offering different tests to determine the required standard. Landmark Australian litigation is analysed in this article: The Bell Group Ltd (in liq) v. Westpac Banking Corporation [No 9] [2008] WASC 239; and its appeal, Westpac Banking Corporation v. Bell Group Ltd (in liq) (No 3) [2012] WASC 157, where the duty to act in the best interests of a company within a corporate group is a substantive issue. Law reform proposals are also examined, including CASAC’s Corporate Groups Final Report 2000 that recommended a whole of enterprise approach be applied to the regulation of corporate groups and subsequent academic commentary. The consolidation regime that permits corporate groups to be considered as a single entity for the purposes of income taxation is also briefly considered as an example of the complexities of an enterprise approach being applied to the regulation of corporate groups.

Keywords: Accounting, Finance

JEL Classification: M40, M41

Suggested Citation

Mescher, Barbara and Bondfield, Brett, Corporate Groups and the Duty of Directors to Act in Their Company's Best Interests (2013). Journal of Applied Research in Accounting and Finance (JARAF), Vol. 8, No. 2, 2013. Available at SSRN: https://ssrn.com/abstract=2376037

Barbara Mescher (Contact Author)

University of Sydney Business School ( email )

Cnr. of Codrington and Rose Streets
Sydney, NSW 2006
Australia

Brett Bondfield

University of Sydney Business School ( email )

Cnr. of Codrington and Rose Streets
Sydney, NSW 2006
Australia

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